What is staking / yield farming? A way to potentially earn passive income in the digital asset markets.
Let your digital assets working for you
stake / lend it!
and receive rewards
What is Proof of stake?
It’s an alternative consensus algorithm that rival’s Bitcoin’s proof of work. Unlike mining, which requires massive electrical power to validate transactions, staking is an eco-friendly process.
An individual partaking in network validation stakes their own coins and is subsequently rewarded more coins, proportional to the number of coins they have staked. The more coins a user stakes, the higher his or her validation power becomes.
ex.: COSMOS, DASH and soos ETHEREUM
We can link your wallet to staking nodes to get rewards.
What is yield farming?
When you deposit money in a bank, you’re effectively making a loan, for which you get interest in return. Yield farming involves lending cryptocurrency.
In return, you get interest and sometimes fees, but they’re less significant than the practice of supplementing interest with handouts of units of a new cryptocurrency.
ex. Aave, Compound, Kyber…
We can link your wallet to DeFi platform to get rewards.
DeFi = Decentralized Finance
What are the risks and what could wrong?
About staking, there are two major risks to consider: the fluctuation in the value of digital assets – the decrease in revenue for the staking.
About yield farming, it’s a little bit complicated. Other factors need to be considered. See below
Yield Farming, what are the risks?
Theft, for one. The digital money you lend out is effectively held by software, and hackers seem to always be able to find ways to exploit vulnerabilities in code and make away with funds. Some coins that people are depositing for yield farming are also only a few years old at most, and could potentially lose their value, causing the entire system to crash. What’s more, early investors often hold large shares of reward tokens, and their moves to sell could have a huge impact on token prices. Lastly, regulators are yet to opine on whether reward tokens are or could become securities — decisions that could have a big impact on the coins’ use and value.
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Yied Farming, what else could go wrong?
Many high-yield harvesting strategies also carry the risk of liquidation. To maximize returns, many users are adapting complex strategies. For example, some investors have been depositing DAI tokens into Compound, then borrowing DAI using initial tokens as collateral, then lending out the borrowed funds. The idea is to get a greater portion of the allocated rewards: Comp tokens. A move in the wrong direction in a token’s value could wipe out all gains and trigger liquidations.
What about market manipulation?
When someone who has lent a cryptocurrency through a DeFi service like Compound then borrows it back, they’re creating artificial demand for the coins — and thereby inflating the coins’ prices. That’s raised concerns that early adopters who have accumulated large holdings, often called whales, are manipulating price movements, a common accusation in a range of crypto markets. Small traders should beware that yield harvesting “has become a game for whales who are capturing the vast majority of rewards,” according to crypto research firm Messari.