Staking and providing liquidity have become very popular lately, so let’s see what that means for you.
In general, both of the options give you the opportunity to put your tokens somewhere and earn interest for just hodling them.
However, there are some differences between the two.
The more common way – staking, requires you to lock a minimum amount of a given cryptocurrency, for a predetermined period of time.
In many cases, if you withdraw your stake earlier, not only you will not get any rewards, but you will be penalized for violating the agreement between you and the service provider.
On top of that, you have to wait for your tokens to be returned to your wallet.
The more profitable and efficient way, but also the riskier one – providing liquidity, may be a bit more complicated, but it has one huge advantage, which is decentralization.
In other words, you put your tokens on a decentralized platform, like Uniswap, and you earn from the fees that people are paying when they are making transactions.
Basically, what both of the options mean is that you transfer your cryptocurrency to a given platform and you get payed for that.
I won’t create a whole how-to-do-it guide.
Every platform has its own steps to follow, so you’ll have to make a very good research, choose one for yourself, and follow its specific instructions.
Don’t forget to not put more than you can afford to lose.
There’s risk in everything and it wouldn’t be very smart if you bet your house on the possibility to earn interest on your crypto.
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Cryptocurrency & Blockchain
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.