In the world of crypto, two popular strategies for growing your digital assets are yield farming and staking. Each strategy has its pros and cons. So which one is right for you? Every investor ultimately needs to decide for themselves.
We’ll take a closer look at both strategies so that you can decide which strategy is best for you.
We’ll cover:
With that in mind, let’s start by looking at how yield farming works.
DeFi yield farming uses multiple strategies to maximize returns from cryptocurrency. It is essentially an umbrella term that can encompass any of the strategies listed below. Here’s how it typically functions:
Staking: At its core, yield farming often starts with staking. This is when investors lock up their crypto assets in a protocol to secure network operations and earn rewards.
Liquidity Mining (LP): Investors can also engage in liquidity mining by providing their tokens to liquidity pools. These are essential for enabling trading on decentralized exchanges (DEXs) without traditional market makers. By contributing to these pools, farmers earn LP tokens, which can then be used or staked to earn additional rewards.
Harvesting Token Rewards: Many DeFi projects issue their own tokens as rewards for contributing liquidity or staking. These tokens can often be harvested, sold, or reinvested into other pools to compound returns.
Extra Incentives: Beyond the basic rewards, many protocols offer additional incentives. These can include boosted yields for early participants or bonus tokens for long-term stakers. These can enhance the profitability of yield farming strategies.
Yield farming and staking are both ways of earning additional return in the crypto space. But they have important differences.
Yield farming is generally more complex, and has potential for higher rewards. This is because it often uses a mix of strategies like liquidity mining and leveraging multiple DeFi protocols. It requires more active management and a deeper understanding of DeFi market dynamics.
Staking on the other hand, is a simpler and more stable way to earn crypto returns. By locking up cryptocurrencies like ETH, investors help secure and operate blockchain networks. The returns from staking are more predictable. This is because they’re generally derived from transaction fees or inflation rewards.
Staking’s simplicity and stability make it appealing, especially for those who prefer a more hands-off approach.
For ETH specifically, staking involves securing the Ethereum network. Staking is especially important now that the network has transitioned from proof of work to proof of stake via the Beacon Chain. Investors can also choose to hold Liquid Staking Tokens (LSTs), which represent staked ETH but offer added liquidity.
In contrast, yield farming with ETH entails using it across various DeFi platforms and liquidity pools to maximize yield.
In short:
To earn higher yields via staking, selecting the right platform is crucial. They each offer unique features tailored to different aspects of DeFi investing.
Here’s a closer look at the three best options:
Lido stands out for its optionality in DeFi. This is because it allows users to stake their ETH without locking it up. Lido’s approach maintains liquidity and enables participation in various other DeFi activities.
The flexibility is great if want to remain active in the DeFi space while still earning staking rewards.
Rocket Pool is best known for promoting ETH decentralization. It does this by lowering the barriers to entry for running an Ethereum validator node.
Individual stakers have to stake 32 ETH to become a validator. But Rocket Pool nodes only need to stake either 8 ETH or 16 ETH per validator. So it’s more accessible for yield farmers with less ETH.
Origin Ether is best known for offering high yields by integrating with platforms like Pendle and EigenLayer. OETH uses these connections to increase profit chances. It's a great option for people wanting to make the most of DeFi earnings.
Origin Ether stands out for its capability to leverage Advanced Market Operations (AMO). It’s a feature that OETH uses these connections to increase profit chances. It's a great option for people wanting to make the most of DeFi earnings.
AMO uses smart math to figure out the best times to start or stop different farming plans, considering risk and rewards. It also eliminates one of the biggest drawbacks of yield farming, which is manually navigating liquidity pools. Plus it spreads risk across various avenues, providing diversification.
OETH is also designed with an inherent focus on transparency and governance. This means token holders can participate in decision-making processes that affect how their assets are managed. OETH is arguably the best choice investors seeking both high returns and a say in their investment strategies.
Origin Protocol's AMO is a special tool that automatically optimizes staking across liquidity pools. Essentially, the AMO strategy deploys assets to capitalize on the best available yield opportunities.
But how does it actually work?
Here’s a quick walkthrough:
Yield farming in DeFi can be incredibly rewarding, but it still has risks. The good news is that OETH was built with many of these risks in mind.
Here are some risks and how OETH helps mitigate them:
Smart Contract Risks: Smart contracts can be vulnerable to bugs and exploits. While no system can be completely secure, using platforms with audited contracts, like Origin Ether, can reduce risk.
Liquidity Risks: Yield farming often requires liquidity providers to lock in their assets. This can be risky in fast-moving markets. Origin Ether provides liquidity solutions that allow for more flexibility and lower risk of impermanent loss.
Counterparty Risks: In many DeFi protocols, you're relying on the actions of other parties. These might not always align with your own interests. Origin Ether’s uses a governance model. This gives token holders a say in the protocol’s development and management, aligning everyone’s interests.
The great thing about OETH is that it balances potential yields against risk exposure. By leveraging robust security practices, automated strategies, and community governance, it aims to provide a safer, more productive yield farming experience. You can start using OETH by clicking here.
What is the best platform to earn ETH APYs?
Origin Ether (OETH) is recognized as a superior choice for earning ETH APYs without centralized exchange risks. With innovative yield-enhancement strategies through the Origin AMO and robust security measures, OETH maintains high and sustainable returns.
Where does ETH yield come from?
ETH yield originates from a variety of activities across the Ethereum network. These can include staking, liquidity mining, and yield farming protocols. This yield is generally produced through transaction fees, interest payments, and incentive tokens. But investors need to be aware of common DeFi risks like rug pulls.
Should you engage in yield farming?
Yield farming can be extremely rewarding. Just be aware of the risks of decentralized applications mentioned above. Origin Ether mitigates these risks with a governance token (OGV). This allows for community-driven governance and enhanced security.
