Staking, yield farming, and liquidity mining are the three most well-known investment methods that investors usually use to gain profit. But understanding the definitions of those methods is difficult for some traders, especially beginners. Today, DePocket will point out the differences and answer the question: How can a DeFi tracker contribute to staking, yield farming, and liquidity mining investment.
Cryptocurrency staking is a process used to verify cryptocurrency transactions. This includes holdings to support the blockchain network and verify transactions. It also allows members to earn passive income from assets. If staking is possible with tokens, you can earn passive income by staking in cryptocurrencies.
This happens through a staking pool that can be compared to a savings account that earns interest. Like a savings account, you can earn anywhere between 5 to 20 percent per annum (APY) on the amount of coin or token you stake.
So why you can earn rewards?. That is because your staked coins are used for a consensus mechanism called Proof of Stake to ensure all transactions are verified and secure. It becomes a part of the process if you have staked it. Cryptocurrencies such as Solana, Polkadot, Ether, and Cardano currently accept staking.
Understanding yield farming
Yield farming is an advanced investment strategy that requires a deep understanding of how DeFi works and the opportunities it creates.
Cryptocurrency holders can leave their funds idle in their wallets or lock them into smart contracts to contribute to liquidity. The liquidity provided in this way can be used to exchange tokens on decentralized exchanges like Uniswap and Balancer or to facilitate borrowing and lending on platforms like Compound or Aave.
Yield Farming is essentially the practice of token holders finding ways to monetize their assets. Depending on how the assets are used, income can be gained in many forms. For example, by acting as a liquidity provider in Uniswap, “farmers” can earn a fraction of the transaction fee each time an agent exchanges a token. Alternatively, staking tokens in Compound accrues interest as these tokens are leased to borrowers who pay interest.
Understanding liquidity mining
Liquidity mining, a subset of yield farming, is a means for cryptocurrency holders to earn rewards by locking or collateralizing their cryptocurrency in a revenue mining pool.
To be eligible for rewards, cryptocurrency holders must deposit funds into the liquidity pool, therefore becoming a liquidity provider, and earn a return from the fees collected by the Defi platform, which operates the liquidity pool.
Liquidity pool is a basic smart contract in which users of the Defi platform deposit their cryptocurrency cash in exchange for incentives. The terms under which the user will be compensated are specified in the smart contract.
Users will immediately get prizes, which may be in the form of a single or many tokens after the criteria and conditions are completed. The tokens earned as prizes can then be utilized for other purposes or reinvested in the same or other pools to earn even more rewards.
How to manage staking/ yield farming/ liquidity mining by using the best DeFi tracker – DePocket
Managing investments is not an easy task when investors often diversify their portfolios in order to minimize risk and there is not any available DeFi tracker. For example, if you have stakings, yield farmings, or liquidity mining on Binance Smart Chain platforms like PancakeSwap, BakerySwap, etc…, or even on Solana, it is time-consuming to calculate your return on investments. In the past, when managing manually, an investor must create an excel file to calculate the profit on each platform by multiplying by a specific APY before calculating the total profit earned over a period of time. And sometimes errors also occur during the calculation process.
For convenient management as well as more effective investment, DePocket is a considerable DeFi tracker that all investors need to keep an eye on. All investments including staking and yield farming are detailed on a single dashboard. Users only need a few simple steps to manage their investments. That makes DePocket become essential for any investor, whether a newbie or a well-experienced one!
You got investments across multi dApp, multi chain, multi wallet! No problem! DePocket, the best DeFi tracker, is here to help! Head over to https://app.depocket.com/ now to manage your portfolio as well as multi wallet with no charge.