This guide on Coinmarketcap offers the best breakdown on staking that you could possibly find:
They also offer guides on a lot of useful concepts and topics in crypto.
I’ve seen countless exchanges and heavily centralized institutions offer “staking” which was really lending. Binance & Crypto.com are too widely known examples of this. Even if the platform offers TRUE staking but is an exchange, the benefits and cons are the exact same as lending.
After rigorously going through reddit and various forums, I’ve concluded that most exchanges just misuse the word staking and are simply lending. This is easily understood by contemplating how they for example, you can get make 19.26% from “staking” TUSD on Crypto.com’s DeFi wallet. TUSD is a stablecoin meaning it’s not really changing in value and yet somehow, you can earn nearly 20% on it. The only way this is even possible is from lending it given there are currently no fiat-pegged stablecoins that can natively be staked.
This is plainly seen through three things:
1. Users can stake unstakable coins.
2. Stablecoins offering returns.
3. Returns that are way above what the coin natively offers.
After some digging and help from my community, I found the answer here:
When you stake ATOM or CRO, you are actually staking. When you “stake” anything else, it’s really just being lent. This includes TUSD and thus proves my initial concern that staking and lending are used interchangeably and I would argue that they purposefully try to make you confuse the two at their benefit.
The biggest differentiation between lending and staking is the control and ownership of the crypto that you are dedicating to the process. With lending, you are required to give up control and thus you do not have full ownership. Typically, you either have to give it to the entity to hold or you hold it on an exchange platform like Blockfi, Crypto.com, Nexo, Celsius, etc. The issue is that you have to KYC and you must ask permission to withdraw your funds. There may also be minimum withdrawals, fees, and much more, but the main caveat is that the responsibility and the liability is no longer yours. If they get hacked, the owner does something malicious, they get sued, go bankrupt, etc., then your crypto is gone too. Soft-staking is what most exchanges offer where it’s not exactly true staking or it’s just lending of some kind.
With staking, you can typically do this from a native wallet for that network or from various DeFi wallets. Staking / decentralized lending can also be done through smart contracts. For example, you can lend on TrueFi through a smart contract, you can stake/lend various coins on Trust Wallet through a smart contract, or you can stake directly through a smart contract on a native wallet using Tron like TronLink.
For the rest of this blog, you can read it on:
Have you ever mixed up lending and staking? Do you lend or stake? How do you earn passive crypto income? Let me know what you think about this in the comments below and don’t forget to subscribe!
Disclaimer: This is not financial advice and is purely for entertainment purposes. What you see, hear, or read is my personal opinion, and any statements made are based on my views and should not be misconstrued as fact. My crypto portfolio may or may not be simulated
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