There are different ways to earn passive income in today’s world. However, some new methods and options are available for users, especially in the cryptocurrency market. The cryptocurrency market, along with a decentralized finance industry, helps people generate better passive income. Two of the most known ways to do so include crypto lending and staking. This article will let you know how these methods are different from each other.
What is Cryptocurrency Lending?
Crypto lending is almost similar to crypto staking when generating passive income, but crypto lending works differently. In crypto lending, the users can lend their digital assets to the borrowers, in return for which the borrowers pay interest to their lenders. The platforms offering crypto lending generally accept cryptos and stable coins. Further, for lending your crypto, you can use centralized finance platforms or decentralized finance platforms.
What is Cryptocurrency Staking?
Staking cryptocurrencies refers to the process of locking up your crypto assets to earn rewards and contribute towards a blockchain network. This is a valuable concept for the network as well as the crypto holders. It allows the crypto holders to generate some value from their cryptos in their possession but simply lie idle. Moreover, staking cryptocurrencies can efficiently generate passive income because some cryptos offer high-interest rates.
Crypto Lending vs Crypto Staking: Working
How does Crypto Lending work?
The lenders and borrowers involved in crypto lending are connected through a third-party online crypto lending platform. Therefore, three parties are involved in this process – The lender, the borrower, and the lending platform.
The lenders are the people who wish to lend their cryptos and stable coins to earn passive income from them.
Cryptocurrency lending platforms are third party online platforms that connect the lenders and automate their transactions.
The borrowers are the people who wish to borrow funds for various purposes and use crypto or fiat assets as collateral to receive funding.
How does Crypto Staking work?
In cryptocurrency staking, the users lock up their coins to the cryptocurrency protocol. Then, from those users, the protocol chooses validators to confirm blocks of transactions. The more coins the user locks up, the more passive income they can generate. Before staking the crypto assets, it is necessary to know how crypto staking works.
To stake a cryptocurrency, the user must hold a cryptocurrency that makes use of the proof-of-stake model.
Then, the user can choose the amount that he wishes to stake. Staking can be done through any crypto staking platform.
While staking, the coins remain in possession of the user. It’s just that the coins are being put to work and can be withdrawn anytime if the user wishes to trade them.
Crypto Lending vs Crypto Staking: Benefits
Crypto Lending
Crypto loans are not much cheaper when compared to mortgage loans, but they act as an inexpensive alternative to personal and credit cards. In addition, crypto loans are available at low-interest rates that are below 10 per cent.
The entire loan amount is based on the user’s asset value. The user can borrow up to 50% of their portfolio value, but some exchanges go as high as 90 per cent.
The users can also choose the loan currency depending upon the platform they are using.
The user’s poor credit or no credit history makes no difference while applying for credit in any crypto lending platform.
The crypto lending process is quite fast, and you can get your loans within a few hours.
Crypto Staking
It does not demand any type of equipment, as in the case of crypto mining.
Users contribute to the security and efficiency of the blockchain.
As compared to crypto mining, it is more environmentally friendly.
Crypto Lending vs Crypto Staking: Available Platforms
Crypto Lending
There are several crypto lending platforms, but some of them are mentioned in the below table.
Crypto Staking
With the help of some best crypto staking platforms, you can simply put your assets to work and generate an excellent passive income. A few of the best crypto staking platforms available are:
Platform : eToro
Description
– The platform offers the users world-class staking crypto services.
– A user-friendly platform pays off high rewards for staking crypto provides support for multiple asset classes, i.e., it supports the investments made up of a combination of assets like cash, equity, and bonds.
Platform : Binance
Description
– The users can stake up to 100 different digital assets on the Binance platform.
– Offers a large pool for staking crypto.
– It is a secure crypto staking site.
– The platform also offers insurance coverage for user funds.
Platform : Coinbase
Description
– The platform enables the users to earn extra income by just holding their cryptocurrency via staking.
– However, only a few cryptocurrencies are eligible for staking for now.
– The platform offers custodial services for large institutions.
– It is a public company that reflects it is well regulated.
Platform : Kucoin
Description
– Kucoin introduced a new concept of soft staking that allows users to earn rewards without even locking up their crypto assets.
– It pays rewards regularly.
– Thus, eliminating the long waiting periods for receiving rewards.
– Provides multiple staking offerings.
– The users can earn up to double daily rewards.
– The platform has a large staking pool
Platform : Poloniex
Description
– The platform offers feeless staking, and the user can get up to 100% of the staking rewards without paying any fees.
– Provides an easy way to earn rewards by holding and depositing crypto assets.
– No lock-up period.
– The user is free to trade, deposit and withdraw anytime.
Crypto Lending vs Crypto Staking: Drawbacks
Crypto Lending
Due to the rising cases of crypto theft, the platform’s security is a severe concern for crypto lending.
The borrowers can borrow a limited amount depending on the platform they are using.
Some crypto lending platforms require the users to stake their cryptocurrencies for a specific time to receive interest.
To participate in crypto lending, the users have to add their crypto to an online digital wallet that is less secure than storing your crypto on a physical wallet.
Crypto Staking
The concept of receiving rewards for staking cryptocurrencies is quite attractive, but the user should not expect much higher returns. In most cases, staking crypto gives lower rewards than regular block rewards issued by the network.
Most platforms require the users to lock up a minimum holding of their crypto assets to receive rewards. However, despite minimum holding, there is always a risk of losing all of it.
Some of the staking assets do not provide rewards daily, due to which there’s a long waiting period for receiving the staking rewards.
Some of the staking assets come along with lock-up periods, which means the user cannot access his assets even if the prices of his staked assets fall considerably.
Crypto Lending vs Crypto Staking: Which one is Safer?
While talking about crypto lending and crypto staking, it is essential to understand all the necessary things about their safety. The users always have a question about whether crypto staking is safe or not? Crypto staking can come up as a safe choice because the users participate in making the network secure, but it also involves some risks. For instance, staking cryptocurrencies requires the user to lock up their assets for a certain period which means they cannot use their funds for investments in other opportunities if some arise.
On the other hand, Crypto lending can be considered safe, but it also comes up with some risks. For instance, there is no surety that the borrower will repay the loan. This is the only reason crypto platforms secure 80% of the collateral in case of a loss.