Yield Farming vs. Staking

Yield farming allows the token holders to generate passive income by locking their funds into a lending pool for some interests as a return. While staking involves a validator who locks up their coins, they can be randomly selected by the Proof-of-stake (POS) protocol at specific intervals to create a block.

When yield farming and staking compared side-by-side, staking usually involves a more considerable amount of crypto to boost the chances of being selected as the next block validator. Depending on the coin maturation, it can take up to a couple of days before the staking rewards come by for collection.

In contrast, yield farmers move the digital assets more actively from time-to-time to earn new governance tokens or smaller transaction fees. Unlike staking, yield farmers can deposit multiple coins into liquidity pools across several protocols. For example, yield farmers can deposit ETH to Compound to mint cETH, then consecutively deposit it into one to another protocol that mints third and fourth tokens.

Compared to staking, yield farming is more complex, and the chains can be hard to follow. And though yield farming has a higher return rate.