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Staking vs Lending

Krystal Earn uses 2 different methods to provide you with the best yields on your idle assets.

What is DeFi Lending?

When you are supplying your tokens on Aave, Compound or Venus, they essentially act as a bank to lend out your funds to interested borrowers.
However, this is done differently from a bank as there is no middleman involved in the entire process. These platforms will use smart contracts to connect lenders to borrowers, and transactions will be executed when certain conditions are met.
What’s more, the interest rate that you receive is dependent on the supply and demand of that asset. If there is greater demand for the asset with a low supply, the interest rates offered will be higher.

What is Staking?

Meanwhile, when you are staking your assets, you will be staking with a validator that processes transactions on a Proof-of-Stake network.
You will receive your rewards in the form of staking rewards, which is determined by each network.
As more of the tokens are staked with validators, the staking yield may decrease and vice versa.
You can find out more about staking in our detailed article here.

The benefits of Liquid Staking

Since staking locks up your funds with a validator, some of these validators have issued a token known as a liquid staking derivative (LSD).
This token is a representation of the number of tokens that you have staked with a validator, and you can exchange this token to receive your staked funds.
For example, staking MATIC with Lido Finance will provide you with the token stMATIC. You can use this token on various DeFi applications, and you can return to Lido to exchange it back for your MATIC tokens.
You should receive the original amount of MATIC, as well as additional MATIC that you have earned by staking with these liquid staking providers.
To learn more about liquid staking derivatives (LSDs), check out our page here.

How are they different?

Here are the 2 main ways that these 2 passive income methods differ:
Text
Liquid Staking
Lending
Type of tokens
Multiple DeFi use cases
Illiquid, specific to platform
Yield sustainability
Depends on staking rewards of the network
Depends on supply and demand for that token

Types of tokens

When you are supplying your tokens on Aave, Compound or Venus, the tokens that you receive (e.g. cTokens or ATokens) are only specific to the platform you’ve supplied with, and are rather illiquid.
In contrast, liquid staking tokens allow you to use these tokens for various DeFi activities like swapping or staking in a liquidity pool with another token.

Yield sustainability

The interest rates that you receive when lending out your tokens will depend on the supply and demand of that asset. If there is greater demand for the asset with a low supply, the interest rates offered will be higher and vice versa.
Meanwhile, when you stake your assets, you will be staking with a validator that processes transactions on a Proof-of-Stake network.
You will receive your rewards in the form of staking rewards, which is determined by each network.
As more of the tokens are staked with validators, the staking yield may decrease and vice versa.