Staking vs lending: Choosing the best strategy

Two useful trading techniques that have become popular in the cryptocurrency space recently are staking and lending.

Today, my goal is to discuss the difference between staking and lending and how you can use these techniques to adapt your trading strategy depending on your risk/reward profile.

Essentially, while staking helps to secure the network and in turn pays users with newly minted coins, lending allows users to lock up their coins and receive an interest payment.

I cannot say one strategy is better than the other, as it depends on what type of investor you are.

If you like to directly participate in a protocol, perhaps staking is more your thing, while if you’re simply looking to get an interest payment, lending could be the right choice for you.

Similarly, if you consider giving up control of your coins too risky no matter what, then you may think neither strategy is worthwhile. It’s completely up to you, and you should always do your own research and make sure you’re comfortable with your level of risk/reward when trading.

As always, the views in this article should not be considered financial advisement.

Staking coins

Although there’s a bunch of Proof-of-Stake (PoS) protocols available – like Ardor, Dash, or EOS – I will instead focus on which exchanges, preferably non-custodial, allow users to stake coins directly.

The first I’ll discuss is IDEX.

IDEX, as the name indicates, is a decentralised exchange where users own their private-public key pairs. To trade, users sign transactions using interfaces such as MetaMask.

IDEX also incorporates the AURA token – the exchange’s native currency – which encourages users to stake the coin and help support the network. The AURA token enables stakers to earn a share of fees generated by IDEX and other Aurora products.

By staking AURA, node operators will be rewarded proportionately to their percentage stake, and 50% of fees have been allocated to be paid to AURA stakers. Traders will also be able to utilise the Boreal coin as a payment option for trading fees or as a stable base currency.

The second exchange worth mentioning is Switchain.

Switchain is an instant non-custodial cryptocurrency exchange with a user-friendly platform that makes trading crypto easy and fast.

Switchain works with different cryptocurrency trading partners to guarantee the best cryptocurrency rates for its clients.

An important partner I would like to mention is Exodus, one of the most widely used crypto wallets. By integrating Switchain’s fixed rate API, users of Exodus wallets have been able to exchange crypto assets with a single click.

Switchain works in a non-custodial manner, and the wallet creates an exchange on behalf of the user. The user sends the coins and receives the exchanged asset instantly.

Lending coins

If you hold different crypto-assets, then you can make them work for you in a high-interest account. Companies like BlockFi and Celsius Network provide a simple way to earn up to 10% interest on your crypto-assets per annum.

You have to read the fine print and do your own research as there are many different companies around offering to pay interest on different cryptocurrencies. Be sure you know the lock-up period (if any) and what rates you get on each coin.

Celsius won’t pay you 10% interest on your BTC, for example. But they will give you somewhere between 4-5% depending on how much you hold with them. If you want to earn the big interest rates, you could consider purchasing a stablecoin like TRUEUSD or Gemini Dollar with your fiat and holding there rather than with a bank.

At the end of the day, with all these solutions, you have to give up custody of your coins. If that’s not a problem for you, earning some additional benefits on your crypto makes a lot of sense. If you’re a firm believer that you should retain your private keys at all times, you may be better off simply HODLing after all.