Want to earn some passive income with your crypto wallet? Nowadays, it is quite easy, but choosing the suitable method can be complicated due to the various alternatives present in the market.
For instance, without extensive knowledge of crypto, people seek services that allow them to either farm or stake their crypto yield. Both can assist you in earning more, but they operate in quite different manners.
The staking model permits holders of cryptocurrency to protect the DeFi blockchain and also participate in validating some of the transactions by locking up specific coins or tokens. In return for their work on strengthening the secured network, Stakers are compensated with crypto rewards and dividends from fees associated with transactions. The purpose, besides fostering the growth and decentralization of the DeFi-supported networks, is to earn passive income.
Also, crypto holders can try yield farming, which entails investing in liquidity pools on decentralized finance platforms and various exchanges. In return, they can realize higher profits than what is generally earned. First, investors suffer some losses by providing sufficient liquidity for conducting transactions and are compensated with interest, trading fees, and various crypto prizes for locking their tokens or coins in such pools. Rather than letting assets sit idle inside a wallet, yield farming allows individuals to profit from them.
As we move through 2025, your choice between the two depends on your goals. If you want a simple, low-maintenance approach, go with staking. If you’re ready to be more active and comfortable with some risk, yield farming might be your path.
Let’s analyze these two strategies.
What is staking?
Staking allows the owner of the cryptocurrency to lock assets in a blockchain network in exchange for rewards and assist in validating transactions within the network. The rewards are often in the form of additional tokens. This mechanism is used in Proof-of-Stake (PoS) blockchains like Ethereum, Cardano and Solana.
Scenario 1
Let’s assume you have 10 ETH and choose to stake it on the Ethereum network. Consider this action as placing a digital asset into a fixed savings account: the bank (blockchain) will utilize your deposit to help keep the machine running smoothly. In return, you are paid interest on your deposit (in this case, staking rewards).
The main difference between traditional mining and staking is that staking does not require costly hardware. Rather, it offers better chances of being picked as a validator for transactions if more assets are staked. Earning passive income through staking is effortless but often comes at the expense of a lock-up period, which means funds may not be available to withdraw immediately.
What is yield farming?
Yield farming is a DeFi method where crypto owners provide liquidity to platforms in exchange for enormous profits. Users do not just hold onto their assets but lend or stake their crypto in liquidity pools available on Uniswap, Aave, or Curve, which enables them to make profits in the form of other tokens.
Scenario 2:
Now let’s say you have $1,000 USDT and ETH. Rather than keeping it idle, you deposit it into a liquidity pool provided by Uniswap. Your investment aids in trading activities and, in turn, helps you earn a portion of the transaction fees and extra tokens as rewards.
Nonetheless, yield farming has some dangers. Should the ETH value decrease, you may experience an impermanent loss, meaning the value of the deposited assets will be less once you withdraw.
Key differences between Staking and Yield Farming
| Risk Level | Staking | Yield Farming |
| Potential Returns (APY) | Staking is generally safer; you are locking up your coins to help secure a blockchain. The main risk is if your coin’s price drops or if you make mistakes as a validator. | Yield farming is riskier because you could lose money from impermanent losses, smart contract bugs, or market swings. |
| Security & Smart Contracts | With staking, you’re looking at steady but modest rewards—usually around 4-10% yearly on networks like Ethereum, Cardano, or Solana. | Yield farming can pay way better (sometimes over 50% yearly), but these rates bounce around a lot based on what other traders are doing. |
| Liquidity & Lock-up Periods | With staking, your crypto tokens are usually locked up for a set time. For example, if you stake Ethereum, you’ll need to wait in line when you want to withdraw | Yield farming gives you more freedom; you can usually pull your money out whenever you want. Just keep in mind that market swings can affect how much you get back. |
| Complexity & Ease of Use | Staking is pretty straightforward. All you need to do is pick a validator, lock up your coins, and watch the rewards come in. It’s like setting up a savings account. | Yield farming takes more work. You have to keep track of different pools, move your money around, and stay on top of risks. Think of it more like active trading. |
| Security & Smart Contracts | Your staked coins are protected by the blockchain itself, which makes things pretty secure. | Yield farming relies on DeFi smart contracts, which can sometimes get hacked or have bugs, so there’s more risk there. |
Which strategy is best in 2025?
Over time, long-term investors have kept their staking strategy unchanged because of its consistency. Unlike the previous years, institutional staking, such as Ether ETFs, seems to be gaining popularity. Furthermore, Ethereum, Cardano, and Solana’s 3%–10% staking yields have made staking attractive to risk-averse investors.
DeFi protocols are advancing, and so is yield farming. Platforms such as Uniswap, Curve, and Aave are incorporating new liquidity provisions, which sometimes leads to APYs exceeding 14%. The only drawback of these innovations is the permanent loss, the loss from delayed withdrawal, and the threat of smart contract hacks.
The introduction of liquid staking derivatives (LSDs) enables users to stake and withdraw their funds at will, combining the advantages of farming and staking.
While farming yields greater profits, more experienced users are gaining from staking due to its steady return. For conservative investors, both strategies appear to be beneficial.
Conclusion
Yield farming and staking both provide profit opportunities, but their selection relies on the investor’s appetite for risk as well as their goals. When it comes to investment strategies, staking leads as the best option for those with a low-risk tolerance, especially now with institutional adoption, as it provides more credibility.
On the other hand, yield farming offers higher potential returns, but it has to be actively managed and has more risk options like smart contact vulnerabilities and impermanent loss.
With innovations such as Liquid Staking Derivatives (LSDs) and ETF-regulated staking, earning passive income has become easier for investors. If you value security and an increasing portfolio in the long run, staking is a better option.
However, if you are willing to tackle the risks presented by DeFi and portfolio fluidity, then yield farming can present more lucrative opportunities in the changing landscape of cryptocurrencies in 2025.
In the end, the most efficient method of functioning is utilizing both strategies or having a hybrid strategy that caters to the user’s investment goals in the perpetually changing cryptocurrency world.
Read More: What is Yield Farming: How to make Passive Income in Defi
