Staking, Liquidity Mining and Yield Farming Explained

Without a doubt, the DeFi market is expanding. Businesses and individuals are realizing the possibilities of DeFi thanks to rapidly developing solutions. Decentralized finance has increased the likelihood of enhanced financial inclusion globally, as well as the tools for accessing and managing digital assets.

There are several methods to generate a sizable passive income in the cryptocurrency market. One of the most deliberative questions is the difference of the methods of farming, staking, and liquidity meaning.

Cryptocurrency Market System

Cryptocurrency markets are decentralized, which means that they are neither issued or backed by a centralized body such as a government. Instead, they are distributed throughout a computer network. Cryptocurrencies, on the other hand, may be purchased and traded on exchanges and held in ‘wallets.’

Cryptocurrencies, unlike traditional currencies, exist only as a shared digital record of ownership maintained on a blockchain. When a person wishes to transmit bitcoin units to another user, they do so using the latter’s digital wallet. The transaction is not considered final until it has been validated and uploaded to the blockchain via the mining process. This is also how most new cryptocurrency tokens are produced.


The trading method is the most known and used among the crypto community. Exchanging one cryptocurrency for another, buying and selling coins, and converting fiat money into cryptocurrency are all examples of crypto trading.

When you acquire cryptocurrencies through an exchange, you are purchasing the coins themselves. To begin a position, you’ll need to open an exchange account, deposit the full amount of the asset, and keep the cryptocurrency tokens in your own wallet until you’re ready to sell.

Exchanges have their own high learning curve because you’ll need to get to grips with the technology and understand how to interpret the data. Many exchanges also have deposit limitations, and accounts may be quite expensive to maintain. 


Crypto staking is a method of verifying cryptocurrency transactions. It entails committing holdings to support and confirm transactions on a blockchain network. It also enables members to generate passive income from their investments.

You can stake some cryptos and generate a passive income if the token you own permits it. It happens through a staking pool, which is similar to an interest-bearing savings account. You may earn anywhere from 5% to 20% each year on the amount of crypto you stake, just like a savings account.

Users must stake either a predetermined amount or participate in liquidity pools to become validators. Each staking platform’s guidelines may change significantly; the most popular method is to use staking pools.

Typically, staking entails locking your crypto money and hence necessitates a coin investment. Staking contributes to network security while also earning passive money.

Farming (Yield Farming)

Yield farming is undoubtedly the most common method of earning a profit from crypto assets. In essence, you may generate passive income by putting cryptocurrency into a liquidity pool. Consider these liquidity pools to be the centralized finance (CeFi) counterpart of your bank account, where you keep your money, which your bank then utilizes to make loans to others and pays you a percentage of the interest earned.

Yield farming is the process of locking one’s crypto assets into a smart contract-based liquidity pool, such as ETH/USDT. The locked assets are subsequently made accessible to other protocol users. These tokens can be borrowed by users of that lending protocol for margin trading.

Liquidity Mining

The process of lending assets to a decentralized exchange in exchange for incentives is known as liquidity mining. These benefits are frequently derived from trading costs incurred by traders swapping tokens. Fees typically 0.3 percent each exchange, and overall payout varies according to one’s proportional participation of a liquidity pool.

Liquidity mining is basically a passive income approach that allows crypto holders to benefit by utilizing their existing assets rather than storing them in cold storage. Assets are lent to a decentralized exchange, and in exchange, the platform distributes trading fees equally to each liquidity provider.

Key Differences

The distinctions between the three actors in staking, yield farming, and liquidity mining would directly allude to several crucial pointers. Here are a few of them, summarized for your convenience.

Liquidity mining and yield farming are essentially subsets of staking. Any of these three approaches will put idle crypto-assets to use. The purpose of yield farming is to increase the yield of a blockchain, whereas stake mining is concerned with keeping a blockchain safe. The DeFi protocol, on the other hand, benefits from liquidity mining.

In terms of goals, yield farming seeks to provide customers with the maximum potential returns on their crypto holdings. Liquidity mining, on the other side, is concerned with increasing the liquidity of a DeFi protocol. Furthermore, staking underlines the importance of a blockchain network’s security.

In the near future, Pafet plans to open Pools for, which will provide its users with a good passive income.

Future updates will allow users to stake Pafet or farm different pools on Goosebumps’ staking and farming pools. We are planning to offer generous APYs so that our users can ‘harvest’ the benefits of a passive income business model which has been unheard of until now in the cryptocurrency world.