I guess Defi protocols and platforms used the word staking in such a way that the traditional meaning of staking or in other words what we say "Proof of Stake" or PoS Blockchain. In PoS blockchain, Stakers act in the same way as Miners act in a "Proof of Work" blockchain like Bitcoin. There can certain threshold of the stake to act as Validator/Miner/Staker depending upon that PoS Blockchain. I will not go into more detail of PoS blockchains but definitely, Defi Staking is not the same as staking in PoS blockchain.
In Defi Staking, tokens are locked into a smart contract, and when the tokens are locked into a smart contract, then the safety of the tokens will be dependent upon the robustness of the smart contract and having good faith in the developer and platform that they did not code any secret backdoor entry or bugs in the smart contract maliciously that can cause loss of token to the users.
So the benefits of decentralized finance come with risk and before pooling tokens in Defi, knowing authenticity, team, and platform credentials is of utmost importance.
Do not chase the APR, security is of utmost importance.
I guess "earning" and high APR actually blind people when they think about the investment but in reality what actually matters is the security of the tokens and investment. Lots of Defi hacks are a testament that Defi is still immature and needs to go a long way to be considered a safe investment. I do not suggest that we should not be involved in Defi but we should consider the risk and not go "all in" or a major portion in this risky investment.
The best way of earning is getting rewards while you have full control of your coins/token and the security of the token is as strong as the blockchain security and your good practices. (if you lose your key or get phished or become a victim of social engineering then blockchain security will not help you in this case.)
This is one of the reasons, I would like to build a stake in Hive and create some stable investment before jumping on the Defi adventure and chasing the high APR of Defi.
It really surprises me when I read posts in Hive who are mourning their loss or getting some high APR and invested all in some obscure projects while completely neglecting the stable 20% APR in HBD and a speculative asset Hive in which one can easily make above 10% with the combination of Staking+curation APR.
So what are your passive income generation methods in crypto and how risk-free do you rate them?
Posted Using LeoFinance Alpha
