Earning Crypto in Canada

How can you earn crypto on your crypto, i.e. passive income? There are three methods: lending, staking, and yield farming. All methods are similar but have their own technicalities to them. For lending and staking, they can be done either through a centralized or decentralized exchange. As for yield farming though, you can only do it through the decentralized exchange. 

Keep in mind that you can potentially lose ALL of your coins if something happens to the platform should they suddenly close shop like Celsius and BlockFi (which is why I won't be talking about centralized crypto platforms). If you’re okay with taking on that risk though, the rewards may be worth it.

The video below is an older video but still does a good job at comparing the differences among lending, staking, and yield farming.

Lending Crypto

For lending, it's pretty straight forward. You lend your coins to the crypto platform and in return they reward you with interest (same coin) on your coins. The platform will then use your coins to lend out (at a higher rate) to those who want to borrow coins and the platform makes money on the difference. This is pretty much the same idea as putting your cash in a high yield savings account with a bank, except not as safe. The diagram below shows how lending works. The interest rates of 4% and 6% are for demonstration purposes only. This video is an example of lending on Venus Protocol. Check out Alchemy to learn more on where you can lend your coins.

Staking Crypto

For staking the idea is similar to lending, but also a little bit different. With staking, you're locking up coins to help secure the coin's network rather than lending your coins to the crypto platform so they can lend that out to borrowers. In return, you earn crypto on your coins that you've locked up. The diagram below shows how staking works. Check out Staking Rewards to learn more on how you can stake your coins.

Yield Farming

As for yield farming this is both different and similar to lending. With yield farming, there are also three parties involved: decentralized exchange, liquidity provider, and swap users. So with yield farming, you're pretty much lending coins (acting as a liquidity provider) to a decentralized exchange so they can then use those coins to help give swap users the best prices. When users do swaps on the decentralized exchange, the decentralize exchange charges a swap fee. Some of the swap fee is then either distributed back to the liquidity provider or used to buy the decentralized exchange's token to then give to the liquidity provider as a reward. Please refer to the diagram below to better understand it. If you'd like to learn more about the process of yield farming, this video can help you to better understand it. Check out Defiprime to learn more on where you can yield farm.

Other Examples