Recently, more and more proposals for staking stable tokens have been appearing. Let’s try to figure out how safe it is and how this method of making a profit works.
The ability to deposit in stablecoins is provided by both centralized platforms and exchanges and decentralized DeFi projects. Staking has different terms: some deposits can be withdrawn at any time, others (usually with a higher rate) only after the expiration of the deposit term.
The advantage of decentralized platforms as non-custodial services is that users independently manage their money and have access to it. At the same time, the DeFi application protocol may work poorly if there are issues on its native blockchain.
In addition to depositing stablecoins, DeFi services offer the opportunity to engage in profitable farming. In this case, the risks increase, as does the profitability. On some platforms, the expected yield in such pairs exceeds 100% per annum. At the same time, only half of the deposit will be nominated in stablecoins, and the other one in highly volatile cryptocurrency.
The main mechanism for generating profitability from stablecoin staking and profitable farming is that liquidity providers receive their percentage to provide it to decentralized exchanges, such as Uniswap on the Ethereum blockchain.
High profitability also implies a high level of risk. Firstly, some sites do not provide links to smart contracts and clarifications — where the estimated profitability from staking comes from. Secondly, the smart contract itself does not guarantee the safety of funds on the deposit: it may contain a hidden withdrawal mechanism. Another likely risk: DeFi sites can be hacked.
And how do you feel about stablecoins? Do you see perspective in them? LATOKEN experts want to remind you that in the cryptocurrency market, stablecoins act as a buffer. Through them, owners of significant capital can enter the crypto market. It is convenient because you can turn a large amount of money at once into money within the blockchain and trade or invest with it. According to many experts, the popularity of digital assets created based on material wealth will only increase in the future.
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LATOKEN crypto exchange does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Like other assets, cryptocurrency is subject to market risk. Please do your own research and trade with caution.
