Difference between revisions of "Liquidity Mining versus Staking"

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(Added DFX for staking; improved formatting)
 
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This small guide should help to decide on the usage of Liquidity Mining or Staking. I addition, it also indicates the pros and cons wether you are using the DeFiChain direct or as a service provider Cake.
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This small guide should help you decide whether to use Liquidity Mining or Staking, if you are debating the two. In addition, it also indicates the advantages and disadvantages whether you should directly use the DeFiChain or use a service provider like CakeDeFi (commonly referred to as Cake).
  
 
== Liquidity Mining (LM) ==
 
== Liquidity Mining (LM) ==
  
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- Risk diversified, as investment and rewards are in DFI and BTC.
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- Rewards are displayed as APR (before compounding)
  
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- Possibly impermanent loss. However, this is negligible if you use LM as cash flow strategy
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Advantages
  
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- Rewards are described as APR (without compound interest)
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* The risk is more diversified, as investment and rewards are in DFI or DUSD and another coin or token. However, if one side of the pool goes to 0, it is possible that you will lose all of your capital.
  
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== Staking ==
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Disadvantages
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- Pure DFI risk
 
  
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- Rewards are described as APY (with compound interest)
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* Possible impermanent loss. However, this is negligible if you use liquidity mining as a cash flow strategy, and rewards are designed to prevent loss of capital from impermanent loss.
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== Cake or DeFiChain? ==
 
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'''Cake:'''
 
  
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- Easier to use
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== Staking (Solo) ==
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- Rewards are described as APY (after compounding)
  
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- LM is possible
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Advantages
  
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- Staking is possible (starting with less than 20,000 DFI)
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* DFI price is the only risk
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* It is possible to freeze or lock masternodes, in order to receive 50% more rewards (5 year) or double rewards (10 years)
  
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- 15% less income
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Disadvantages
  
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- Platform risk
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* 20,000 DFI is required to make a masternode
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* Rewards are not consistent, some days the masternode may earn multiple block rewards, others none at all
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== Staking (Indirect vs. Direct) ==
  
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- KYC necessary
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==== '''Cake''' ====
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Pros
  
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- Withdrawal partially delayed
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* User-friendly, designed for an investor with little experience
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* There is no minimum stake amount
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* May have additional VIP benefits
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* Run mainly by Dr. Julian Hosp and U-Zyn Chua, the founders of DeFiChain
  
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'''DefiChain Wallet/Masternode'''
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Cons
  
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- LM is possible
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* 15% fee on rewards (reduction possible through freezer lockup) 
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* Platform and centralization risk 
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* KYC required
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* Longer withdrawal due to processing by Cake and transaction time on blockchain
  
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- Staking (at least 20,000 DFI)
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==== '''DFX.swiss''' ====
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See separate Wiki-entry:  [[DFX FAQ#Staking bei DFX]]
  
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- No deduction on income
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additional Pro:
  
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- No KYC & your keys - your coins
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* Participate in CFP/DFIP-Voting even with less than 20.000 DFI in staking
  
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- Smart contract risk
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==== '''DefiChain Wallet (Solo Staking with Masternode)''' ====
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Pros
  
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- More difficult to operate
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* Rapid withdrawal (only transaction time in the blockchain is necessary.
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* No fees on income
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* No KYC required
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* Non-custodial, investors hold their own keys
  
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- Rapid withdrawal
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Cons
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* 20,000 DFI minimum stake amount
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* Smart contract risk
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* Less user-friendly

Latest revision as of 19:59, 31 August 2022

This small guide should help you decide whether to use Liquidity Mining or Staking, if you are debating the two. In addition, it also indicates the advantages and disadvantages whether you should directly use the DeFiChain or use a service provider like CakeDeFi (commonly referred to as Cake).

Liquidity Mining (LM)

- Rewards are displayed as APR (before compounding)

Advantages

  • The risk is more diversified, as investment and rewards are in DFI or DUSD and another coin or token. However, if one side of the pool goes to 0, it is possible that you will lose all of your capital.

Disadvantages

  • Possible impermanent loss. However, this is negligible if you use liquidity mining as a cash flow strategy, and rewards are designed to prevent loss of capital from impermanent loss.

Staking (Solo)

- Rewards are described as APY (after compounding)

Advantages

  • DFI price is the only risk
  • It is possible to freeze or lock masternodes, in order to receive 50% more rewards (5 year) or double rewards (10 years)

Disadvantages

  • 20,000 DFI is required to make a masternode
  • Rewards are not consistent, some days the masternode may earn multiple block rewards, others none at all

Staking (Indirect vs. Direct)

Cake

Pros

  • User-friendly, designed for an investor with little experience
  • There is no minimum stake amount
  • May have additional VIP benefits
  • Run mainly by Dr. Julian Hosp and U-Zyn Chua, the founders of DeFiChain

Cons

  • 15% fee on rewards (reduction possible through freezer lockup)
  • Platform and centralization risk
  • KYC required
  • Longer withdrawal due to processing by Cake and transaction time on blockchain

DFX.swiss

See separate Wiki-entry: DFX FAQ#Staking bei DFX

additional Pro:

  • Participate in CFP/DFIP-Voting even with less than 20.000 DFI in staking

DefiChain Wallet (Solo Staking with Masternode)

Pros

  • Rapid withdrawal (only transaction time in the blockchain is necessary.
  • No fees on income
  • No KYC required
  • Non-custodial, investors hold their own keys

Cons

  • 20,000 DFI minimum stake amount
  • Smart contract risk
  • Less user-friendly
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