How to Earn Interest: Staking & Liquidity Pools

Investing Guides

Last Updated: November 8, 2022

How to Earn Interest: Staking & Liquidity Pools

Staking and Liquidity pools are the two most common and best ways to invest in cryptocurrency. In this article, we will review what is Staking & Liquidity pools and the differences between them.

What are staking pools?

Staking is the process of locking up your cryptocurrency to participate in blockchain transaction validations. Staking pool is a network where you put your idle assets to work (stake).

You earn interest by locking up your assets for a certain amount of time, during which you are not able to use your currency.

The Advantages of Staking

There are several advantages of using a staking pool, including the following:

  • Easy way to earn interest.
  • Simple and safe way to earn rewards.
  • Staking doesn’t require a lot of effort and energy.

Bitlocus Token Staking

If you own Bitlocus tokens you can stake them for additional rewards. You can stake a BTL tokens on Bitlocus platform. Here's a quick tutorial on how to easily do that.

What are Liquidity Pools?

Liquidity Pools are an essential component of the crypto ecosystem. They can be thought of as a box into which liquidity providers (investors) store their cryptocurrencies. The tokens inside the pool are used for exchanges, loans, and other purposes by other users.

Advantages of Liquidity Pools

Users of liquidity pools enjoy the following benefits:

  • Ability for anyone to participate and provide liquidity.
  • Large income potential, with several earning tiers.
  • Possible voting rights on the pool decisions.
  • Users have complete control over their digital assets.

Gateway to DeFi protocols - Bitlocus

Our goal is to enable anyone to benefit from decentralized finance and the associated interest rates!

Bitlocus users are able to participate in lending and earn stable yearly interest (always bear in mind the risks). Assets, available for lending are USDC, USDT, CAKE & DAI. Here's a quick tutorial on how to start lending.

Liquidity vs Staking

While the concepts of staking and liquidity are used in decentralized finance and have some similarities, they relate to two different investment strategies.

Staking is the process of storing your crypto coins as collateral in a blockchain in order to secure the network and earn rewards. When you stake your tokens, you lock them for a set period of time which means you won't be able to use them. However, you will be compensated with interest.

Liquidity, on the other hand, refers to depositing pairs of tokens into a liquidity pool in order to earn lending interest. Other users use, borrow, and trade these tokens for their own reasons, paying fees that are then divided among liquidity providers.

Staking demands a big investment, whereas liquidity pools do not, allowing anybody to invest. Staking, on the other hand, can be less risky. Furthermore, liquidity providers can stake their liquidity pool tokens to gain additional benefits on top of the interest they already receive. For liquidity pools, this is where staking plays a role.