Staking vs lending: where the return comes from

Staking and lending both pay you for locking up crypto, and both are advertised with a yearly rate. The difference is who pays it. Staking rewards come from the network. Lending interest comes from borrowers.

Side by side

	Staking	DeFi lending
What you do	Lock up coins to help confirm transactions	Deposit tokens into a pool that borrowers draw on
Who pays you	The network, in new coins and fees	Borrowers, in interest
Why the rate changes	It falls as more coins are staked	It rises when much of the pool is borrowed and falls when little is
Main risks	Penalties and slashing, the coin's price, a wait to exit	A flaw in the contract, the token losing value
Getting out	Through the network's exit queue or waiting period	Usually at any time, unless nearly all of the pool is lent out

Staking

A proof-of-stake network pays validators for proposing and checking blocks. If you stake through a pool or an exchange, it passes the reward on and keeps a share.

The reward is paid in the coin you staked, so its value moves with the price. Where rewards are paid in newly created coins, part of the rate only keeps your share of the network level. Lesson 50 explains how to check.

Lending

In a DeFi lending pool, borrowers put up collateral worth more than they borrow and pay interest. The interest is shared among the depositors.

Lending is not a savings account. The contract can fail, and the token you lent can lose its value. Lesson 43 covers how these loans work.

Something that is neither

Some companies offer "earn" accounts that pay interest on deposited crypto. The company takes your crypto and lends or invests it. A US regulator warned in 2022 that such deposits are not insured and that the company might fail. Several large crypto lenders did fail that year.

The question to ask of both

Who is paying me, and what am I paid in? A rate far above what the network or borrowers are paying is a warning. Either it is temporary, or it comes from somewhere you have not been told about. Lesson 44 gives four questions to ask before you deposit.

This page explains a difference. It is not a recommendation, and we do not tell you what to buy.