Binance CEO Explains the Distinctions Between Staking, Lending, Yield, Earn, and Savings in Cryptocurrency
On March 1, the CEO of Binance, Changpeng Zhao, took to Twitter to address the confusion that many people have when it comes to terms like lending, staking, yield, earn, and savings. In his tweet, Zhao provided a clear and concise explanation of each of these terms and highlighted the subtle yet important differences between them.
According to Zhao, staking refers to “locking” your coins on a blockchain to get rewards by helping with validating blocks. This means that you maintain control of your funds (your keys) and staking rewards are usually governed at the protocol level, making them highly predictable.
There are confusions between terms: lending, staking, yield, earn, savings, etc. There are subtle, but important differences. I usually understand/define them as the following. 1/5
— CZ 🔶 Binance (@cz_binance) March 1, 2023
On the other hand, lending is when you lend your funds to someone else to get interest. Unlike staking, you no longer maintain control of the funds, and if that person/entity goes down, you may lose your principal. This means that the risk profile for lending is very different from staking.
Zhao also explained that yield or APY (Annual Percentage Yield) usually refers to the interest rate on an annual basis. This is a straightforward concept that doesn’t require much explanation.
However, things can get a bit confusing when it comes to product names like Earn and Savings, which different platforms may use. These terms may refer to one or any combination of the above concepts, and they don’t always mean the same things, especially across different platforms.
Overall, Zhao’s tweet provides a helpful guide for anyone looking to understand the differences between these commonly used terms in the cryptocurrency space. With so many new investors entering the market, it’s important to have a clear understanding of the various concepts and their associated risks. By clarifying these terms, Zhao has helped to demystify some of the complexities of the crypto world and make it more accessible to a wider audience.
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