KoinlyticsPeople treat lending, staking, and LPing as interchangeable ways to earn yield. They are not. Each pays you for taking a different risk, and the money comes from a different source. Confusing them is how people end up losing more than they earned.
Lending
You deposit an asset into a money market (Aave, Compound, Morpho). Borrowers pay interest to draw from the pool. You get a share. Interest rate = f(utilization).
- You get paid for: risk that borrowers cannot be liquidated fast enough during a crash.
- Yield range: 1-15% APY on major assets, higher on volatile.
- Loss modes: bad debt after a fast crash, smart-contract exploit, oracle manipulation on illiquid collateral.
Staking
You lock a chain's native token (ETH, SOL, ATOM) to validate the chain and earn issuance + fees.
- You get paid for: keeping the chain running honestly. Slashing risk if your validator misbehaves.
- Yield range: 2-8% APY for ETH, 5-8% for SOL, higher for smaller L1s.
- Loss modes: validator slashing, unstaking queue during panic, LST depeg if using stETH etc.
LPing (providing liquidity)
You deposit two tokens into an AMM pool. You earn a share of trading fees. But the pool auto-rebalances your tokens as prices move, causing impermanent loss.
- You get paid for: making a market that traders arbitrage against you. Fees compensate for IL.
- Yield range: 0.5-100%+ depending on volume and volatility.
- Loss modes: IL exceeding fees earned, protocol exploit, rug on one side of the pair.
What actually pays
Lending yield comes from other users. Staking yield comes from issuance (dilution of non-stakers). LP yield comes from swap-fee traders and, when it exists, LP token incentives (mercenary yield).
Rule of thumb
Small money learning the space: staking (low touch, predictable). Growing portfolio with some risk tolerance: lending on blue-chip protocols. Only LP when you understand the pair's volatility and expected IL vs the fee tier's revenue.