Crypto Staking vs Crypto Lending: Which is Right For You?

At a glance: 

• Lending vs staking: key differences  
• What is crypto lending?
• How crypto lending works
• What is crypto staking?
• How crypto staking works
• How much can you earn?
• Crypto lending risks
• Crypto staking risks
• Which strategy is better?

For crypto holders looking to earn passive income, staking and lending are two of the most common (and often confused) strategies. Both can help you grow your crypto holdings without active trading. But they operate differently, come with distinct risks, and suit different investor profiles.

This guide breaks down how each method works, where they fit into your portfolio, and which might be the better option based on your assets, goals, and risk appetite.

Read more: How to Borrow Against Crypto

Lending vs staking: key differences  

What is crypto lending?

Crypto lending involves depositing your digital assets into a lending platform, which then loans them to borrowers in exchange for interest. On platforms like Ledn, this is streamlined through Growth Accounts: you earn interest on BTC or USDC while retaining flexibility and avoiding the complexity of direct lending.

Want to go deeper? Try The Ultimate Guide To Crypto Lending; Everything You Need To Know

How crypto lending works

• You deposit crypto into a lending account.
• The platform lends that crypto to institutional borrowers.
• You earn a share of the interest paid by borrowers, credited monthly.

Unlike staking, you can usually withdraw your funds at any time. This liquidity makes lending attractive to investors who prioritise access and predictability.

Read more: How to Earn Interest on Bitcoin

What is crypto staking?

Staking means locking your crypto into a proof-of-stake (PoS) blockchain to help validate transactions and maintain network security. In return, you receive staking rewards, similar to earning interest.

To stake, you must hold a PoS-native asset like ETH, DOT, or ADA. Bitcoin, which runs on proof-of-work, cannot be staked.

How crypto staking works

• You lock your crypto via a staking wallet, exchange, or validator.
• Your assets help secure the network and validate blocks.
• You earn rewards, often paid in the same crypto.

Staking is essential to blockchain networks. It’s how they stay decentralised and operational. But it also comes with lock-up periods and protocol risk.

Choose lending if...

• You hold Bitcoin or stablecoins.
• You want stable, predictable income.
• Liquidity matters, i.e. you may need to withdraw quickly.
• You prefer working with trusted platforms that offer customer support and risk controls.

Platforms like Ledn offer:

• Up to 1.00% APY on BTC
• Up to 9.00% APY on USDC
• Transparent yield generation via Open Book Reports 
• Assets ring-fenced to isolate risk
• Full control to transfer between interest and non-interest accounts

Choose staking if...

• You hold PoS tokens like ETH, DOT, or SOL.
• You’re comfortable locking assets for a set term.
• You want higher yields and are committed to the long-term growth of a network.
• You’re happy with a more technical setup or using a centralised staking service.

Some current average staking yields:

• ETH: ~3–4% APY
• DOT: ~14% APY
• SOL: ~6–7% APY

Note: Yields vary and are influenced by network inflation, validator commissions, and governance decisions.

How much can you earn?

Here's what you could earn based on current rates:

However, returns aren’t the whole story. You should also consider the trade-offs in liquidity, custody, and complexity.

Lending risks are largely related to the platform and its credit practices. If you choose a provider with strong risk controls, full reserves, and ring-fenced accounts (like Ledn), these risks can be significantly reduced.

Staking risks are more protocol-driven. They require a long-term mindset, technical understanding, and confidence in the underlying blockchain.

Before committing, ask:

• Who controls the assets?
• What happens if something fails?
• Can I access my funds when I need them?

Crypto lending risks

Platform insolvency

When you lend through a centralised platform, you give up custody of your assets. If that platform becomes insolvent, your funds may be unrecoverable. This risk became painfully clear in 2022 when multiple lenders, including Celsius and BlockFi, collapsed due to poor risk management and overexposure to volatile borrowers.

What to look for: Transparent financial reporting, independent audits, and segregated accounts.

Counterparty exposure

Your returns depend on the platform’s borrowers repaying their loans. If a borrower defaults, or if the platform’s due diligence is weak, your capital is at risk. This risk increases during periods of market stress when creditworthiness deteriorates.

What to ask: Who are the borrowers? Are they institutional? How is credit risk assessed?

Liquidity mismatch

Some platforms offer instant withdrawals, but the underlying loans are longer term. If too many users try to withdraw at once, the platform may freeze accounts or delay access, similar to a bank run.

What to ask: Can I withdraw funds at any time, or are there waiting periods?

Mitigation at Ledn

Ledn’s Growth Accounts are ring-fenced, meaning your assets are only exposed to the specific borrowers that generate your yield, rather than other Ledn products. This limits systemic exposure. You can read more about rehypothecation here.

Additionally, Ledn publishes regular Proof-of-Reserves attestation reports, verifying that all client assets are fully backed.  

Crypto staking risks

Smart contract vulnerabilities

If you stake through a smart contract (especially in DeFi protocols), bugs in the code can expose your funds to theft or permanent loss. Smart contracts are irreversible by design, so there’s no recourse if something goes wrong.

Tip: Stick with audited protocols and mainstream validator infrastructure. Avoid newly launched or unaudited staking services.

Locked assets and illiquidity

Staked funds are often locked for a defined period (e.g. 14 days or more). During that time, you can’t access or sell your crypto, even if prices crash or you urgently need liquidity. This rigidity makes staking unsuitable for short-term investors.

Some networks (like Ethereum) allow unstaking with a delay, but the queue can be weeks long in congested periods.

Slashing penalties

If you delegate your tokens to a validator that behaves maliciously or makes technical errors (e.g. going offline), a portion of your staked assets can be permanently destroyed.

Mitigation: Choose reputable validators with strong uptime and a good slashing track record.

Governance and protocol risk

In proof-of-stake systems, protocol parameters can change through community votes. Rewards may be reduced, or lock-up periods extended. While this is part of decentralised governance, it can introduce unpredictability.

For example, a chain may vote to reduce staking yields in response to inflation concerns, impacting your expected returns.

Key management risk

When staking directly (non-custodially), you must manage your own private keys. If you lose access to your wallet or fail to secure it properly, your funds are permanently lost.

Tip: Use a hardware wallet or trusted custody solution.

Which strategy is better?

It really depends on what you hold and what you value.

If your goal is to earn steady income on BTC or USDC while keeping control over your funds, Ledn Growth Accounts are worth considering. If you’re committed to the future of a PoS blockchain and don’t need access to your funds, staking may offer more upside.

Final thoughts

Both staking and lending are valid strategies for earning passive income on your crypto. The right choice comes down to your portfolio composition, liquidity needs, and comfort with risk.

If you’re looking for a trusted, transparent way to earn yield on Bitcoin or stablecoins, Ledn’s Growth Accounts offer a straightforward solution, balancing risk, return, and control.

Open an account in minutes and start earning interest today:

BTC: Up to 1.00% APY

USDC: Up to 9.00% APY

Withdraw anytime

Backed by proof-of-reserves and full transparency

Explore Ledn Growth Accounts 

Sponsored by 21 Technologies Inc. (“Ledn”). Opinions are based on personal experience and research.

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