Staking vs Yield Farming: Security Guide (2025)
Both strategies can earn yield—but they expose you to different risks. This guide compares threat models and provides a practical checklist to help keep funds safe in 2025.
Threat Model: How Funds Can Be Lost
| Area | Staking | Yield Farming |
|---|---|---|
| Smart contracts | Liquid staking contracts | AMMs, vaults, lending markets |
| Custody | CEX/frozen withdrawals; validator misbehavior (slashing) | CEX/bridges custody; admin-key risk |
| Market | Token devaluation; unlock risk | Impermanent loss; incentive token dumps |
| Liquidity | Unstaking delays / queue | Low TVL pools; exit slippage |
| Operational | Key management, phishing | Active management errors, gas, MEV |
Custody & Key Management
- Self-custody: hardware wallet, multisig where possible, separate hot/cold flows.
- Custodial/CEX: prefer regulated venues; enable 2FA, withdrawal allowlists.
- LSTs: contract & depeg risk—use reputable issuers with audits/bounties.
Audits, Bounties & Governance
- Look for multiple independent audits and public reports.
- Bug bounty programs with meaningful payouts.
- Transparent governance (on-chain votes, public teams, clear docs).
Bridges & Interop Risks
Cross-chain bridges remain a major attack surface.
- Avoid bridging unless necessary; use canonical bridges for major ecosystems.
- Prefer strategies within a single L1/L2 when starting.
Best Practices by Strategy
For Staking
- Use reputable validators; monitor slashing history and fees.
- Understand lock-up and unbonding times; keep liquidity buffer.
- For LSTs, monitor peg health and redemption mechanics.
For Yield Farming
- Favour deep-liquidity pools and blue-chip pairs; avoid reflexive emissions.
- Size positions small; automate alerts for APR, TVL, and pool health.
- Account for gas, fees and IL when estimating net yield.
Security Checklist (Printable)
- Hardware wallet + fresh addresses for strategies
- 2FA + withdrawal allowlist on custodians
- Protocol has 1–2 independent audits + active bounty
- TVL/liquidity sufficient for entries/exits
- Small test tx before full allocation
- Document tx links for accounting/taxes
Frequently Asked Questions
Is staking safer than yield farming?
Generally, yes—staking major assets via reputable providers has fewer moving parts. Yield farming adds smart-contract, liquidity and strategy risks.
What’s the biggest risk in yield farming?
Smart-contract exploits and impermanent loss. Incentive tokens can also drop in value, reducing net returns.
How do I reduce staking risk?
Use reputable validators/providers, understand lockups and slashing, and consider hardware wallets or regulated custodians.
Start Safe
New to earning? Begin with our Passive Income Starter, then explore Yield vs Staking with the risk checklist above.