In the virtual asset market, there is staking, which allows users to deposit virtual assets and earn interest similarly to banks. For investors considering long-term investments, it is more beneficial to deposit their assets in a blockchain network to earn income from interest rather than leaving them in an exchange wallet. (Chosun Ilbo, Jan. 11, 2025, <[Escape from Korini] Virtual asset 'staking interest' like bank deposit interest>)
The most important feature of staking is that the blockchain consensus algorithm must be in a 'Proof of Stake' (PoS) manner. Therefore, staking is only possible with Ethereum, Cardano, and Solana, which operate on the PoS method, while Bitcoin, which operates on a 'Proof of Work' (PoW) method, is not stakeable.
However, if you are a virtual asset investor, you may have heard of the investment product 'Gopai,' which gained popularity in Korea a few years ago and is now facing issues. Gopai allowed deposits and interest earning not only with Ethereum but also with Bitcoin. It was said that virtual asset deposits could only be made in a PoS manner, so how could Bitcoin be deposited?
◇ Staking and yield farming: despite being the same type of deposit, their purposes and interest rates differ
In precise terms, investment products such as Gopai are completely different concepts from staking. To understand Gopai, you first need to learn about 'De-fi' and 'yield farming.' Staking involves directly depositing a user's virtual asset into the blockchain network, while yield farming is defined as depositing to a De-fi platform rather than the network.
The emergence of yield farming introduced the concept of De-fi, which stands for Decentralized Finance. In decentralized finance, transactions occur using smart contracts on the blockchain without intermediaries like Central Banks. At this point, since there is no Central Bank, liquidity is necessary to prepare for instances where the balance between virtual asset buyers and sellers does not match.
For this reason, De-fi platforms require investors to supply liquidity. Similarly to staking, an investor holding any virtual asset, including Bitcoin, does not plan to sell it immediately may lend their virtual asset for liquidity for a set period, and in return, receive the principal and interest. This is referred to as yield farming.
Comparing staking and yield farming, both involve depositing virtual assets to earn rewards. However, while staking involves the investor depositing their coins to contribute to the security and operation of a PoS blockchain network, yield farming involves depositing their coins to provide liquidity in a De-fi platform.
◇ Gopai, born to regain investors attracted to yield farming
Therefore, yield farming does not need to be based on PoS, and any virtual asset used on a De-fi platform can be the subject of deposits. Additionally, while staking typically requires a lock-up period and poses risks due to coin price fluctuations, yield farming usually allows free deposits and withdrawals, thus presenting a higher risk due to potential hacking of smart contracts or loss of liquidity. This is also why the average annual percentage yield (APY) of yield farming tends to be higher than that of staking.
Starting around 2021, yield farming also began to trend in Korea due to its potential for high returns. Along with this trend appeared centralized exchange deposit products, including Gopai. As virtual asset investors began to deposit assets directly into De-fi platforms instead of exchanges and started trading within De-fi, the usage rate of exchanges decreased, prompting a response.
Unlike staking and yield farming, Gopai involves depositing into an exchange, where virtual asset management companies handle operations and pay investment returns as interest. This is a much simpler structure than the previous two. However, there is a risk of not receiving the principal and interest if the managing company or lending institution goes bankrupt, or if the exchange becomes unstable. In the case of Gopai, the situation arose when the managing company, Genesis Capital, went bankrupt.
Jung Woo-hyun, a research institute member of Jenggle Research, noted, "In the virtual asset industry, products or protocols that offer rewards after deposits, such as staking and yield farming, vary widely. It is important to check how each project or service generates revenue and to identify potential risks, considering one’s risk preference and investment goals before making a choice."