The choice between Hard or Soft Staking comes down to the trade-off between the flexibility of access of Soft Staking vs much the higher rates but constraints of a lock-up period.
If you opt for Hard Staking and the asset you have staked appreciates over the lock-up period you win twice – higher interest plus the increase in value.
If you choose to be paid interest in the token specific to the provider, and that also appreciates in value, you’re winning on three fronts, but trebling your overall risk.
If the markets start to tumble during the lock-in period, you have no choice but to watch your deposit fall in value. You can withdraw the interest accrued and exchange that, albeit for a declining return but are otherwise powerless.
Getting Paid In A Native Token
Getting paid in a token specific to the provider has its own set of trade-offs. Interest rates are higher if you get paid in a native crypto token because the providers are trying to incentivise its use.
Native tokens are however volatile. Indeed, the relative illiquidity of such tokens – difficulty of selling them – make them more unpredictable than the likes of Bitcoin and Ethereum. By choosing to be paid interest in a native token you are speculating that their price will increase, which is no different to speculating on any cryptocurrency:
- What is its value proposition?
- Will the user base grow?
- Will the provider change its model? Is it competitive?
- Is the provider secure from attack?
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