Different Forms of Generating Passive Income and How Black Stallion Staking is Standing Out

6 min readDec 27, 2022

Hello, Black Stallion community! We hope you are well and have spent a nice holiday time with your friends and families.

Black Stallion as a platform will enable our users to generate income in active and passive ways, and that passive way is staking. However, there are more ways to generate passive income such as:

Yield farming
Liquidity pooling

We wanted to make an educational article and show why we chose staking as the preferred method for generating passive income.

While those three share many commonalities, there are also small but important differences, and it’s easy to mistake one for another. By learning all the details of each, you can be sure you don’t stake your coins when you want to put them in a liquidity pool, or vice-versa.

Without further ado, let’s explore yield farming, liquidity pools, and staking.

Yield Farming

Broadly speaking, yield farming is putting your crypto assets to work to earn returns. Also known as yield farming or liquidity mining, farming sits somewhere in between liquidity providing (more on that later) and staking.

Some examples of yield farming include:

Lending crypto assets
Staking your LP tokens (more on this below)
Providing liquidity to a DEX in exchange for fees

For instance, yield farmers who lock their funds into a liquidity pool get rewards (basically interest) in one or multiple tokens they’ve locked into the liquidity pool, in addition to getting the native token as a reward for providing liquidity.

As you can see, the idea is obvious for yield farming: The more you invest, the more you potentially get in return.

Without yield farmers, Defi protocols wouldn’t be able to offer any of their lending or exchange services. Yield farmers are the source of liquidity on decentralized exchanges and we will talk about that in the next section.

Liquidity Pools and Providers

Liquidity providing falls under the umbrella of yield farming.

Let’s say you went on a trip to Europe and you went to the local fiat currency exchange to exchange American Dollars for Euros. Obviously, you would have to have some American Dollars. The exchange would also have to have some Euros.

The same is true for centralized crypto exchanges, like Coinbase and Binance, or the DEX that we have in the works. If you want to trade BTC for ETH, the exchange needs to have both tokens.

But what if there aren’t enough tokens or the bidders and sellers can’t agree on the exchange rate? That’s where market makers come in.

Market makers provide liquidity to the market and facilitate trades, enabling people to exchange currencies at almost any time — even if no other individual is there to accept the requested exchange rate. Market makers typically make money from the bid-ask spread difference.

You may be wondering, “How do AMMs work? Here’s a quick overview:

On traditional exchanges, prices are determined by the order book.
On AMMs, there’s an underlying algorithm that provides asset prices (it’s near what you find on sites like CoinGecko).

Staking

The reason why providing liquidity is so similar to staking is because liquidity providing IS a form of staking. But here’s the difference:

In liquidity pools, the providers deposit some “third-party” token pair
In staking pools, those who stake deposit just one currency and earn yield. The token they stake is often the platform’s native token. For example, on PancakeSwap, you stake CAKE — the platform’s native token.
On our platform, you will be able to stake BS Token and more

So, why would anyone want to stake tokens and not provide liquidity?

Well, we don’t wish to bore you with how blockchain works and how new blocks are created, but there are two major ways that are done: proof of work and proof of stake.

With proof of stake blockchains, those who stake more and for a longer period of time are more likely to validate a new block on the blockchain and earn rewards. The reason they’d want to do that is because, by increasing the size of the blockchain, the entire network becomes more secure and efficient. Staking also doesn’t require expensive equipment, like Bitcoin mining does (proof of work).

Another reason to choose to stake over liquidity providing is that staking is generally (but not always) less risky than liquidity providing. Participating in liquidity pools exposes you to what’s called impermanent loss. You can read about impermanent loss over here, but the gist of it is that when you provide liquidity with a coin pair, there’s a chance that the value of the tokens could change in the way that you would’ve made more had you just HODLed. And the more you’ve provided, the greater the unrealized gains would be.

Staking simply doesn’t involve impermanent loss, as it only deals with one token.

However, staking does involve some risks:

The value of the token you staked could drop
Often you need to lock your tokens for a fixed amount of time, leaving you unable to use those assets for other purposes
There could be unstaking periods

Black Stallion Staking

Black Stallion will provide the users the ability to stake BS Token and several other cryptocurrencies, by developing a third-generation Blockchain Staking pool.

Specifically, users will be able to stake:

• BS Tokens

• Binance Coin (BNB)

• Ethereum (ETH)

• Polygon (MATIC)

• Avalanche (AVAX)

• Binance USD (BUSD)

• USD Coin (USDC)

• Tether (USDT)

An ERC-1155 Cross–Chain Smart Contract will allow the users to stake within specific time frames, and to earn different APYs and NFT rewards, according to different types of staking contracts they can make.

Users will be able to stake any of the above cryptocurrencies for a short period of time (3, 6, 9, or 12 months).

Each of the above categories will have specific benefits and limitations.

For example, if you wish to stake for 3 months the minimum you can stake is 100 BS and the maximum is 1000 BS.

If you wish to stake for 12 months, you will have to stake at least 10k BS and you’ll be able to stake 100k BS at maximum. Your APY will be higher as well at 0.13% (as opposed to 0.1% for 3 months) and you get an NFT airdrop.

So let’s say you staked 10k BS. After a year, you would’ve had 14,680 BS tokens of gains.

Final Thoughts

To make things easier, we’ve briefly summarized the three ways of generating passive income:

So in short, Black Stallion chose staking as its preferred option for generating passive income because it provides security to the network, but it also provides the best cost to benefit, or risk to reward ratio.

We want our users to be incentivized to use our platform and not intimidated by the prospect of losing their funds.

*This article is for informational purposes only, and should not be considered financial advice. Understand that rewards vary based on network, overall participation, and other factors. Do your research and consult with a financial advisor before deciding to provide liquidity, stake, or farm tokens.

About Black Stallion

Missions, visions, and focal points of BLACK STALLION are to Design and Develop its own Metaverse, own wallet, Metaverse play to earn games, integrate an NFT Marketplace and staking, and merge the gaming industry with cryptocurrencies by establishing an ecosystem controlled by users that enables them to transact both ways through the BLACK STALLION token, allowing gamers, investors, and content producers to earn money while immersed in a unique environment.

The BLACK STALLION token is a cryptocurrency that aims to break down barriers in the video game industry by allowing users to trade within the game using BLACK STALLION Crystals. Players can sell items they’ve discovered, produced, or earned in the game to each other. BLACK STALLION platform is free to play and will enable players to make money as they play.