In today’s world it’s almost impossible to follow a quiet pace of life. In this hustle-bustle, everyone is rushing, some are thinking of how to earn more, others are bound to their 9 to 5 job coming home exhausted and emotionally empty each day. Just imagine how life could change if we care a bit less about our income and have more rest making the most of our time being with our family or dedicating it to our hobbies. That’s the thing!
Why not seize an opportunity of the modern realities and forget about how to increase your earnings? That’s the chance crypto staking offers to all of us, and that’s the moment of your life turning you to the right way if it hasn’t yet.
In this guide, you’ll get the valuable pieces of information with all the details on how to earn passive income on the digital assets. We will cover nuts and bolts: where and how to stake crypto, what to pay attention to. Upon reading this guide, you will enjoy your income growth with no worry of burning a hole in your pocket.
Passive income in crypto is the most topical and burning question concerning the nowadays’ finances. These streams of earnings can generate profit just in seconds with minimal efforts. Back then, there was only mining that could make profit regarding the cryptocurrency sphere whereas now passive income with crypto is more than possible. This guide will open for you the doors for great opportunities crypto staking offers to us. Let’s go!
1. What is Staking?
In a nutshell, staking is a process of holding your crypto in the network and getting interest on it. Basically, you lock up your coins in the network for some period of time and earn rewards on this. Staking works according to a specific algorithm called PoS. Essentially, you get paid for buying and holding crypto in your wallet depending on the amount of crypto you stake.
Why do you earn rewards? Easy as pie! You participate in the network operation when locking up your coins on a proof-of-stake blockchain. You may be able to make new blocks in the blockchain and become a validator for which you get rewarded.
- The rewards you earn from a blockchain depend on how much crypto you stake: the more crypto you stake, the higher chances are to participate in creating a new block.
- Staking works on Proof-of-Stake model so you can stake your coins only on proof-of-stake blockchains.
- On Proof-of-Stake blockchains everyone staking crypto can validate transactions and earn rewards for this.
- When staking, you help to secure and keep the blockchain in good order by participating in Proof of Stake consensus.
- Lending coins to other traders in return for interest can also be called staking
Basic Staking Terms
To navigate in staking, let’s learn the basics first.
Let’s begin with what is called APY. APY is an annual percentage yield you get for holding a cryptocurrency. It depends on how much you stake. The more coins you stake, the higher the reward is. Usually, when choosing coins to stake, we look at the APY of each of them to compare and make a conclusion on what matches our goals and what doesn’t.
There’s the following formula to calculate your total return:
APY= Yield + Capital Gain/Loss
As you may see, APY consists of two components: yield and capital gain or loss. Yield is your staking rewards as such in the form of a percentage. You earn yield when locking up coins for a certain period of time.
However, it doesn’t mean that if you see the yield of 12% opposite a coin, you will get exactly this number at the end of the staking period. Such factors as capital gain & loss mean a lot here. To clarify, a coin you start staking can lose in value or rather increase over the time you stake it. In this case, you need to subtract or add the percentage of gain/loss to/from the yield.
There is also APR which is the annual percentage rate. APY and APR are different by the fact that APR doesn’t count compound interest, which involves plowing back your profits to increase your returns.
To choose coins, investors usually compare their APY, evaluate cryptocurrency prospects, its potential risks and calculate the profit. All the information on crypto assets, you can find on Stakingrewards.com.
Types of Staking
Cryptocurrency staking is not a one-corner activity, there are different types of staking so to say for anyone’s taste and that’s actually also a factor to pay attention to when choosing coins and networks to stake.
Cold staking is when you use a hardware wallet for staking coins. These wallets are in fact less risky than hot wallets which have access to the Internet and are basically apps or programs you use for staking.
Locked staking implies that during a locking-up period, you are not able to redeem your principal.
Flexible staking is a less risky type of staking. Although the APY is slightly lower, you can get your money back at one day's notice, though.
2. What is Proof of Stake?
Staking is maintained by the Proof-of-Stake consensus algorithm. You have to take this into account when choosing platforms and coins to stake. What does it mean?
To break this down, a blockchain, a public transaction ledger, is a big decentralized network consisting of different blocks with data. To verify transactions and add new blocks, it needs nodes (miners) and a consensus algorithm representing the rules according to which the nodes or miners agree on the current state of data in all blocks. For now, there are two main ways to reach a consensus in blockchain technology: Proof-of-Work (PoW) and Proof-of-Stake (PoS)
Initially, it all began with the PoW algorithm. When Bitcoin was invented, the best way to keep the blockchain decentralized and secure appeared PoW. For now, the modern blockchain technology has moved over to PoS. Why?
Each of these consensus algorithms has its dos and don'ts though one of them stays more advanced and profitable in a bunch of ways. Which one and what its key takeaways are, explore in this paragraph!
PoS Vs. PoW
In a Proof-of-Stake blockchain, there are validators who run nodes, process transactions and earn fees. Running a node demands huge undertaking, so most users lend their coins out to a validator and then get the rewards proportional to the amount of coins they staked. That can’t be said about a Proof-of-Work consensus where your rewards depend absolutely on the computing power, and that’s one of the reasons why blockchains started to migrate to the environmentally sustainable ways such as Proof-of-Stake. Proof-of-Stake blockchains are more secure, work faster, and cost less compared to the Proof-of-Work algorithms.
As any system in the world, Proof-of-Stake has its downsides and one of them is a probability of a single validator or a group of validators to get a control over the network. To prevent these problems, developers built in some economic incentives, for example, reducing staking rewards once a single validator has staked a certain amount of crypto or punishing validators who tried to corrupt the network. In this case, slashing takes place. It implies burning a part of a validator’s staked crypto, and sometimes it can affect investors who delegated their coins to an inappropriate validator.
Alright! Here are some key takeaways:
- Pow is slow especially when the network is loaded
- Miners compete for the rewards based on their computer power.
- You can get rewards only when you mine.
- To create a new block or verify a transaction, miners have to decrypt each block transaction problem: the first one who did it, gets rewarded with a coin.
- PoW is hard to scale up.
- Keeping a blockchain secure requires huge amounts of energy and intensive computer resources.
- To add a block, you need to have a computer more powerful than 51% of the network.
- The first and largest cryptocurrency Bitcoin uses the PoW algorythm.
- PoS is faster and more technology advanced.
- Nobody competes for rewards: a block creator is chosen by an algorithm based on the amount of coins staked.
- Each investor participating in staking has a chance to get rewarded
- There is no reward for making a block: a block creator takes a transaction fee.
- It’s easier to scale up.
- PoS is less expensive as it doesn’t demand intensive computer resources.
- To add a block, you have to hold at least 51% of all the crypto in the network.
- Presently, only altcoins and stablecoins can be staked.
To make a recap, while Bitcoin and the PoW algorithm were the first on the way to decentralized finances, they stepped behind the benefits of PoS. PoS has been created as an alternative to PoW to eliminate its flaws. In many ways, especially with the electricity issue, it played its role and gained respect. The PoS algorithm is way less power-hungry, more profitable for users, faster and easier to scale up, yet with its flaws. Obviously, if rewards depend on how much a user stake, it turns out that those having more than 51% of staking coins in the network can get control over it. It’s also called “the 51% Attack” and is considered the biggest disadvantage of the PoS algorithm. Moreover, both PoW and PoS can lead to a monopoly on the blockchain that’s why developers came up with a more advanced consensus algorithm – Delegated Proof Of Stake (DPoS).
What is DPoS?
Delegated Proof Of Stake (DPoS) was developed by Daniel Larimer in 2014 as a better version of the PoS algorithm. To recall the facts, in Proof-of-Stake networks, users verify transactions and ensure security through collateral staking. Delegated-Proof-of-Stake networks work in the similar way, yet, in addition, it includes a voting and delegation system making the process to reach a consensus more democratic. Allright, how does it work?
As the name implies, users of the network choose a delegate to validate a new block by voting. Delegates are also calledwitnesses or block producers. You can vote on a particular block producer by pooling your tokens into a staking pool linking them to a particular candidate. By the way, as the number of validators is limited, it’s quicker to reach a consensus and transactions are confirmed faster. Next, when the delegates are chosen (usually at least 20, maximum 100) for each new block, they validate new blocks and receive transaction fees. The matter of fact is that they share this reward with other users pooling their tokens in the successful delegate’s pool. Your share depends on the percentage your stake takes from the whole pool: the more you stake, the higher a share you get. Say that, if your stake is 4% of the total staking balance, you will receive 4% of the block reward.
DPoS was implemented first on the decentralized crypto exchange platform BitShares in 2015. As for today, such exchanges asCardano, EOS and TRON use DPoS as well.
- DPoS is the improved version of the PoS algorithm.
- DPoS allows a more diverse group of people to participate in the process.
- DPoS is faster and more efficient than its progenitors (PoW and PoS).
- The chance of a so-called “51% Attack” where more than 50% of the network is controlled by a certain group of miners because the success of a delegate depends on its earned reputation but not on overall health.
The main concept of DPoS is a more democratic way of choosing a validator. For sure, testing and experimentation on PoS algorithms continues to optimize further: to increase transaction speed, throughput of blockchain protocols and overall efficiency of networks. To streamline, developers tend to select and mix only the best features of different consensus algorithms. Right now, many new crypto projects pop up, for instance, NPoS, PoA, PoB, and others.
In the constantly developing crypto world, there would be even more advanced consensus algorithms offering solutions to address the vulnerabilities and shortcomings of blockchain networks. Essentially, to reasonably evaluate a crypto project, you need to learn its stuffing first: the do's and don'ts of its protocol and its consensus algorithm. All in all, switching from PoW to PoS has become a tipping point in the development of blockchain technology. As of now, the PoS algorithm holds great potential to dominate the crypto world in the future.
Biggest Proof-of-Stake Blockchains
Cardano is a decentralized PoS blockchain platform with its own native cryptocurrency token ADA and its own DPoS algorithm called “Ouroboros”. Designed as an alternative to Ethereum in 2015, Cardano wins its forerunner in speed, volume and cost of transactions.
Cardano addressed 3 main problems which other cryptocurrencies featured:
The “slot” system makes Cardano easy to scale up. The more users come, the more slots are created. It results in higher transaction speed and overall efficiency.
Cardano features Cross-Chain Transfer. It becomes possible to move funds freely from one blockchain to another so that ledgers with different regulatory compliances don’t need to share any private data stored on their blockchains.
Any blockchain should guarantee its users that it keeps on working. As a guarantee for users that the blockchain keeps on working, Cardano established a treasury collecting fees and pays those who contributed to the network.
Speaking of staking on Cardano, it involves 2 key parties: stake pool operators (SPOs) and delegators.
How to Stake ADA
Staking ADA as a SPO is a complex process with validating transactions. You need to be really savvy and understand the Cardano blockchain. Well, if you’re an advanced professional, why not?
As a delegator, you stake ADA tokens within a chosen staking pool. By delegating ADA to a certain pool, you support your SPO to be chosen. When a SPO is chosen, rewards are distributed between this SPO and its delegators. You can delegate tokens directly through a crypto wallet or indirectly through a crypto exchange. As a Cardanostaker, you get rewards every 5 days which is called the “Epoch“ period.
You can also stake Cardano by lending your coins through DeFi and CeFi providers. Here, you loan your coins out to other traders through a lend/borrow service and have a chance to get higher rewards along with higher risks and a more complex process compared to that through a wallet or exchange.
If you are a beginner, the easiest will be to stake ADA directly on your crypto wallet. To get started staking ADA, you will need to get ADA tokens on your cryptocurrency wallet like Exodus (hot wallet), or a hardware wallet, like Ledger.
The reason why we’re discussing Ethereum is that it is shifting now from PoW to PoS consensus algorithms.
Ethereum is a decentralized blockchain platform that enables writing of smart contracts and decentralized applications (Dapps), and allowing developers to design new kinds of decentralized services.
Ethereum has its own cryptocurrency Ether (ETH) and programming language Solidity. Ethereum keeps the light on with the fees that users pay for using Dapps on its platform. These fees are called”gas” and unfortunately they hit over the head. In 2021 the average “gas” fee was above $10 per transaction. Ether fuels all transactions within Dapps based on Ethereum and is accepted as a form of payment by some merchants and service vendors, e.g.Overstock or Shopify.
Now, Ethereum is being under the upgrade called “Ethereum 2.0” in order to scale up and eliminate technical issues affecting the speed and efficiency of the network. Ethereum 2.0 will work on PoS where validators will be selected randomly and rewarded for securing the network.
In terms of its value, Ethereum is highly volatile. In terms of inflation, thanks to recent upgrades, Ethereum has decreased this rate as some amount of Ethereum gets burnt now.
Ethereum can be mined and can be staked. According to stakingrewads.com, you will get a return of an average of 10% if you become an Ethereum validator. Yet, running your own node demands at least 32 Ethereum tokens which cost about $100,000 and that is a huge undertaking. That’s why users unite their funds instaking pools to be able to stake Ethereum. You can stake ETH 2.0 on crypto exchanges such as Binance, Coinbase, Kraken (where you even don’t need ETH minimum), and others.
As a home to loads of Dapps, Ethereum aims at becoming a platform for all kinds of apps that can store information safely. Experiencing technical problems pushed developers to migrate to Proof-of-Stake algorithms.
The Polkadot blockchain is known as ‘blockchain of blockchains’ or‘multichain’ running on NPoS (Nominated Proof-of-Stake) with its own cryptocurrency DOT.
In the “Nominated Proof-of-Stake” algorithm, there are validatorsand nominators. Nominators give their stake to validators to help them get recognized by the network and mine the blocks. Profits and losses are shared with nominators. Due to this mechanism, untrustworthy validators are excluded from the system.
Polkadot was created to improve decentralisation, speed, and security. Relay chain and Parachains are the two connected elements of the Polkadot multichain.
Relay chain is central to everything and manages security, consensus and cross-chain interoperability across the network.
Relay chain is central to everything and manages security, consensus and cross-chain interoperability across the network. Connected with the Relay Chain, Parachains provide fast transactions and implementation of smart contracts. Parachains can communicate with Parathreads which make it possible for other blockchains like Bitcoin and Ethereum to join the Polkadot family.
What makes Polkadot especially good? At the moment, there are about 100 parachains connected to the multichain. Polkadot is striving to reach the speed of 1,000,000 transactions per secondwith all of them being genuinely decentralized. In fact, only one Relay chain is in charge of everything that’s why transaction cost is substantially lower. Moreover, Polkadot is developer-friendly and allows blockchains to be built within hours and get easily connected to the network.
How to Stake ADA
Through a cryptocurrency exchange (Binance or Kraken). Choose an exchange, deposit tokens into your Polkadot wallet and start staking.
With a wallet or node. You can choose a hardware wallet (Ledger) or hot wallet (like Polkadot JS, imToken). Once you have transferred DOT funds, all you need to do is redeem your rewards.
Via your own masternode set-up as a validator. That’s for the hardcore fans with high speed and capacity hardware and significant system administration experience.
In general, Polkadot features a lot of prospects for the future since more than 100 projects have recently claimed to start using the Polkadot mechanisms.
Binance Chain is the leading blockchain combining PoA and PoS mechanisms. It belongs to the Binance ecosystem with its own cryptocurrency called BNB which investors and traders widely use inside the network to save on fees. On top of Binance Chain, there is DEX (Decentralized Exchange) and recently Binance launched Binance Smart Chain to optimize the speed and costs of transactions and enhance programmability and interoperability.
Originally, Binance Smart Chain had the goal of introducing smart contracts and complex Dapps into the ecosystem. Not fully decentralized, it has only 21 validators with Proof-of-Staked Authority (PoSA) consensus supporting short block time and lower fees. For staking, the most bonded candidates become validators and produce blocks. Binance Smart Chain runs in parallel to the Binance Chain but compared to the latter, it’s compatible with the Ethereum Virtual Machine (EVM).
Speaking of staking, the Binance fees are pretty much lower than anywhere else and the rewards are quite favorable. You can earn around 5-10% staking rewards. For staking, investors usually use Trust Wallet or Binance Chain Wallet.
How to Stake BNB
Staking on an exchange which operates as the validator so that you don't worry about selecting a good validator. No staking fees are charged, which is a bonus.
Staking BNB through a cryptocurrency wallet such as Trust Wallet or Binance Chain Wallet. You’ve got more flexibility in terms of security and choosing a validator. Mind that withdrawing BNB from a wallet will take 7 days and in each wallet there’s a certain minimum to stake.
As a validator, you will need to operate a full node and stake a minimum of 10,000 BNB. Validators are elected every 24 hours through being a top 21 candidate in terms of voting power.
- Proof-of-Stake is an advanced consensus algorithm where you get rewards based on the amount of coins staked.
- There are different versions of PoS that attempt to enhance security and rewards. One of them is DPoS.
- Among the biggest PoS blockchains are Cardano, Ethereum, Polkadot and Binance Chain.
- We can’t ‘stake’ PoW coins but can lend them to traders for a fee.
- You can stake a blockchain asset directly through a wallet or deposit your coins on DeFi or CeFi to get yield. Tech savvy hardcore lovers can opt for validating transactions and get rewarded for that.
- Returns are usually not certain or fixed.
3. What Coins Can I Stake?
PoS networks are gaining momentum so loads of coins are already available for staking though some of them coming out without enticing rates at all. Well, if you want to find out the best coins to stake, hold on, it’s right here in this paragraph!
Remember, that only altcoins and stablecoins can run on Proof-of-Stake algorithm, so Bitcoin is not our case then. The interesting situation comes with Ethereum which is in the middle of transferring from PoW to PoS.
Solana token has grown steadily over the past few months and became one of the top cryptocurrencies by market cap at №7 on Coinrate.com. Solana got popularity due to its speedy and low-cost blockchain.
To stake Solana in a decentralized manner, go to solanabeach.io and check what’s happening out there: see validators, how much stake they own in the system, the percentage of the network they have. Mind that your rewards will change depending on a validator you choose and the amount of inflation going on with Solana at the moment. To calculate your actual reward, you need to reduce the adjusted reward. Despite the inflation, Solana tokens have done very well over the past few months.
If you want to steer clear of DeFi platforms, you can easily set up an account on some exchanges. For instance, on Binance you can stake Solana with the estimated APY of about 9.90% for 60 days or for 30 days with a slightly lower APY.
- Exodus Wallet
- Ledger Hardware Wallet
- Atomic Wallet
- Trust Wallet
are good fit for staking Solana so far.
Polygon, known as the Matic Network, has gained a lot of hype today. Essentially, it is a scaling solution aiming to improve the speed and reduce cost and complexities of transactions on blockchain networks. Polygon is used as a protocol for building and connecting Ethereum-compatible blockchain networks thus maintaining a multi-chain Ethereum ecosystem. Polygon has its own cryptocurrency MATIC which is used as payment and settlement unit within the network. Polygon is a layer 2 solution for Ethereum and allows you to use Ethereum-based tokens and Dapps. While Polygon Matic features low fees using Ethereum-based tokens, it doesn’t mean a thing until Ethereum has completely shifted to Ethereum 2.0 and become a Proof-of-Stake blockchain.
As for staking, Polygon fees almost don’t exist. Anyway, to stake MATIC tokens, you have to move them to Polygon. On the Polygon network website, you can calculate the rewards for staking MATIC tokens.
You can become a delegator on Polygon and delegate your tokens. To become a validator, you will need a computer that runs 24//7 which is a huge undertaking, so most users just delegate their tokens.
To make it easier, you can go to Binance and stake MATIC token directly through this exchange with good rewards as well. To stake MATIC on Binance, you will get about 12.20% return for 60 days.
Take into account the fact that there is slashing in Matic tokens. Some amount is taken out from the turnover and a validator is liable for partial slashing as well. You can check the relevant information on Polygon MATIC on coinrate.com.
Yet not so popular, Polkadot is becoming the Internet of blockchains with the structure allowing other blockchains to be built on top. Polkadot stays within the top coins according to coinrate.com and now takes place №9. Polkadot has its own cryptocurrency DOT, test blockchain Kusama and runs on a PoS system, namely – Nominated Proof-of-Stake.
- In this system, there are validators and nominators. Like in other blockchains, becoming a validator on Polkadot doesn’t come easy at all – it requires a huge stake of coins. The path of least resistance is to become a nominator. Unlike Solana and Matic where you choose only 1 validator, here you can support a whole group – up to 16 validators as candidates.
- More simply, the same you can do by setting up an account for instance, on Binance and stake DOT in there. Mind that for now it is available on Binance only in the form of Flexible Savings.
The rewards on Polkadot are distributed in a different way. If 2 pools are doing the same amount of work, in terms of validating a block on the blockchain, they would be paid the same amount of tokens with no proportion to the stakes in each pool. Even if one of the pools is a lot smaller than the other. Yet, the number of users counts and a pool with a larger number of participants gets less rewards than one with a smaller number. The rewards are pretty high – more than 13%, check it out on Stakingrewards.com. Speaking of the inflation rate, Polkadot keeps on rising in its value, so it will be net-positive for both the price and the yield you get.
*To nominate validators you can use the Polkadot extension.
Binance Chain (BNB)
Binance Coin (BNB) is the native cryptocurrency of Binance Exchange and is primarily used for trading on Binance Exchange. Binance Coin was initially launched in 2017 and firstly resided on the Ethereum blockchain with the token ERC-20. Later on, Binance transferred BNB to its own blockchain making it a utility token within its own ecosystem. BNB holders get a discount for transaction fees as an incentive on the Binance Exchange.
Binance is the largest crypto exchange ecosystem consisting of two exchanges and two blockchains, correspondingly – Centralized Exchange (CEX) and Decentralized Exchange (DEX) – Binance Chain and Binance Smart Chain. To make trading for its users lightning fast, smooth, and decentralized, Binance launched its own blockchain, the Binance Chain in 2017. At that very moment, BNB moved from the Ethereum blockchain. Binance Chain missed out a lot on the functionality, it wasn’t programmable and flexible enough, moreover, incompatible with Ethereum tools. So, Binance created Binance Smart Chaincompliant with EVM or Ethereum Virtual Machine and thus supporting Ethereum-based Dapps. Due to its dual-chain structure, users of Binance Smart Chain can enjoy fast and cheap transactions and trading with smart contract programming functionality and tools.
As a utility token BNB serves many purposes:
- Currency. BNB can be used as a payment method to buy virtual items, to book flights, hotels, and more.
- Transaction fees. Users paying with BNB, get a discount.
- Mining rewards in new tokes. If you participate in mining new tokens backed by the Binance Launchpad maintaining blockchain startups, you get rewarded with BNB.
- GAS. Gas is a fee that developers pay to validate transactions or deploy smart contracts. So, developers can pay ‘gas’ with BNB.
- Staking. Validators of the Binance Smart Chain get rewarded with BNB as well.
- You can stake BNB on Binance Exchange in a centralized manner or on a DeFi wallet (e.g. Trustwallet). Anyway, if you use Binance, you can use BNB tokens to reduce your trading fees. Come to Binance to choose a validator to delegate your coins to.
- If you want to stake BNB on a DeFi platform, the minimum amount to stake is 1 BNB which roughly equals to 400$. This way, the easier option will be to stake on Binance where the lower limit is around 80$ with decent staking rewards.
Cardano is a public blockchain platform with the native cryptocurrency ADA. Launched in 2015, it’s now the largest cryptocurrency using Proof-of-Stake consensus algorithm.
Cardano runs on its special version called ‘Ouroboros’. This version of PoS isn’t exposed to slashing so even if a node works bad, you won’t lose any rewards. In this mechanism, there are validators and stake pools where you can invest your coins and participate in the rewards. To calculate potential rewards, go to Cardano website.
- You can run a stake pool gathering other users and earn potentially higher rewards from all users staking their coins.
- Also, there’s an option to delegate your coins. To stake ADA, you can use one of its wallets YOROI which can work as a Chrome extension as well. Keeping the system fair and square, Cardano reduces the amount of rewards if a stake pool gets too big which is actually great because you won’t get small rewards participating in a large pool.
- If you don’t want to get into DeFi staking, you can come to Binance and stake ADA there with a return of more than 7% for 60 days. Also, Celsios wallet is considered a safe and secure place to earn good rewards with ADA.
There’s some inflation in the token yet we can see that over the last few months the price of Cardano has been doing really well (check out coinrate.com) so you can take advantage of good staking rewards and the capital appreciation.
Where Can I Stake?
5 Best Staking Platforms
eToro is a popular platform in the financial sphere that enables users to invest in crypto and generate passive income by holding and staking digital assets. It pays rewards to users every monthfor locking up their crypto. EToro is regulated by the UK’s FCA, CySEC, ASIC, and FinCEN and now serves over 20 million users worldwide so you can be sure that your funds and personal data will be secured. The rewards depend on the membership (bronze, silver, gold, platinum, and platinum+) which is built based on your staking ability. For instance, to become a Platinum+ member, you should keep at least 90% of your monthly staking yield.
- Regulated by top bodies
- Has over 20 million users globally
- High rewards for staking
- Dynamic reward system
AgainstStart staking on eToro
- As of now, eToro supports only two digital assets: Cardano (ADA) and Tron (TRX).
Binance is the largest crypto exchange by trading volume and the best place for staking crypto. The platform features more than 100 digital assets including the most popular cryptocurrencies, altcoins, and stablecoins. In fact, Binance is an entire ecosystem offering a flurry of income-generating services: flexible, fixed, locked savings plans, guaranteed and high-yield savings, DeFi staking and so on. The returns depend on the staking asset, and there is a line of higher rates for newly-released crypto rather than big names such as BTC or BNB. Say that, on staking CHR, you will get about 45% APY while staking BNB on DeFi – just about 8%. All in all, Binance is considered the safest crypto staking platform: your funds are protected by SAFU, and 10% of Binance trading fees go to insurance coverage in case of a hack.
- Security and safety
- Insurance coverage
- Various options to stake crypto
AgainstStart staking on Binance
- Not regulated
Coinbase is a top U.S. crypto exchange allowing investors to trade over their crypto. As well as its competitors, Coinbase has a range of options to generate passive income via staking. Broken down further, Coinbase helps users run and sync nodes to the blockchain with an opportunity to just sit back and earn rewards counted in proportion with the number of coins staked. Yet, the number of cryptocurrencies to stake is not big at all – only Algorand, Cosmos, Ethereum, Dai, USDC, and Tezos are available for staking at the moment. With Ethereum and Cosmos, you get the largest 5% APY, Tezos goes with 4.63%, Algorand and Dai – with 4% and 2% respectively, and for staking USDC, you will earn only 0.15% APY which is obviously sad. Moreover, your profit can be spoilt by a whopping commission of 25% for staking services on the platform.
- User-friendly platform
- Offers custodial services for large institutions
- Public regulated company
AgainstStart staking on Coinbase
- Enormous staking fees
- Few crypto assets to stake
Founded in 2017, Kucoin has become one of the best crypto staking sites in the world. On Kucoin, there are 2 staking programs: Soft Staking and Pool X. If you opt for Soft Staking, you will get daily rewards on the following crypto assets: EOS, ATOM, TRX, IOST, KSM, and others. Pool-X maintains over 8 cryptocurrencies, including EOS, ATOM, TRX, and TOMO. Interests range from 5% to 19.65%, or approximately 20%. Kucoin charges a minimum of 5% and a maximum of 8% for staking fees. One more perk is that users can earn from both staking and Proof-of-Liquidity (POL).
*POL (Proof Of Liquidity) is a decentralized token issued by the Pool-X exchange based on TRON's TRC20 protocol.
- Multiple staking offerings
- 2 staking programs
- Large staking pool
AgainstStart staking on KuCoin
- High staking fees
To round up our list, Poloniex is a cryptocurrency exchange that allows users to buy or sell digital assets (BTC, ETH, TRX, and so on). Poloniex has a 24-hour trading volume worth over $150 million. Besides, it offers staking cryptocurrency and earning rewards, yet with a limited number of digital assets for staking rewards including TRX, BTT, and WIN. The plus is that you don’t pay any fees. To get 100% of the staking reward, you need to stake up to 100 TRX while staking BTT and WIN will give you around 8-10%. Furthermore, there are no lock-up periods and you can trade your assets while they are generating returns for you.
- No fees
- Decent staking rewards
AgainstStart staking on Poloniex
- Only 3 crypto for staking supported
4. Can I Stake Stablecoins?
What are Stablecoins?
Crypto market is as volatile as the stock exchange so you need to have some backup assets to maintain your portfolio during possible harsh times. Here come stablecoins. What are they?
Compared with other cryptocurrencies, stablecoins are pegged to real world assets such as gold, U.S. dollar, yen, euro – whatever exists in our traditional centralized financial system. They run on DeFi protocol and have minimal to ‘zero’ risk of changing in value which means they are less volatile. With the low interest rates, they have great lending potential so you can both earn yields and stay away from market volatility.
To check what APY you can get from staking certain stablecoins, go to Stakingrewards.com and do some research. Among the top stablecoins are Dai, Gemini Dollar, USDN, USD Coin, Sai, Tether, True USD, sUSD and Binance USD.
Where to Stake Stablecoins?
You may ask: ‘What’s the best place to stake stablecoins?’ Well, let’s have a look at some popular platforms.
Binance is the largest cryptocurrency exchange in the world and of course it proves reliable and sustainable. There’re good staking products though with not always enticing rewards. For instance, you can lock up your stablecoins as ‘Savings’ or opt for DeFi staking where APY will be higher for sure and therefore with higher risks as well. Many stick to Binance since it earned a good reputation and leaves lots of premises for the future, so when choosing a product on Binance, be quick because they’re sold out extremely fast.
Crypto.com is a cryptocurrency exchange platform and so to say an old-timer among the modern cryptocurrency exchanges. In fact, it stands out as a one-stop place for any kind of crypto transactions. Anyway, if you can allow yourself to lock up your stablecoins for 3 months, you will get pretty decent yields on this platform. Moreover, Crypto.com offers 2 apps: a regular one and a DeFi. With the DeFi app, you hold custody on your private keys, with the higher interest rates. For example, you could get over 22% on staking USDT.
Nexo is a blockchain-based platform offering users to earn by storing crypto assets such as Bitcoin (BTC), Ether (ETH), Litecoin (LTC) or XRP (XRP) on the platform. In short, you deposit an accepted token as collateral to receive a loan in the form of a fiat currency or stablecoin. You can stake stablecoins here as well and get a decent interest rate of about 12%. To get the highest APY, you need to have at least 10% of your account balance in NEXO tokens on the platform which is a really good deal as you get 10% more and 5 free withdrawals. That really comes in handy as of today since the Ethereum fees are on the dear side. One more perk of staking stablecoins on the Nexo platform is thatthe interest rate is paid out daily, and you don’t have any lock-up periods with the opportunity to withdraw your assets at any time.
Celsius is a blockchain-based lending platform that is accessible through a free mobile app. For instance, you could earn around 8% APY on staking USDC. However, by transferring your crypto to Celsius, you will be able to earn up to 17.78% APY in minutes. The interest rate is paid out weekly. In terms of the loyalty program, you need to have at least 20% of your funds to be in CEL tokens to get the highest APY. It’s more than on Nexo but the rewards are higher as well. any time.
BlockFi is a cryptocurrency exchange and a wallet offering interest-earning, portfolio-backed loans, and fee-free trading. Like other big crypto exchanges, you can fund your account with crypto, USD, or stablecoins. Here, APY amounts to about 8% on staking USD-based stablecoins, including USDC, USDT, GUSD, and PAX. You can withdraw your assets at any time point, but take into account that you can withdraw your funds for free only once a month.
Waves.Exchange is a worldwide decentralised cryptocurrency exchange which allows users to transfer, trade, issue, and stake cryptocurrencies. Waves.Exchange offers to stake USDT and USDC with the yield up to 35%. Choosing between USDT and USDC, opt for the latter one if you strive for higher yield.
Hotbit is considered riskier since it’s a Chinese exchange where you never know if the rules are going to change. They offer up to 20% APY on staking USDT which is actually a great rate. Moreover, you can find there a wide range of cryptocurrencies besides stablecoins.
Super-high Risk Platforms
You might have already guessed that super-risky websites offer APY around 100% which is obviously a path to get on the rocks or go bankrupt without fail. So, steer clear of such platforms.
All in all, when staking stablecoins (like any other crypto), try to diversify the platforms you use so that if one gets into trouble, you could still have some assets locked up in another. Splitting your total balance between multiple platforms diminishes risks and gives you the opportunity to make use of different interest rates offered on different platforms. Of course, staking stablecoins is a good way to stake crypto from scratch since they are low-volatile and low-risk assets.
5. What is SaaS in Service?
What is SaaS in Crypto?
In staking there is a “Staking-as-a-Service” concept (SaaS) helping non-technical investors to stake their assets and earn rewards. Staking-as-a-Service platforms represent a third-party service that takes care of the technical part of the staking process and charges fees for that. The fees are basically a percentage of your staking rewards. It comes especially useful when you’re new to crypto or can’t boast of technical knowledge. Staking-as-a-Service platforms eliminate the barriers to enter the staking process so that anyone can earn tokens by providing them as a stake in a PoS network. Using a third-party staking service is often called “soft staking”.
Besides SaaS crypto platforms, the leading exchanges also offer staking services which are dubbed “exchange staking”. Exchange staking gives investors the opportunity to hold their assets in the account’s wallets and earn interest in the form of newly-minted tokens. Since exchanges take responsibility for the technical side of the process, it also charges a percentage fee for that.
Best SaaS Platforms
Take a look at some of the reputable and market-proven SaaS platforms:
1. Figment Network
Figment Network is a Canadian largest Staking-as-a-Service provider offering software, and tools for crypto holders and staking blockchains.
- Founded: 2019
- Stakable Assets: Ethereum (ETH), Polkadot (DOT), Tezos (XTZ), Algorand (ALGO), Aion (AION), Livepeer (LPT), Chainlink (LINK), Cosmos (ATOM), Solana (SOL), ICON (ICX), Kava (KAVA)
- Fees: 0 – 15%
MyCointainer is an Estonian regulated SaaS provider enabling soft staking with a huge variety of PoS coins on their user-friendly and intuitive platform.
- Founded: 2019
- Stakable Assets: Phore (PHR), PinkCoin (PINK), Bitbay (BAY), CloakCoin (CLOAK), PIVX (PIVX), Particl (PART), NavCoin (NAV), OKCash (OK), Wagerr (WGR), BlackCoin (BLK) and others.
- Fees: 0% – 28%
3. Stake Capital
Stake Capital is a France-based reliable cryptocurrency staking platform providing financial services and tools on top of DeFi and staking networks.
- Founded: 2019
- Stakable Assets: Loom Network (LOOM), Cosmos (ATOM), Livepeer (LPT), Idex (IDEX), Tezos (XTZ), Kava (KAVA), Aion (AION) and many more coming soon.
- Fees: 0% – 10%
Stake.Fish is a Staking-as-a-Service platform based in South Korea that enables soft staking. Here, you can pool your crypto assets and earn an interest from it.
- Founded: 2019
- Stakable Assets: Alogrand (ALGO), Cosmos (ATOM), Livepeer (LPT), Tezos (XTZ), Cardano (ADA), Kava (KAVA), Solana (SOL) and Aion (AION)
- Fees: 10% – 20%
Staked is a New-York based company helping investors securely earn on their crypto by 5%-100% annually participating in staking or lending.
- Founded: 2019
- Stakable Assets: Tezos (XTZ), Livepeer (LPT), Decred (DCR), and Cosmos (ATOM)
- Fees: 0% – 54%
Stakinglab is a leading European Staking-as-a-Service provider based in Germany allowing users to participate in soft staking and hosting masternodes for a wide range of digital assets.
- Founded: 2019
- Stakable Assets: Phore (PHR), PIVX (PIVX), Reddcoin (RDD)
- Fees: 7.5%
7. Staking Facilities
Staking Facilities is Web 3.0 infrastructure and service provider based in Germany. It enables enterprise-grade infrastructure and services for blockchain investors who aim to stake PoS assets and earn interest on their assets.
- Founded: 2019
- Stakable Assets: Tezos (XTZ), Cosmos (ATOM), Aion (AION)
- Fees: 5% – 20%
To make a recap…
If you want the best staking experience, you can try staking on Staking-as-a-Service (SaaS) platforms. The plus is that you can start staking and join masternodes instantly with minimum investment. All you need to do is to hit some buttons and the platform will run the masternodes or do staking for you. This way, you can immediately generate rewards and the platform will only charge a reasonable fee for the service.
6. What is DeFi?
DeFi: Main Features
As we discussed above, you have several options to stake, and one of them is to go on a DeFi platform. What is DeFi? Is it safe? Is it profitable? Catch in this paragraph!
DeFi stands for Decentralized Finances and was initially started in 2017 with MakerDao technology enabling various financial services with cryptocurrencies on the Ethereum blockchain. The point is that there is no intermediary, no authority controlling user funds. Instead, every process running in the system is managed by rules implemented into smart contracts.
DeFi, same with CeFi (Centralized Finances), has its own infrastructure, form of money, and services.
- Ethereum plays the first role in DeFi as most DeFi projects are built on Ethereum.
- Decentralized money is represented by altcoins (since Bitcoin can’t run on the Ethereum platform) and stablecoins.
- One of the DeFi services is DEX which is a decentralized exchange allowing for trading crypto with no intermediary. DEXs have no financial agent managing user funds, so transactions occur directly between traders which is calleda peer-to-peer cryptocurrency transaction.
DeFi: Pros, Cons, Risks
DeFi have for and against points.
(+) A decentralized financial system is flexible, transparent, and equal for everyone.
(+) You manage your money and don’t have to pay fees usually charged by intermediary institutions.
(-) Whilst smart contracts look secure, DeFi is exposed to hacking like any other system can get breached. Hackers will always find the way to possible holes.
(-) Remember that nobody is going to help you if any troubles come up. All processes are regulated by smart contracts and you will not have an opportunity to make a complaint.
Once you decide to earn on a DeFi platform, do research: size up a network, calculate all risks, get familiar with any issues that might happen to your principal. Also, start with small sums and always stay sharp.
Being careful and keeping an eye out, you can make a profit on this new digital realia, earn income and enjoy non-intermediary financial services.
Firing on all cylinders, DeFi staking is now one of the hottest trends in the cryptocurrency industry. Leveraging the benefits of decentralized finances, it becomes a real way to generate passive income with way more appealing returns compared to traditional CeFi savings plans. Yet finding the right platform for this activity remains essential, however. DeFi staking is still on its development stage with no widespread awareness though leaving huge promises in the future to show its benefits to the broader industry.
DeFi staking eliminates the shortcomings and breaches of traditional centralized institutions such as corruption, hidden fees and others. In this sense, this is considered less risky and safer. Also, users have complete control over their funds which is a real empowerment.
Basically, DeFi staking is the process of locking up your crypto into a DeFi smart contract to earn more of those tokens in return. Most often, you stake the native token of the blockchain protocol, e.g. if you stake on Polkadot, you will stake DOT. Another thing is that if you are an Ethereum holder and lock your tokens into the Ethereum 2.0 smart contract, you get additional ETH for ensuring the network’s security. The DeFi staking process is automated so no manual oversight is needed. Once you lock up your token into the smart contract, the Proof-of-Stake algorithm will manage everything onwards and all you need to do afterwards is to claim your rewards for staking. Besides staking rewards, tokens get a percentage of the revenue cumulated by platform products and services, e.g. the fees from swaps on liquidity pools also go to stakers.
For Ethereum 2.0, the minimum requirement for staking is 32 ETH which is a pretty big buck. However, some DeFi platforms utilize a special pooling mechanism where people can stake without this daunting minimum. The majority of the decentralized exchanges (DEXs) that use the Automated Market Maker (AMM) model allow users to stake their native tokens. These are Uniswap (UNI token), PancakeSwap (CAKE token), Plasma.Finance (PPAY token), to name a few.
You can go for DeFi staking on the platforms discussed in the previous paragraphs.
DeFi Staking Protocols and Dapps
Yearn Vaults belongs to Yearn Finance, responding to recent liquidity trends. Basically, Yearn Vaults are pools of funds which attempt to provide passive income streams through competitive yield farming strategies. Yearn Vaults is based on Yearn Finance protocol that aims to maximise yields by strategically distributing liquidity to various DeFi protocols.
Aave is a liquidity protocol based on Ethereum which allows users to earn interest on deposits and borrow assets. Aave features notable “uncollateralized loans” and “rate switching” which let users switch between rates to find the best one when borrowing. Users deposit AAVE tokens within the protocol Safety Module and receive these tokens as an incentive to protect the protocol.
Compound is a decentralized protocol which algorithmically sets interest rates based on supply and demand, allowing users to exchange Ethereum assets. Suppliers and borrowers interact directly with the protocol earning and paying a floating interest rate.
Lido is a liquid staking solution for ETH 2.0 and allows users to stake their ETH without locking up their assets whilst participating in on-chain activities, e.g. lending. Lido aims to make ETH liquid and let users participate in staking with any amount of ETH. Remember that there are no lock-ups or minimum deposits on Lido.
Curve Y is a decentralized money market protocol based on Ethereum. Curve Y allows for lending assets and earning interest with USD Coin, Dai, Tether, and TrueUSD. Users can stake their CURV tokens to receive rewards from ICOs hosted on the CryptoCurve platform.
7. What is Yield Farming?
Basically, yield farming allows investors to earn rewards on their crypto holdings. Users lock up their assets in a DeFi platform or liquidity pool and earn interest on trading fees and revenue generated by a chosen platform. Meanwhile, they can easily move their assets between other pools and platforms to find more enticing rates and maximize returns.
Yield Farming Basics
Yield farming includes a liquidity provider and a liquidity poolpowering a DeFi market and runs on the AMM model.
- Liquidity pool is a pool of tokens locked into a smart contract and facilitating asset trading. Here, users borrow, lend, and swap tokens, paying trading fees to the platform. These trading fees are then shared with liquidity providers.
- Liquidity provider is a crypto investor who deposits funds into a smart contract.
- AMM is the Automated Market Model which eliminates traditional “buyers” and “sellers” existing on a cryptocurrency exchange and instead of setting the price, AMM creates liquidity pools through smart contracts and carries out trades based on predetermined algorithms.
- Impermanent (Divergence) loss is a unique asset depreciation which occurs when the value of the tokens inside a liquidity pool diverges from that one outside of the pool. It might become a problem if you planned to trade your tokens out of the pool whilst the asset value diverged.
The model results in a unique instance of asset depreciation known as impermanent loss, or divergence loss. Impermanent loss refers to when the value of the tokens inside of a liquidity pool diverges from the value of the same tokens outside of the pool. As AMM formulas prioritize a ratio balance, your asset value can differ from its value outside of the liquidity pool. If you were to trade your tokens out of the liquidity pool, it would be at a loss. The asset price is set by analyzing the lowest and the highest points of a buyer and a seller. This way AMM defines demand and supply and measures the amount of coins in a pool so you need to add an equal amount of tokens to a liquidity pool.
How Does Yield Farming Work?
If we take as an example the Compound protocol. It actually plays the role of the matching engine. Namely, the protocol provides liquidity to borrowers using smart contracts on the Ethereum blockchain.
Liquidity providers deposit funds into the liquidity pools. When an interest rate for the loan is agreed, the borrower receives the funds and the liquidity provider gets COMP – Compound native tokens for the exchange. Also, the liquidity provider takes a share of the interest paid by the borrower.
Some of the protocols can also mint tokens which represent your deposited funds in the system. Say that, if you deposit DAI into Compound Finance, you get cDAI.
Should you try yield farming? First, calculate the risks!
Yield Farming Risks
Despite its obvious potential upside, yield farming has its risks. They include:
1. Smart Contract Risks
Although smart contracts eliminate go-betweens, plus they are cheaper and safer for transactions, they are exposed to cyber attacks and bugs in the code. Users of popular DeFi protocols Uniswap and Akropolis have already suffered losses due to smart contract scams.
2. Price Slippage
Yield farming comes especially risky during sharp market moves because the AMM model doesn’t update token prices immediately. Imagine that if an asset’s price drops by 60% on a centralized exchange, it won’t be displayed on a DEX right away. So, a professional arbitrage trader can use that price gap to sell their token on a yield farming platform at a premium. If the price drops, liquidity pools will have to cover this difference and suffer losses. Considering that their capital is locked in the pool, they can’t benefit from the price rise. To upshot, choose a protocol with a low price slip (e.g. renBTC pairs on Curve).
3. Liquidation risks
As with the traditional finance space, DeFi platforms use their customers’ deposits to provide liquidity to their markets. However, a problem could arise when the value of the collateral drops below the loan’s price. For instance, if you take out a loan in ETH collateralized by BTC, a price increase in ETH would result in the loan being liquidated as the value of the collateral (BTC) would be less than the value of the ETH loan.
4. High Gas Fees
Since most of DeFi projects reside on the Ethereum blockchain, the gas fees can be pretty high. If you operate with a small capital, you may find it complicated to even withdraw your earnings due to gas fees so yield farming appears pricy and can cost you more rather than just holding your crypto.
All in all, the yield farming sphere is dynamic and quite volatile. Before entering yield farming, take into account that you might lose your principal in one fell swoop. While yield farming features high returns, invest at your own risk and not more than you’re ready to lose.
What is Uniswap?
Uniswap is a liquidity protocol which provides liquidity for ERC-20 tokens on Ethereum. It is fully decentralised and uses a unique process called Automated Liquidity Protocol. Since it's open-source, anyone can copy the code for creating a DEX and list tokens there for free. Here, you have full control over your funds and private keys which prevents the risks and consequences of cyberattacks.
How Does Yield Farming Work?
Uniswap allows users to swap ERC-tokens which Uniswap pool into liquidity pools and then users trade against these pools. Anyone can add tokens to a pool or swap or list a token on Uniswap. It iscompatible with ERC-20 tokens and infrastructures like wallet services MetaMask and MyEtherWallet.
Each pool is represented by a smart contract adding liquidity and enabling swapping tokens. Each pool is a smart contract with a combination of ETH and another ERC-20 token. For example, LINK/ETH.
You can become a liquidity provider by depositing the value of the underlying token in return for pool tokens. Importantly, you are able to redeem your assets at any time.
Compared to CeFi…
Looking at how centralized exchanges work (e.g. Coinbase), orders there can’t be fulfilled until one order lines up with another. If there are more buyers than sellers, liquidity diminishes. Moreover, liquidity relies on the order book where buy and sell orders are waiting to be matched. Uniswap is nowhere near in these terms.
Uniswap incentivizes their users to become liquidity providers (LPs), so they pool their money together creating a fund used to execute trades on the platform. Every listed token has a pool which users can contribute to. Liquidity providers receive a token representing their staked contribution.Token prices are calculated by an algorithm so traders don’t have to wait for a matching buy or sell order. Orders are executed instantly if there is enough liquidity in a pool. If you contributed $5000 to a liquidity pool with $50,000 of liquidity, you would receive a token representing 10% of the pool.
You can redeem your token for a share of the trading fees. Uniswap charges a fee of 0.30% for every trade, which goes to a liquidity reserve and 0.05% of this 0.30% goes to finance the platform in the future.
How to Start on Uniswap?
To participate in Uniswap liquidity staking, get an ERC-20 wallet, some ETH, and the Uniswap app. Some of the ERC-20 supported wallets to start with are Coinbase wallet, Fortmatic, Portis MetaMask, WalletConnect. Next, add some ETH and connect your wallet to the Uniswap website. Alright! You can now swap your ERC-20 tokens via Uniswap liquidity pools.
- There are fees for each transaction on Ethereum (the gas fee) which goes to Ethereum miners who maintain the Ethereum network. The fees depend on how many people are active on the network.
- You can choose the speed of your transactions: the quicker the transaction, the higher the gas fee. The progress of your transaction can be checked here: https://etherscan.io/.
Then, you can swap your ERC-20 tokens via Uniswap liquidity pools. There is no limit: the more you lock up, the more profit you make. Uniswap is different from any other cryptocurrency staking and making passive income with Uniswap appears more profitable and with more perspectives (alongside with risks) than any other crypto staking platforms.
8. Do I Need a Wallet for Staking?
Yes, you need a wallet for staking. Now, let’s delve into their types and features!
What are Crypto Wallets?
Generally, a cryptocurrency wallet allows users to store and manage their digital assets. There are DeFi and CeFi wallets. Let’s look at their virtues and flaws.
Full control of your funds, keys, and pass to your wallet
No control over your crypto
No insurance since DeFi wallet is an open source computer code exposed to hacks and rug-pulls.
If something, you will get compensated
Also, there are hot wallets and cold wallets.
Hot wallet is a software program running on Android, iOS, Chrome, Windows etc. which you can download on a smartphone, browser, or desktop.
- This is decentralized, free, open source.
- You use hot wallets to interact with dapps.
- No customer service, no one will help – you’re on your own.
- They’re always connected to the Internet and can get hacked.
Cold wallet is a piece of hardware like a physical USB stick device that doesn’t have access to the Internet and which you need to plug into your computer.
- Cold wallet can link up with your hot wallet.
- Passphrase and key let you manage your coins connected with that wallet.
- Cold wallets are safer than hot wallets.
- If you lose your passphrase, you’re done – no one will help you.
If you lose your cold wallet, it doesn't matter as long as you can load it again with the passphrase for that wallet: cold wallets simply store your keys offline.
You’d better print the key out on a piece of paper, laminate and hide it at the safest place where only you have access to.
- You need a wallet to stake on a DeFi.
- Choose the right wallet supporting the blockchain you use.
- Wallets don’t store cryptocurrency but only information about it.
- Each wallet is connected to a certain blockchain. Your coins are on the blockchain.
Popular Wallets for Staking
Let’s spell out some of the most popular wallets:
Metamask is a cryptocurrency wallet available on the Chrome, Firefox and Brave browsers and also works as a browser extension. It allows users to access their Ethereum wallet and interact with Dapps.
- Open-source and free
- Private keys are kept on the browser
- Used for Ethereum or Binance Smart Chain
- Can be linked up with cold wallets
- Used for DeFi staking
- Supports Ethereum and ERC-20 tokens only
2. Trust Wallet
Trust Wallet is a crypto wallet available on mobile created to simplify the way Ethereum tokens are sent, received, and stored on the ETH blockchain. Its native code is both open sourced and closed source. The wallet is closed source for Android (Java) and Open source (Swift) for iOS.
- Owned by Binance.
- DeFi wallet for Binance Smart Chain.
- Used for DeFi staking.
- Supports Ethereum (ETH), Ethereum Classic (ETC) and all ERC20 and ERC223 tokens.
Coinomi is a secure multi-asset wallet providing support and ownership for a total of 1770 coins and tokens. Available in 168 fiat currencies and 25 languages
- A third-party wallet not owned by a blockchain
- Used cross platforms
- Supports multiple blockchains and coins (multi-chain)
- Can be linked up with cold wallets
- Great customer support (24/7)
- Private keys stored on my mobile
Exodus is a desktop and mobile wallet with a built-in DeFi exchange. It allows users to swap between over 100 different cryptocurrencies with the optional support for cold storage.
- Total control over your assets
- Used for DeFi staking
- Supports multiple cryptocurrencies
- Built-in exchange
- Good customer support
- Closed source software
How to Choose a Wallet?
Before getting started with a wallet, consider the following:
Make sure your chosen wallet is supported by the product you intend to use.
2. Supported Assets
Different wallets support different assets. Make sure your wallet is compatible with the coins you plan to store.
3. Social Presence
Check out the wallet’s community on social media to check out the reviews and see if it’s trusted by users.
Making a recap, the flexible and secure way to stake is to use a hardware wallet. In this case, you can choose a cryptocurrency to stake and a validator to delegate your funds to.
9. Start Staking!
Nothing stops you to start staking right now. Calculating all the risks and choosing your own strategy is what you need to do first.
Risks of Staking
Staking crypto gives you an opportunity to generate better-than-average returns, however, like any other types of investing, it brings about certain risks. Before getting into this process, make yourself aware of all issues that might occur to your principal.
1. Price Movement
When you start staking coins, their price can obviously increase or dip in value. It influences your total returns and if the price goes down, you may lose some profit. That’s why, choose carefully, make thorough research before staking. Consider a coin background and build its perspectives for the future, not only sticking to its APY figure.
2. Iliquidity Risk
When you start staking coins, their price can obviously increase or dip in value. It influences your total returns and if the price goes down, you may lose some profit. That’s why, choose carefully, make thorough research before staking. Consider a coin background and build its perspectives for the future, not only sticking to its APY figure.
Liquidity is the essential factor to consider when choosing a coin to stake. The point is that if an asset gets illiquid, you may struggle to sell it or convert into other cryptocurrency – liquid ones. Well, if you stake liquid assets with high trading volumes, you will reduce liquidity risk.
If you are staking a micro-cap altcoin that barely has any liquidity on exchanges, you may find it difficult to sell your asset, or to convert your staking returns into bitcoin or stablecoins.
3. Locking-up Periods
You’ve already known that some coins can’t be redeemed until their locking-up period ends (e.g. Tron, Cosmos). So, if their prices drop significantly and you’re not able to unstake them, you will lose some profit, obviously. Thus, staking crypto without locking-up periods will mitigate risks.
4. Rewards Duration
Staking some crypto assets, you don’t get rewarded daily and have to wait some period of time to get your rewards. If you’re a “hodler” and stake coins the entire year, it doesn’t influence your APY. Nevertheless, it will rob you of the chance to reinvest staking rewards to get more yield. The way out is to opt for crypto or platforms where you are paid out daily or at least weekly.
5. Validator Risk
Using your own validator node can come with risks as well. Your returns partially depend on a validator node that should be technically competent to ensure staking process. Moreover, nodes should have 100% uptime to maximize staking returns. If a node misbehaves and gets penalized, it might affect your total returns. The worst scenario is when a validator has the right to “slash” their stake and a share of staked coins gets lost. To avoid such risks, you can delegate your stake to a third-party validator e.g. Trust Wallet, Exodus. Keep in mind that running a validator node brings certain costs (for electricity or hardware) and to a third-party provider you pay a percentage of your staking rewards.
6. Insecure Asset Storage
Speaking of security issues, make sure to have safe asset storage: back up your wallet and secure your private keys. In these terms, it’s better to use hot or cold wallets where you hold your keys rather than to use custodial services.
Crypto Staking Strategy
To build a good strategy and adhere to it whatever happens, you firstly should define your goals. What is your objective? Do you plan to accumulate and grow passive income in a conservative way with average rates or take a chance and put your principal at risk with potential prospects to catch a jackpot? That’s a question you need to answer first and only then you may start to choose the methods.
Remember that crypto staking isn’t available on all cryptocurrencies but only on those built on the Proof-of-Stake model so go with that!
We have several ways to stake.
1. The easiest and lowest risk option is to stake various coins on a CeFi exchange. That’s the best fit for true beginners. Here, you have some kind of insurance if something happens with the platform. The rates can be quite low but your principal will be secured.
2. Opt for a Stalking-as-a-Service provider if you want to earn your passive income in the maximum passive way with everything done by the platform. Don’t forget about the fees charged by their service.
3. Opt for DeFi protocols and Dapps and enjoy full control over your funds and higher APY as well as higher risks. However, DeFi staking enables unprecedented flexibility with the 24/7 access to markets, smart-contract automation and absence of intermediaries. You can switch between numerous DeFi protocols with little to zero downtime.
4. Try yield farming which is not only about earning passive income but also an opportunity to participate in DeFi projects scaling and development. Remember about DeFi risks.
5. You can also become a validator though keep in mind that it’s a huge undertaking and requires great technical knowledge. It matches professional and seasoned stakers.
- It’s worth saying that diversifying your portfolio will hedge you against unexpected risks. In this case, we speak not only about different coins to stake but we mean various platforms as well. If one company fails, you will still have some backup investments in another one. That’s important.
- The balance between risky and conservative instruments and methods makes a path to successful asset management and generating profit on a constant basis. Squirrel this in your head.
- To secure your portfolio, stake coins of higher value like ADA, DOT, SOL: even if they drop down in value, they are likely to recover over time. Such established coins like Polkadot or Cardano have minimal chances to dip in price for good and make you bankrupt. Nevertheless, nobody knows what the future “hodls”.
All in all…
We can stake blockchain assets, stablecoins, or lend coins on DeFi/CeFi to get yield. Remember that higher staking rewards come along with higher risks almost proportionally and vice versa. Staking stablecoins is a low-risk strategy which best feets newbies entering the crypto market. Staking various tokens on DeFi comes with increased risks without fail. In case, you want to keep your assets as safe as possible while participating in staking – choose CeFi platforms or the most regulated ones.
Right now staking is not so widespread around the globe but it promises a lot for the future finances, increasing its market share in the crypto sector. The shift towards staking got huge support when Ethereum finally decided to welcome it in December 2020.
Staking runs on the Proof-of-Stake mechanism appears to be faster, less expensive and resource-intensive and much more beneficial for investors. Staking implies that you put up some collateral and earn interest in the form of yield. You don’t simply invest, you participate in maintaining the network running and get rewarded for this.
Diversified staking opportunities can’t but surprise: everyone can find a product meeting the goals. DeFi staking, staking blockchain assets or stablecoins, staking on the exchange, and many other options (literally popping up every day) make this way of passive income really flexible. Even a beginner will find a reliable start point.
Speaking of terms and conditions of staking, they also vary. You can stake on locked or flexible terms, you can stake for 30 or 60 days, get interest every day, week, or month which depends on a blockchain. Before making a decision on the coins for staking, you can compare their APYs taking into account their potential capital gain or loss. Yield is not your total return, it’s just a half of it. Total return actually consists of a yield and capital gain or loss.
It is important to determine the goals and calculate all risksthat might come up during the lock-up period (if you go for that). Size up a crypto exchange you choose, coins that might go up and down in value, and a type of wallet which best meets your demands.
Nowadays, mining is stepping behind. Though being pioneers in the creating the DeFi World, Bitcoin and its technology miss out on loads of issues. Crypto staking is a relatively new way of generating passive income which is now gaining momentum and popularity making the idea of earning passive income on crypto a reality.
Ready, Steady, STAKE!
Always stay sharp and remember that crypto staking comes with certain risks same with any other types of investments, so it is essential to do proper research and invest wisely. Happy staking and big profit!
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