Staking Introduction
Staking enables cryptocurrencies to validate their transactions through a model known as proof of stake. The blockchain that the cryptocurrency uses can validate the transactions. Investors that decide to stake their cryptocurrency can receive a reward. By undertaking this process investors can receive passive returns on their investment. This would be similar to getting paid interest on the funds you store in a bank. When you hold these funds for a specified period of time you can receive a return or reward for holding these assets with the platform provider. With interest rates at an all-time low staking may be an option worth considering increasing the returns on your investment.
Why would you stake Cryptocurrency?
Firstly, many crypto trading platforms now offer a built-in feature within the exchange platform to stake cryptocurrency. Secondly, some of the larger platforms such as Coinbase and Binance have a limited amount of coins that can be staked through the online platform. Thirdly, it is important to first work out which asset you would like to acquire prior to going ahead and purchasing it on an app. Furthermore, you would prefer to receive a return just for holding your asset rather than solely waiting for the price of the asset to appreciate. Therefore, you can earn income for verifying the blockchain and increasing your wealth over time.
Staking Crypto in a Pool
Staking can also be done through a staking pool. This is where crypto investors have pooled together funds in return for a reward on their investment. Generally to receive rewards you will need to have a crypto wallet first before starting to earn the rewards. From there, you could send crypto from your wallet to be held in a staking pool to start earning the rewards.
I have included a list of pros and cons as to the benefits of staking:
Pros
- Receive a passive income for holding cryptocurrency
- Stake assets for a specified period of time
- Reinvest the funds to grow your cryptocurrency portfolio
- Low investment limit to commence staking
- Earn consistent returns staking regularly
Cons
- Funds may be locked up for a specified period of time
- Flexible staking options may offer a lower rate of return
- The platform you choose could vary the rate received over time
- Limited coins that can be staked
Staking via an online crypto platform
A limited number of cryptocurrency coins can currently be staked. This can be done via locked staking where the funds held in a cryptocurrency wallet are used to support the operations and function of the blockchain network. Defi staking (Decentralised Finance) uses smart contracts to provide a higher return on specific cryptocurrencies. Binance provides this feature to use without the need for an on-chain wallet. Some examples of coins that can be staked in Defi include BNB, USDT and BUSD. Redeeming funds early from staking may however result in a loss of interest for the period the coins were staked. Therefore it is important you first understand the terms of the arrangement before staking your coins.
Some of the popular Cryptocurrency Coins that are staked include:
- Cardano (ADA)
- Ethereum (ETH)
- Polkadot (DOT)
- Solana (SOL)
- Terra (LUNA)
- Teziz (XTZ)
Staking can be done through platforms such as Binance, Coinbase and Coinstash. For instance, Coinbase allows you to earn an Annual Percentage Yield (APY) ranging from 2% – 5% on coins including:
- Dai – 2% APY
- Tezos – 4.63% APY
- Algorand – 4% APY
- Cosmos – 5% APY
Staking with Crypto.com
There is also the option to stake cryptocurrency with crypto.com. This is a popular online crypto exchange where you can buy sell and earn cryptocurrency. For instance, you can stake Polkadot (DOT) as one example of a crytpo for 3 months at an 10% Annual Percentage Yield Return. This is only one instance and there are many of different crypto’s to choose from. An added bonus is the supercharged staking that crypto.com offers. You would be required to stake CRO the crypto.com digital currency to invest in their staking projects. They tun for up to 45 days generally offering a higher yield return as you must stake under their specific terms.
This is not an exhaustive list, rather a place where you can get started staking coins. Therefore, make sure you do your own independent research, as there is quite a variation of the returns you would expect to receive depending on the online platform that you choose. If you would like to read the full list of pros and cons for staking with crypto.com have a read of the following Crypto.com Review. Alternatively, you can get started investing now and head to the crypto.com signup page.
Staking Summary
In summary, staking cryptocurrency can be a great way to start earning a new passive income stream. For instance, if you do not have a lot of capital to start investing but want to start earning a passive income this may be an option to consider. Moreover, you can either choose to stake specific crypto such as Solana, Polkadot or Terra via online platforms such as Binance. Alternatively, you can stake these coins in a pool. However, If you are wanting to compare online crypto trading platforms, I have included a list of the Top 10 Crypto Platforms. Whichever you choose it’s important to do your own research to make sure you are choosing the investment that fits your risk profile. Finally, if you want some more information about cryptocurrency and getting started, have a read of Investing in cryptocurrency in 2021.
