What Is Cryptocurrency Staking?
The year 2020 is one of the most important years in the history of cryptocurrency. There have been a lot of developments in this field, and crypto staking has played a vital role in it. The market saw a very steady rise in the number of users who were staking crypto, the lack of exposure and experience among users was resulting in not taking full advantage of this method, but as the popularity increased, more and more users started to stake crypto. At first, there were not enough currencies that could be staked, but as the investors showed interest in this method, significant coins like Ethereum also allowed users to stake their coins. According to a report, more than a billion-dollar worth of crypto is being staked in one of the platforms known as Kraken’s only, while the report says it doesn’t yet include the staking done through other platforms like Binance, Huobi, and other major exchanges. So the question arises in the mind of a user who is unaware of this term that what actually is staking that everyone is talking about?
It is an activity where a trader holds his capital which is invested in a cryptocurrency wallet. This act is done to support the network of cryptocurrencies and help boost the market. If a trader decides to hold up his coins, so it is likely to get a reward in return which is also known as interest. The crypto staking is common among many traders who are looking to get larger amounts of profits but still, it is applicable to only a few of the cryptocurrencies. The traders hold up their investments in cryptocurrencies, and in return, they get rewards when the currency raises its price. In this article, I’m going to tell you everything you need to know about crypto staking and how it works.
How Does It Work?
It is not as simple as it sounds, many traders mistake it as a very simple process of just buying some of the coins and holding them to increase the rate and get a reward, but there is a lot to do in it. With the Proof Of Mechanism, the mining of new blocks is required if you want to verify the transaction. One of the most popular cryptocurrencies which have allowed many traders to earn major profits is Bitcoin which is capable of Proof-of-stake. It allows traders to stake Bitcoin without any major difficulties. Staking depends on what quantity of cryptocurrency you hold; the more the quantity, the more will be the reward for it. A trader who takes a digital currency is also going to provide support and strengthen the network.
Coins That You Can Stake
As a result of the growing popularity of cryptocurrencies, people are getting more aware of many trading and profit-gaining methods. Staking is one of those methods in which you get rewards. But unfortunately, an investor can’t stake every coin that he owns; in fact, there are certain coins that can be staked.
The first and the most popular coin that can be staked is Ethereum; it is no doubt one of the hottest staking options at the time, and many investors have staked Ethereum to get rewards from it. In order to stake Ethereum, you need a minimum of 32 ETH along with an Eth1 mainnet client.
Another option of the coin that can be staked is Tezos (XTZ), it was created in June 2018, and ever since then, it has gained a lot of popularity among traders. If a user has decided to stake this coin so he is required to own at least 8,000 XTZ coins before he can start staking. But with the involvement of third-party services, it has now become possible to stake a small amount of XTZ because they contribute and share the percentage of the rewards with their clients. Some other major options which can be staked are Algorand (ALGO), Icon (ICX), etc.
Platforms Offering Crypto Staking
It is not possible that every platform dealing with cryptocurrency can provide you with the facility of staking, but there are some platforms that do offer you staking; they are listed below:
The staking method is used by many traders in order to achieve high profits and rewards; for that matter, there are many platforms available that allow traders to stake cryptocurrency, the reward you earn after staking crypto is automatically added into your account. However, most of the exchanges charge you some of the percentages of that reward as regards their fees. The plus point of staking on an exchange is that it makes you a member of a larger staking pool. But the question arises that how can someone stake crypto? So basically, you can stake crypto through exchanges that provide their customers the facility and platform to stake.
If we talk about the exchanges which stake crypto, so one of the best options you have is “Binance.” It is an exchange that allows users to stake crypto and most preferably “Ethereum,” which is a very popular cryptocurrency. So for your ease, I’m going to tell you how staking with Binance works in step. The first thing to do is make an account with Binance and buy some of the Ethereum coins; as an exchange, it has a plus point to exchange your other coins with Ethereum if you wish to stake them. After you are done with the first step, then you have to go to their website, and there will be an option of Ethereum staking named ETH 2.0 staking. It should be considered that staked Ethereum coins have a limit to hold them for up to 24 months; the exchange tokenize the coins (that you hold) and disperse the rewards. So in the section of Ethereum 2.0, there will be an option “Stake Now,” you have to click that option and enter the preferred amount you want to stake. Confirm your action by agreeing to the terms and conditions provided by the exchange, and your process of staking will be done.
There are some other worthy exchanges as well which offer a stake in cryptocurrency; the list includes BlockFi, Crypto.com, Change NOW, Coinbase, etc.
- Cold/Private Wallets
This type of staking is also referred to as “cold staking.” In this type of staking, a trader has to keep the coins in the same address, if he tries to move it, then the lock-up period will break, and the chances of getting a reward decreases significantly.
If we talk about the options that a trader has, if he wishes to cold stake so he will start off with a private wallet company known as Ledger, it is one of the most popular companies for private wallets. If it is listed among the top wallets so surely, there will be no compromise on the security of the wallet, and there is no doubt in that. But other than remarkable security, the wallet also provides certain currencies which are capable of staking, which includes Tron (TRX), ATOM, and ALGO.
Another option that traders have is Trust Wallet. It is a private wallet that is supported by one of the best exchanges, “Binance.” The wallet allows users to have added security features and with the facility to stake some of the currencies like XTZ, ATOM, VeChain (VET), TRX, and many more as well.
- Staking-as-a Services Platforms
These are the platforms that are only providing staking facilities, unlike exchanges and wallets, which provide other features as well along with staking. These platforms are specialized only in the staking of coins, and they charge a small amount of the reward as their fees as well. The staking done through these platforms is usually referred to as soft staking.
First of all, we have a platform named “Stake Capital.” As the name says, it is a staking platform that supports the staking of different currencies like KAVA, XTZ, ATOM, LPT, etc. another platform that provides a soft staking facility is “MyCointanier,” this is a platform that has three different types of plans. Each plan is different from the other in terms of staking options and prices. For example, the user who is using the Basic option will need to pay $1 per month, which is less than the users who are using the Power Max plan.
How To Choose A Staking Platform
It is advised by many experienced traders that you should not hurry in staking the coins as the staking platform is going to set the limit of rewards and how much you are going to get. A little mistake in a hurry of staking coins can make you lose your rewards and, in some cases, coins as well. So it is very much important to look for the best platform to start staking. In order to help you out, the following are some of the ways of how to choose the best staking platform for you.
If you are interested in DeFi platforms, you need to be cautious about whatever the claims that the platform is providing. And check out for any type of suspicious activity; you can get aware by going on Reddit or Twitter, for that matter.
It is always best to stick with the most reputed platforms out there in the market when it comes to staking. Especially if you are not a tech-guy or experienced in staking so, you should avoid experimenting with new platforms and stick to the already existing ones with positive reviews. That way, you are going to be safe from any type of scam or loss. There are a couple of reputed platforms which provide the facility of staking like Maker, Cool Wallet, etc.
Always try to use authentic and reliable analytics. Bogus and unreliable analytics are going to make a lot of claims but always choose for the best of those—for example, CoinMarketCap, which is a very reputed analytic.
Before staking, you should consider that the government is regulating staking in most cases, so it is very important to read the terms and conditions in order to be aware of whether or not your wallet needs to be online 24/7 or any other requirements that you have to fulfill while staking.
Conditions Applied To Stake Crypto
Although you can stake crypto whenever you want still there are some conditions, or you can say eligibility criteria that a trader has to meet before he can stake crypto. The first condition which needs to be fulfilled is that the wallet of the trader who has decided to stake coins needs to be online 24/7, but if a trader decided to the cold stake, then this condition doesn’t apply. The second condition is that your wallet from which you are going to do the staking should support it; there are certain exchanges like Binance that offer wallets that are capable of staking, and hence users having such wallets can do it. Another condition is that the coin has to be mature for a couple of days before you receive your awards for staking. The coins which are amature are not eligible to be staked. This condition is, however, not a must, but there may be a minimum amount that can be staked; it depends on the exchange you are staking through the platform.
Rewards Of Staking
Everyone who knows about staking is going to stake crypto in order to receive rewards; we have discussed earlier how staking is going to make you earn some rewards after a while. But the question arises how much is the reward? The reward of crypto staking is usually a fixed percentage throughout the year. However, this percentage can theoretically change, but in real life, it is not likely to happen if you wish to receive the rewards so they can be given to you in two ways, either individually or in a pool. A pool is basically a group of people who put their respective coins together in order to increase the chances of validating a block. If an individual is staking coins so it is not gonna be as effective as compared to the people doing it in groups because it will increase the chances of validating a block; as a result that the reward is going to increase as well. Hence many traders prefer staking coins in pools rather than doing it individually.
What Is The Future Of Crypto Staking?
It is proven that staking is a much better alternative to other types of mining like POW, and that is why it is gaining a lot of popularity, and many investors are coming towards staking. The popularity was given adrenaline when Ethereum, which is one of the most popular cryptocurrencies, allowed the feature of staking. After this announcement, many traders started to stake coins of Ethereum. So for the people who are concerned about the future of staking, it is already seen that investors are still coming towards the staking method, and it doesn’t seem like it is going to end anywhere soon.
Why Should You Consider Crypto Staking?
Many new investors who are not aware of how staking works have a question: why should they start staking? In order to answer that question, I have researched more about crypto staking and found out that there are actually a couple of advantages that an investor can get if he starts staking coins. The first and, in my opinion, the most appealing reason why anyone should stake coins is because it is a better and risk-free alternative that provides you with a passive income, unlike in trading, where there is always a risk of losing your capital. In staking that risk is not there. Does another reason explain it with a cross-question of why shouldn’t anyone consider crypto staking? It is a low entry option that means anyone can join, and you don’t even need some fancy or high-end equipment to start staking. The platforms and interface of staking are made extremely user-friendly for the stakers. It is one of the key features that is going to keep investors away from staking; hence it has been kept as simple as possible to allow more and more investors to adopt this method. At last, for all of those investors who are worried about the environment, staking is relatively a much safer and healthier option for the environment; hence it can be a plus point of why one should stake crypto.
Do Your Research Before You Start Staking
With a lot of options available and platforms provided by many exchanges, wallets and services can often confuse investors. But it is your right to do your research properly before choosing any method or coin to stake. Choosing a coin can include both your mental calculations and gut feelings as well. It is also advised by many experienced traders that if you decide to stake, then start with a minimum amount of capital and gradually increase the amount so that you can get exposure to how it is done properly.
As the world of crypto is growing at a rapid pace every day, new opportunities are being explored by traders to earn profits, and crypto trading is one of those opportunities which does not only offer stakers to earn rewards but also give them a secured method to earn profits rather than being worried about losing your capital while trading. So, at last, I would say it is up to personal preferences whether or not you want to stake crypto but if you decide to do so, make sure that you do your research before choosing your platform and coin that you are going to stake.