Decentralized Finance (DeFi), a fantastic new crypto industry that came to prominence after Compound’s token launch in June 2020. A slew of DeFi copycat protocols soon helped investors turn passive ownership of their crypto assets into lucrative passive income. This was achieved through the power of smart DeFi protocols offering incredible incentives for those who were willing to stake their assets and lock them into risky smart contracts ,by offering both interest on investment as well as governance tokens that shot up dramatically in value. Since then, the DeFi market cap has exploded in size, and the industry continues to evolve, even giving the
TradFi
space a run for its money.
Web 3.0
and the
Metaverse
more hype at present than anything else, DeFi now has a proven track record to help investors maximize their crypto earnings.
What Is Crypto Staking?
Staking is an activity where a user keeps his cryptocurrency in a wallet to take part in a proof-of-stake blockchain system. Like cryptocurrency mining, staking helps a network reach a conclusion while compensating users who join in.
Staking allows users to lock their coins in a wallet to validate transactions. Like mining on a PoW platform, stakers are incentivized to find a new block or add a transaction on a blockchain. In addition to incentives, PoS blockchain platforms are scalable and have high transaction speeds.
How Does Proof-of-Stake Work?
proof-of-stake (PoS)
consensus mechanism
validators
to verify transactions and maintain
consensus
in a blockchain network. The network incentivizes users to run validator nodes and stake their coins, which helps secure the network in return for earning interest on their stake.
The algorithm for most PoS systems chooses blocks at random and assigns them to a validator node for review. The validator then checks the legitimacy of the transactions. If everything is accurate, the validator adds the block to the ledger and receives the block rewards and transaction fees. If a validator adds a block with the wrong data, however, it may be penalized by having some of its staked holdings taken away.
Ethereum
PoS model also offers stronger support for
shard chains, one of the most promising scaling solutions to date.
Mining vs Staking
consensus mechanism
used to validate transactions. Mining is used for
Proof-of-Work
(PoW), most notably in
BTC. Meanwhile, staking is mainly used for
Proof-of-Stake
(PoS), such as in
Ethereum 2.0
– Ethereum’s shift from
PoW to PoS
consensus mechanism.
The following are some of the differences between mining and staking:
- Mining – miners solve complicated mathematical puzzles vs Staking – nodes in the network engage in validating new blocks by locking up their funds.
- Mining – the first miner to solve the mathematical puzzle adds a block to the blockchain vs Staking – nodes validate a new block by locking up native tokens in a smart contract.
- Mining – requires specialised mining hardware (e.g. GPU) which consumes a lot of energy vs Staking – widely considered to be more environmentally sustainable, saving over 99% of energy consumption according to Vitalik Buterin.
- Mining – more computational power (work), higher chance of solving the block and getting rewarded vs Staking – more native tokens staked (stored value), more likely to get selected to validate new blocks.
What Can I Stake?
Coinbase
and
FTX, as well as directly on specific blockchains’ native wallets or dedicated hardware wallets. Here are a few of the best. However, there are many others to consider, such as
Avalanche
and
ETH Staking
miners
and stakers. The miners validate transactions on the execution layer (formerly called Eth1), while stakers verify blocks on the consensus layer (formerly called Eth2). This means that Ethereum stakers will initially need to transfer their ETH from the
execution layer
to the consensus layer in order to stake. Moreover, your ETH cannot be withdrawn until the Ethereum mainnet ultimately merges with the
validator node, users need at least 32 ETH to stake. While its hardware requirements are not nearly as high as in Bitcoin mining, you’ll need a fast computer with large storage space that is connected to the Internet 24/7. If you still want to be an Ethereum validator after knowing all this, head over to the
staking pools
that offer a lesser minimum stake. You may also opt to buy tokenized staked ETH such as
ankrETH, which allows you to use the coin for DeFi activities without withdrawing your stake. These alternatives also offer ETH holders an opportunity to stake without the hassle of setting up and maintaining a validator node.
Chainlink (LINK) Staking
reiterated
the company’s plans to launch LINK staking in 2022. However, no date has been set in stone yet.
super-linear staking, which can efficiently scale its security features according to the needs of the hybrid smart contract system.
Polkadot Staking
uses
nominated proof-of-stake (NPoS) as its consensus algorithm, where
nominators
back multiple validators that they deem to be of good behavior with their stake. Both types of network participants lock their tokens as collateral and earn staking rewards for their contribution. Note that if a nominator supports a malicious validator, they will incur a loss.
validator, there are a few hardware and server requirements you need to have. Since this option is more technical and cumbersome, we generally recommend being a
nominator
unless you are an advanced user.
Nominating a validator allows you to stake your DOT in order to earn a share of the validator rewards. The amount of rewards you earn will depend on how well the validator performs. Keep in mind that you can unstake your DOT at any time, but there is a 28-day waiting period before you can transfer your funds.
are generally paid out equally among stakers. This is because, unlike other protocols, Polkadot pays out its validator pools for their equal work, not in proportion to the size of their stake.
Terra (LUNA) Staking
allows users to earn interest on their
LUNA
coins by staking them on supported wallets, such as Terra Station. All you have to do is create a wallet, transfer your LUNA, choose a validator, and stake your LUNA. However, there is another option to earn even higher rewards: farming.
liquid staking protocol
to allow users to acquire
bonded LUNA (bLUNA), a tokenized representation of staked LUNA that continuously accrues rewards. Therefore, your idle bLUNA tokens will continuously make money even as they’re held in your wallet. But why stop there?
TerraSwap
and
Loop Markets. Simply buy equal amounts of LUNA and bLUNA tokens and deposit them in LUNA-bLUNA pools on
DEXs, which will earn you rewards from
transaction fees. With this farming strategy, you can make money in three ways simultaneously:
- LUNA staking rewards (through bLUNA tokens)
- DEX transaction fee rewards (a portion of the fees of your liquidity pool)
- Potentially with DEX tokens (such as LOOP)
bug exploit
or hack.
Staking on Tezos (XTZ)
was born in June 2018, causing a major storm as the
biggest initial coin offering (ICO)
with over $230 million in investment. It implements a version of PoS called liquid proof-of-stake (LPoS).
Tezos’ native currency is called XTZ and the process of staking is called “baking.” Bakers are rewarded using the native coin. Furthermore, bakers who act maliciously are penalized by having their stake confiscated.
If you want to become a staker/baker on Tezos, you need to hold 8,000 XTZ coins and run a full node. Luckily, there are now third party services that allow small coin holders to delegate small XTZ quantities and share baking rewards. The annual percentage yield you can get from staking XTZ ranges anywhere from five to six percent.
Staking on Algorand (ALGO)
main aim is to drive low-cost cross-border payments. Being a PoS protocol, the network needs stakers for security and transaction processing. Unlike Tezos, it uses the pure proof-of-stake (PPoS) consensus mechanism. However, it still requires stakers to run full nodes.
In addition to the delegation platforms that support ALGO, there are also third-party services that offer staking rewards. These rewards can range from 5% to 10% annually, and are influenced by the platform being used. For example, users of Binance Staking currently have an APY (annual percentage yield) of 2.9%.
Staking on Icon (ICX)
Icon (ICX)
offers another platform that natively allows staking. However, Icon differs from Algorand and Tezos in that it uses the delegated-proof-of stake (DPoS) consensus algorithm. With this model, a select number of users find new blocks and verify transactions while others delegate their coins to these entities.
ICON’s native token is ICX, and as of March 2022, the annual staking rewards on ICON are 14.27% on Binance Staking.
Staking Stablecoins
stablecoins
is a great way to hold your funds in the current low interest rate environment and earn yields while avoiding market volatility. Here are the lastest stablecoins yields across some of the top exchanges as of March 2022:
- USDC: 2.79% in Binance, 0.15% in Coinbase, 2.5% in ByBit
- BUSD: 3.21% in Binance, 4.5% in ByBit
- DAI: 3.78% in Binance, 0.15% in Coinbase, 5% in ByBit
- USDT: 3.12% in Binance, 3% in ByBit
Best Crypto Staking Platforms
After explaining the formalities, I will share with you some of the best crypto staking platforms, as well as the reasons to choose them. Ultimately, you will be able to select the platform that best suits your needs.
Don’t wait. Dive in.
Uphold
The crypto staking platform Uphold offers competitive returns on investment, with an annual yield of up to 19.5%. reinvestment of rewards is also supported, allowing users to maximize their earnings potential.
To start staking a specific asset on Uphold, create an account and select the asset you want to stake.
You receive rewards every week if you stake your cryptocurrency, and are free to sell it at any time.
With Uphold, you must wait at least four days before you can start earning rewards from staking. As of now, you will pay a 15% commission on your staking rewards, which is already taken out of the annual percentage yield.
Cake Defi
With the Cake Defi staking program, you can earn high returns without any hassle.
What makes Cake Defi great is its transparency. Most crypto companies don’t publish quarterly reports detailing their growth, roadmap, rewards paid, etc.
The APY mentioned includes all fees and indicates the amount you’ll finally get. Additionally, Cake Defi supports one-click un-staking.
This platform also allows rewards to compound automatically to get the highest possible returns.
The platform’s legitimacy can also be checked by looking at the addresses of the nodes involved in previous activity.
This means that you can start earning rewards on your Cake Defi deposits without having to meet any minimum deposit requirements.
Kraken
As of this writing, Kraken is ranked as the fourth largest crypto exchange by CoinMarketCap. It allows staking in 12 crypto assets, with unstaking support for most crypto coins.
If you unstake your money, that means you’re taking it out to trade or withdraw. So there’s no set period of time you have to keep your money in.
Kraken also allows you to stake your rewards to earn more.
Kraken refers to the usual way of staking as on-chain staking. They also have off-chain staking available in some countries. In addition, Kraken doesn’t charge anything extra for staking or un-staking.
Binance
It is agreed that Binance is the top crypto exchange when looking at daily exchange volume. It is also said to be one of the best platforms to stake your crypto coins, with support for over 100 different coins.
Binance has two types of staking: locked and flexible.
Locked staking requires you to commit to a set period of time, but you are still able to withdraw your original investment. However, you will not receive any rewards for doing so. Flexible staking does not have this restriction, but you will receive less rewards.
Binance offers a locked staking option that usually requires you to keep your funds deposited for at least 30 days, although there are a few coins that only require a 10 or 15 day staking period. These coins often offer a higher annualized percentage yield (APY) and are considered to be safer investment options.
When you stake your money in a DeFi project, you are likely to lose your investment if the smart contract gets attacked.
One of the best features of DeFi staking is that you don’t need to create a separate wallet for each project you want to invest in. Additionally, most DeFi projects have very short Lock-up periods, usually around 24 hours.
If you find Binance confusing, you can use Trust Wallet, which is officially supported by Binance, to stake your coins.
Binance does not charge a staking fee like Kraken.
BitStamp
BitStamp exchange offers staking rewards for holding crypto for a set amount of time. This exchange is ranked eleventh out of over 300 others according to CoinMarketCap.
As of now, BitStamp allows you to stake Algorand (ALGO) and Ethereum.
24 hours after you have them in your account, your ALGO will be automatically staked. Your APY will be up to 5%, depending on your staked amount.
The Algorand Community Governance Program provides awards that are distributed quarterly. You can stake ALGO without any lock-up, and you can also opt-out at any time.
To stake Ethereum, you need to convert all ETH into ETH2. This means moving your Ethereum tokens to the beacon chain, which will be the only one surviving once Ethereum upgrades to the Proof-of-Stake protocol (a.k.a Ethereum 2.0).
If you migrate your ETH to the Algorand platform, it will automatically be put up as a stake. This makes it eligible to earn interest at a rate of up to 4.44% per year. The size of your ETH stake will determine what annual percentage yield (APY) you earn.
The rewards for ETH are distributed monthly, but they can only be used after the staking period is completed. This means that you will have to wait until the Ethereum 2.0 upgrade is finished.
It’s advised to check out the FAQ section at BitStamp before proceeding because the ETH staking process can be confusing.
MyCointainer
MyCointainer is a great way to automatically stake your coins and share in masternode staking rewards.
Masternodes have more invested in the network, perform different tasks, and earn more rewards than regular nodes on a specific blockchain network.
The MyCointainer website currently displays the total rewards you receive from both regular and masternode staking, but promises to show separation of these rewards in future updates to their FAQ section.
MyCointainer is a crypto platform that is regulated by the regional Financial Intelligence Unit, which is different from most other crypto platforms.
You can also set up a personal wallet and stake it through MyCointainer. This uses your own private keys, which is safer than regular staking.
MyCointainer allows you to earn money through staking by being transparent about the fees associated with particular coins. By staking rewards, you can maximize profits through compound interest.
Leave a Reply