Crypto staking can be profitable if you can do it correctly. Crypto staking means how many cryptocurrencies you can hold. The more you can hold the more reward you will get. If you have more secure coins then you will be chosen as the new block validator. Here you have to submit tokens to the service of a blockchain in exchange for rewards in the form of new tokens. So, if you can stake the cryptocurrency properly then it will be worth trying.
- Crypto staking is a new concept and it allows crypto traders generate a passive income on their crypto holdings
- The main purpose of crypto staking is to verify transactions and support the blockchain network
- If you want to make money from crypto staking then you have to buy/own crypto that uses the proof-of-stake model
- Ethereum (ETH), Polkadot (DOT), Tezos (XTZ), Cardano (ADA), etc. are the best crypto currency for crypto staking
What Is Crypto Staking?
Crypto staking is a new method and it is an important part of the technology behind certain cryptocurrencies. Crypto Staking is a process of holding cryptocurrency to verify transactions and support the blockchain network. So, here you will hold the cryptocurrency and strengthen the network to receive the rewards/profits. So, with crypto staking, you will be able to generate a passive income by only holding coins. Moreover, you will be able to earn more money, if the value of the coins increases. However, not all cryptocurrency supports staking.
How Crypto Staking Works?
Crypto staking is a new type of transaction that is recently added to the blockchain. In this process, the crypto traders pledge their coins to the cryptocurrency protocol. Then, from those participants, the protocol chooses validators to confirm blocks of transactions. Therefore, the more coins you pledge, the more likely you will get the rewards. When a block is added to the blockchain, new cryptocurrency coins are minted and distributed as staking rewards to that block’s validator. You will receive the same cryptocurrency that you are staking. Sometimes, blockchains use a different type of cryptocurrency for rewards.
If you want to stake crypto then you should own crypto that uses the proof-of-stake model. Next, you can choose the amount of coin you want to stake. There are lots of cryptocurrency exchanges available that allow Crypto Staking. The coins you steak will remain in your possession which is very convenient. Moreover, you’re free to unstack your coins anytime you want. Many cryptocurrencies require maintaining a minimum staking time before you can withdraw the coins. Crypto coins with proof of work require considerable computing power; on the other hand, Proof of stake doesn’t require too much energy.
Benefits Of Crypto Staking
1. Relatively an easy way to earn interest on your cryptocurrency holdings
2. Don’t require any equipment for crypto staking
3. Crypto Steaking helps to maintain the security and efficiency of the blockchain
4. Crypto Steaking is environment friendly compared to crypto mining
Disadvantages Of Crypto Staking
1. The price of cryptocurrency is volatile and it can drop quickly, so if your staked coins drop price rapidly then it might outweigh the interest you earn on them
2. Crypto staking might require you to lock up your coins for a minimum amount of time and during that time you won’t be able to do anything
3. Crypto un-staking might have a fixed period of seven days or longer
Which Crypto To Stake?
The list of cryptocurrencies increases every year and many new cryptocurrencies are included in the list. Currently, the most popular coins for staking are:
1. Tezos (~7% interest rate)
2. Cosmos (~7.2% interest rate)
3. Komodo (~5% interest rate)
4. QTUM (~4% interest rate)
5. Decred (~9% interest rate)
6. ICON (~19% interest rate)
7. ZCoin (~14% interest rate)
8. PIVX (~9% interest rate)
9. NOW Token (up to 25% interest rate)
Rules For Crypto Staking
If you want to stake crypto then you have to consider the terms and rules of the respective staking pool and blockchain. Some crypto exchanges allow both online and offline crypto staking, while other exchanges don’t. If you want to do crypto staking offline then you have to use your computer as the staking node which is also known as a delegate node. Moreover, you would need different nodes depending on the blockchain that you are using. For example, if your crypto coins support PoS then it will need a node that meets the minimum technical requirements to keep the network’s operation quality high. Therefore, before starting crypto staking you must check if the blockchain uses the Proof-of-Stake mechanism. Apart from that, you have to comply with some other rules of the staking service. Some common rules are –
1. Your crypto wallet must be online 24/7
2. Crypto wallet must support staking
3. The coins must have to be matured for a couple of days before you will be able to receive a staking reward
4. There might be a limit of minimum and maximum amount of coin that you can stake
How To Stake Crypto Coin?
Crypto staking is an easy process. Follow the below steps if you want to stake crypto –
1. Choose A Coin To Stake: First, pick a coin that you want to stake. Make sure you pick a coin that supports PoS.
2. Download The Wallet: The next step is to download the crypto wallet. Make sure you choose a crypto wallet that supports crypto staking as well as the coin that you have chosen. Without a crypto wallet, you won’t be able to stake the coin.
3. Check The Minimum Requirements: Next check the minimum requirements of crypto staking because some crypto coins have a minimum number of coins required to stake. For example, Dash requires 1000 DASH for staking while Ethereum requires 32 ETH. On the other hand, there are some PoS coins like PIVX, NEO, and PART that don’t have any minimum requirements.
4. Pick A Hardware: Crypto staking requires a 24/7 connection to the network and uninterrupted internet access. Therefore, you will need a standard desktop computer as well as a reliable internet connection. You can use Raspberry Pi and it will save you electricity. Moreover, you can also use virtual private servers (VPS) to avoid maintenance works.
5. Start Staking: Once you have fulfilled the above requirements, then you have to set up your wallet. After setting up the wallet you will be able to start the crypto staking process.
6. Stake The Coin: You can stake the coin both online and offline. If you want to stake coin online then you have to use a staking pool, an online service, or an exchange. Each staking method has different requirements and terms therefore, check them out before you start staking.
Crypto Staking Rewards
The rewards of crypto staking vary based on the cryptocurrency, network condition, blockchain requirements, etc., and the method you use. For example, according to Binance.US, the annual reward for the staking algorithm would range from 8 to 10%. Coinbase has an algorithm at a 4% annual percentage yield and Ether at a 4.5% annual percentage rate.
FAQs About Is Crypto Staking Worth It? A Beginner’s Guide On Crypto Staking
Is Staking Crypto Profitable?
Yes, crypto staking is profitable and it is an excellent way to generate passive profits. If you can do the crypto staking properly then it could be a comparatively reliable source of passive income that ranges from 5-12%, in return for simply locking up your cryptocurrencies.
What Is The Downside To Staking Crypto?
There are some downsides to crypto staking. The price of cryptocurrency is volatile therefore it can be risky and might result in profit loss if the price drops significantly and rapidly. Moreover, you would need some investments and pay some fees to stake crypto.
Is Staking ETH Safe?
Yes, crypto staking is safe. It is a good method for the Ethereum ecosystem. With crypto staking, you will be able to secure the ETH network as well as earn some rewards.
Does Coinbase Offer To Stake?
Yes, Coinbase offers crypto staking. Coinbase customers in the USA and other countries can use their Coinbase wallet to stake cryptocurrency.
What Is ETH Staking?
ETH staking means holding an amount of ETH on the Ethereum blockchain for a specific period to contribute to the security of the blockchain as well as earn some rewards.
Last Updated on October 8, 2022 by Magalie D.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.