2020 was the year of Decentralized Finance (DeFi). Cryptocurrency staking played a huge role in the phenomenal growth of the new generation of crypto assets. At the time when the total number of miners on proof-of-work (PoW) blockchains (which involve Bitcoin mining and formation of a block after solving mathematical puzzles and verification of transactions) begin to dwindle (except for Bitcoin), the number of proof of stake PoS coins is increasing rapidly. Users stake their altcoins for earning fixed interest or yielding farming rewards.
In the Kraken platform itself, more than a billion dollars worth of cryptocurrencies is staked to earn crypto. Other major exchanges where huge amounts of stacked coins are there include Binance and Huobi. In January 2021, the total assets staked in DeFi platforms amounted to US$21-23 billion. The scope, platform, and expanse of crypto staking are increasing at a very fast pace. But what is it all about? Let’s explore more.
Staking of cryptocurrencies implies an activity (or a process of staking) where a user holds his crypto funds in a crypto wallet (hot or cold) and also participates to maintain the operations of a proof of stake (PoS) based blockchain system. This is a very similar system to crypto mining in the sense that it helps the network in achieving consensus as the users participating get rewarded.
In the staking process, the right of validating new blocks of transactions involves the number of digital coins that are locked inside a wallet. The stakers, just like mining of a PoW platform, get incentives for finding a new block of a cryptocurrency or adding a transaction on a blockchain. Besides the incentive aspect, PoS blockchain platforms are highly scalable in nature and also have high transaction speeds.
A wide array of cryptocurrencies can be staked by the investors and users for earning passive income with their held or idle cryptocurrency assets. Here are some of the leading cryptocurrencies that offer excellent staking rewards:
It is one of the hottest staking options available. If you have already bought Ethereum (ETH), you can easily stake it, become one of the early validators, help the system grow further, and in return earn passive income.
For staking ETH, the minimum criteria is to own at least 32 ETH coins. In addition, you have to be the Eth1 mainnet client. You can get started by visiting the Eth2 Launch Pad.
In June 2018, Tezos was born. It caused a major uproar as it became the biggest ICO (Initial Coin Offering) with a total investment of more than US$230 million. It implemented liquid proof-of-stake (LPoS), a PoS version.
XTZ is the native currency of Tezos and the staking process is called “baking”. The participants in the Tezos’ staking process are rewarded with the native coin. The system penalizes malicious bakers by confiscating their stake.
A user has to hold 8,000 XTZ coins and at the same time run a full node to become a staker/baker on Tezos. Many 3rd party services have also emerged that allow smaller coin holders to delegate their held XTZ and consequently share their earning rewards. XTZ’s annual percentage yield varies from 5-to-6%.
The main aim of Algorand (ALGO) is to carry out low-cost cross-border payments. For both security and transaction processing, the network needs stakers. It is especially true because of the PoS protocol. A pure proof-of-stake (PPoS) consensus mechanism is used but still needs stakers in running full nodes.
The ALGO delegation is also supported by the 3rd party. The staking rewards for Algorand range within 5-to-10% annually. The reward percentage is mainly dependent upon the platform used. Binance Staking, for example, provides an 8% APY (annual percentage yield).
Icon (ICX), a complex Korean blockchain project, also offers a platform for staking natively. The Delegated-Proof-of-Stake (DPoS) consensus algorithm is used. This model involves finding of new blocks by a select number of users and verification of transactions. Others involved in the process simply delegate their ICX native tokens. The best part is the staking reward, which ranges from 6-to-36%.
Crypto staking can be done on:
If you are ready to invest in PoS coins or buy Bitcoins through online brokerage accounts, you can do so in a legit way by investing through cryptocurrency apps. You have to open an account with such an exchange, verify details (including basic personal information), and then fund your cryptocurrency trading account.
You can start depositing funds to your crypto exchange account to buy cryptocurrencies by connecting your bank account (savings accounts or checking accounts), and then transferring fiat currency money online through bank transfer, credit cards, debit cards, and other payment options. If you need further assistance, you may consider taking help from the vibrant and helpful community. You can trade these cryptos with credit cards, debit cards, or other payment options through reliable crypto trading platforms.
In case you are bullish on the future prospects of staking crypto, you can buy them with USD or other fiat currencies of your choice. Once bought, transfer them to hot wallets (including mobile app wallets and software wallets) or cold wallets (including most secure hardware wallets) and hold them for a longer time period for a significant price appreciation. Keep your coins safe with Ledger Nano S, Trezor One, other Ledger and Trezor models, or other popular ones and stake them directly from there.
This will help you get a higher return in the long run, much more than investing in stocks, mutual funds, index funds, real estates, CD rates, money market returns, yield savings accounts, real estate investment trusts, fiat currency trading (forex trading), and others. In fact, many retirement funds or IRA accounts such as Roth IRA are allowing cryptocurrency investors to purchase these altcoins. You can also check the retirement calculator to know how much you should invest in which asset class and what return you can expect.
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You may also check “Napbots Review – Simple Way To Increase Your Crypto Returns” before taking the plunge.
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If you still need assistance, you can refer to the following step-by-step purchasing guides for the various payment methods: