Staking is a part of PoS consensus mechanism used in PoS based blockchains. It implies locking funds into a pool or a wallet to aid a blockchain network to achieve consensus, thus, rewarding the participants for their staked assets. The stakeholder essentially becomes a node or a master node by staking some funds mandated by a project such as a stake of 32 Ethers in Ethereum makes the investor an Ethereum validator. In DeFi Staking, a user simply stakes her holdings to silently gain Annual Percentage Yields or APYs over time. And in a PoS dedicated blockchain, the staked tokens enable the stakeholder to claim block rewards generated by the blockchain.
Why The Need For Staking
The staking mechanism helps the user wield special rights in the governance protocol of a network or system. The higher the number of staked assets, the more influence you possesses and the more the rewards. It allows the stakeholder to vote for functionalities on the same network by delegating their voting rights. PoS blockchain is highly scalable and has faster transaction speeds, thus, they are much popular among people willing to allocate their assets and enjoy the said rewards and benefits. The recent Ethereum update to 2.0 is a sign that the project is concerned about scalability by shifting from PoW to Pos. Users are now more eager to invest their idle assets into crypto staking to earn the best of passive income in fixed percentages that vary with individual networks. Now with the advent of Decentralized Finance, staking has picked up even more steam among enthusiasts.
This demand for crypto staking can be justified by the amount of sheer wealth addition to DeFi protocols. With over $64 bn worth of assets staked in this ecosystem, DeFi has neutralized the notion that the crypto technology was a fallacy. Before DeFi emerged, people had to rely on the bank savings that earned them negligible interests. These returns are so tiny that saving $1,000 in the bank couldn’t even buy your family a night’s dinner after a year of interest return.
Then came the Defi staking that allowed users to enjoy yield lucrative interests by just holding their digital assets without having to transact or trade on the network. This is commonly referred to as Yield Farming, a method to maximize profits by harvesting the best yields across protocols.
The Benefits Of Staking
1. Crypto Staking dismisses buying expensive mining hardware used in other consensus algorithms such as PoW which is ultra-secure but is not environment friendly.
2. Guaranteed return from the network because it is after all a Proof of Stake, so there is proof that you’ve staked a certain number.
3. The most important benefit is that your investment doesn’t depreciate with time unlike what happens with Asics and other mining hardware. Your stakes only depend on the market fluctuations.
4. There is no need to manage private keys, initiate trades, or perform complicated tasks for participating in staking with Staking as a Service providers
How To Start Crypto Staking
First and foremost, choosing the right digital asset should be your forte, if not you can still stake into a good protocol by learning with Tradedog Research & Analysis section. Aim for pools that yield little, slow yet constant rewards for staking at first. Once you get used to it, you can get ready to bet big. Since you are contributing to the project’s success, choose the one you believe in.
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Your crypto staking journey begins by choosing a crypto exchange or crypto staking pools such as Moonstake or Stakefish.
Both choices can get confusing, so make sure you know what you’re doing. Exchanges are easy but entail higher fees, staking pools though have a large group of stakeholders who constantly shift their assets from pool to pool and hunt for higher yields. Hacks and exploits are other drawbacks, one rug pull and woosh! the entire pool gets drained of liquidity, a huge loss of your money.
Staking-as-a-Service providers run nodes for PoS protocols on behalf of their investors. This could be a better opportunity for you to join a pool that is provided by the meticulous due diligence of these service providers thus reducing the threat to your investments. Just get your Metamask wallet ready with tokens of choice and you’re ready to earn staking rewards. Calculators and data aggregators like Staking Rewards calculate annual earnings and display the best available pools for staking your assets. Staking rewards currently tracks 216 yield-bearing assets with an average reward rate of 14.95%.
The Dos and Dont’s of Staking
- Do not get lured by higher APYs
- Learn as much as you can about the project such as its reputation and age
- Use analytics and statistics from reliable resources to keep a track of the platform, understand its mechanisms and benefits.
- Learn about the minimum staking amount, unstaking (withdrawals) conditions, wallets supported etc.
- If you exit the staking period before the tenure, you will lose interest and earnings.
Here Are Some Top Staking Service Providers (PoS Chains) and Exchanges To Earn Passive Income With Little to No Technical Aptitude
Stake Capital offers DeFi and staking networks and supports a slew of services and derivative products on their Dao. Stake Capital allows its users to deploy many strategies to get the best returns on staked digital assets across lending, borrowing, swapping, leveraging, arbitrage, SaaS and helps earn fee revenues using StakeDAO.
Stake Fish is a Non-custodial staking platform that operates validators on the following projects
Enterprise-grade validator architecture with $120mn+ in staked amount
The largest exchange in terms of volume, binance offers staking with minimal efforts. One can choose from locked staking or DeFi staking and get started effortlessly.
Coinbase is a completely offline, insured, licensed staking service provider. Coinbase Custody is a great choice as it allows staking in a few taps without risking your crypto holdings. Coinbase allows staking in some available PoS assets and enables full custody of your staked cryptocurrencies in a secure offline (cold) wallet, thus, significantly minimising risks of hacking and accidental slashing (Validator Misbehaviour)
With so many Staking as a service provider, it gets tough to choose one. If you invest enough time in reviewing your strategy and service providers, you can get a great headstart and make passive income with your idle crypto and get good APYs. With staking platforms, you don’t need any technical aptitude. The provider itself would validate stakes on your behalf enabling you to earn passive rewards.
Staking may be extremely rewarding but the process should be approached with high caution. Are you ready to call yourself a Yield Farmer or Liquidity Provider? Invest wisely!