Make money by crypto staking and taking control of your financial future! Do you want to make money in the cryptocurrency space without taking on too much risk? If so, then crypto staking may be the perfect option for you. Staking cryptocurrency is a great way to generate passive income while diversifying your portfolio.
The global cryptocurrency market has seen tremendous growth over the past few years. As of November 2022, the total staked value of the top two cryptocurrencies, Ethereum and Cardano, is estimated to be around 29.17 billion US dollars. This demonstrates the immense potential in crypto staking, which also speaks to the fact that it’s an abundant market you can tap into to make money.
Global biggest cryptocurrencies based on staked value. All values as of November 2022. Extracted from Statista
This simple guide on how to make money by staking crypto will explain what crypto staking is, how it works, and why it can be a great way to generate passive income from your cryptocurrency investments.
What is Crypto Staking?
Put simply, crypto staking is the process of holding cryptocurrency in a wallet to help support the network. In return for doing so, users will be rewarded with staking rewards. These rewards can come in the form of additional coins or tokens that can be sold for a profit. Staking works because it helps secure a given blockchain and process transactions on it, making it an attractive way to generate passive income from cryptocurrencies.
Crypto Staking is becoming increasingly popular as more and more people are looking for ways to earn passive income. Crypto Staking is a great way to do this as it requires little effort and has the potential to generate substantial rewards.
However, only Proof-of-Stake (PoS) cryptocurrencies support staking. Your chances of becoming a validator (or miner) increase when you pledge (stake) more cryptocurrency since the system views you as more reliable than other users.
What is meant by Proof-of-Stake (PoS)?
Proof-of-stake (PoS) is a consensus algorithm for cryptocurrencies that rewards users for endorsing legitimate transactions, hence reducing the risk of fraud. When a cryptocurrency incorporates proof of stake, it signifies that staking, as opposed to mining, is the primary mechanism used.
As soon as Bitcoin (BTC) became the first cryptocurrency to use blockchain technology in 2009, transactions on the network were (and still are) authorized via mining. Participants in the network use their processing capacity to resolve complex mathematical problems in this process. This consensus technique for adding new blocks of transactions is called Proof-of-Work (PoW), and it consumes a lot of energy.
Although PoW does the task of maintaining the network’s decentralization and ensuring the security of transactions, some people may have questioned if there is a more effective approach to managing blockchain transactions. The Proof-of-Stake (PoS) consensus method is introduced as a result. It enables participants to lock up their digital assets and randomly chooses users to verify blocks at certain intervals. The majority of PoS protocols choose to verify the next block from among the players with the largest stakes.
PoS protocols process more transactions per time than PoW networks and are far more scalable. Applications created for PoS networks do tasks more quickly and easily in this fashion. With the Ethereum 2.0 or Eth2 update, the biggest blockchain for decentralized applications, Ethereum, has started a move away from PoW to make use of these advantages of the PoS architecture.
Is Staking Always Profitable?
The answer to the question “Is Crypto Staking Always Profitable?” is a “YES!” Crypto staking is almost as rewarding as mining or trading cryptocurrencies, and it is risk-free. For instance, you would receive 0.05 ETH annually if you staked 1 ETH at a 5% annual interest rate. While it may not seem like much, over time it adds up.
However, many factors can affect the profitability of crypto staking. These factors include the amount of cryptocurrency staked, the length of time the staking is held, the current market conditions, and the staking rewards offered by the cryptocurrency. Crypto staking can also be impacted by changes in network fees, network upgrades, and other external factors. As such, it is important to thoroughly research and understand the staking process before entering into a staking agreement to maximize the potential for profitability.
Is It Worth Staking Your Crypto?
It is worthwhile to stake top-ranked currencies in solid projects or on centralized exchanges such as Binance or Vauld. You will get less APY (2-15%), but it is secure, and in today’s market, if you panic sell your BTC, ETH, or other strong currencies, you will almost certainly lose half of your investment. Therefore, it’s best to hang on and be patient.
Yet, if you invest in certain random DAO projects, it seems to be quite lucrative as some promise more than 1000% APY. Yet, they often reduce your investment to pennies or less in a certain period.
So staking is good, but only if done wisely.
How Much Can You Earn from Staking?
The amount you can earn from staking depends on the cryptocurrency you stake and the amount that you are staking. Generally, the more you stake, the higher the rewards you can earn. Also, endeavor to consider the staking rewards of each cryptocurrency before investing in staking. For example, some cryptocurrencies offer higher rewards than others.
The program you choose will outline the staking benefits it provides. Staking may provide an annual percentage return of 4% to 10% or more (APY). To entice users to stake their cryptocurrency, several of the most well-known blockchains provide yield incentives in the form of their native cryptocurrency (such as ETH or SOL).
In addition, the amount of time you hold your staked coins also affects how much you can earn from staking. Generally, the longer you hold your staked coins, the higher the rewards you can earn. Just be aware of the market fluctuations of the cryptocurrency you are staking, as it could lead to higher or lower rewards.
What Is The Downside of Staking?
While staking remains a popular way to earn passive income from cryptocurrency investments, it has its downsides too, and you must be aware of them before making any decisions on staking.
- Risky: Staking is a high-risk strategy that can lead to major losses if the asset price moves in the wrong direction. Since it involves tying up capital in a single asset or project, the staker may lose the staked funds if the asset or project fails.
- Requires large capital: Staking generally requires a large amount of capital to be committed, which could be difficult to access for some investors.
- Not Suitable for quick profits: Staking is a long-term strategy and may not be suitable for investors looking to make quick profits.
- Complex: staking can be complex and may require a higher level of technical knowledge than other forms of investing.
- Unpredictable: Staking rewards may also be subject to volatility and may not be as reliable or predictable as other forms of investment income.
Is Staking Safer than Farming?
Staking is generally considered safer than farming when it comes to cryptocurrencies. Staking involves holding a certain amount of coins in a wallet and receiving rewards in return, while farming typically involves investing in high-risk projects that may not result in any returns. With staking, the user can rest assured that their rewards are guaranteed, as long as they keep their coins in their wallet. This makes it a much safer option than farming. Additionally, staking is a much simpler process than farming, requiring less effort and knowledge of the cryptocurrency market. This makes it a great option for people who don’t have the time or dedication to stay on top of the market. Staking is, therefore, a safer option than farming for those looking to make some extra money with their digital assets.
Which Coin has the Highest Staking Rewards?
The most lucrative coins for staking are BUSD, USDC, and USDT. As you can observe, these are all stablecoins, meaning they are backed by fiat currency and have very low volatility. As such, they offer a secure and reliable way to earn staking rewards. Binance USD, USDC, and USDT all offer staking rewards of up to 8% per annum, making them some of the best options for staking.
What Are the Best Coins for Staking?
The best coins for staking depend on your goals and risk tolerance. Some popular coins to stake are Ethereum, Neo, Cosmos, QTUM, and ICON. Generally speaking, these coins have higher reward rates, but they can also be more volatile. Hence, you should endeavour to do your own research and assesses the risks associated with each coin before taking a risk with crypto staking.
3 Ways to Stake Your Crypto
- Using a Crypto Exchange
One of the easiest ways to stake your cryptocurrency is to use a crypto exchange. Many exchanges offer staking services for their supported cryptocurrencies. For example, TransferXO allows users to stake their BTC, ETH, and other cryptocurrencies for rewards. This is an easy way for users to earn rewards for holding their crypto.
- Join a stakes pool.
A group of cryptocurrency owners who pool their resources to boost their chances of winning rewards is known as a staking pool. By combining their resources, they could improve their chances of winning by using their combined weight.
For individuals who wish to spread their risks out or don’t have enough coins to gamble on their own, this is seen as a fantastic option. The payouts in a staking pool are divided among the participants based on their contributions.
A Masternode is a node on a blockchain network that is responsible for verifying and validating transactions. Masternode owners can stake their cryptocurrency and receive rewards in exchange for their service.
- Cold Staking
This is a process of staking cryptocurrency by locking up assets in a cold wallet, which is a wallet that is offline and not connected to the internet. Cold staking provides security from online threats and eliminates the risk of losing funds due to hacking or scams.
- Liquidity Mining
This is a process of providing liquidity to decentralized exchanges in exchange for rewards. As a liquidity provider, you can stake your cryptocurrency on the exchange and receive rewards for providing liquidity.
Make Money by Crypto Staking in 5 Steps
Below are some of the steps you can follow to get started making money by staking crypto:
- Decide which coin or cryptocurrency to invest
You will have to choose your favourite coin as a user from the list of the several platforms that use the PoS process. The top cryptocurrencies to stake are listed below:
- Ethereum (ETH): ETH is the first cryptocurrency ever released on a programmable blockchain, enabling the creation of decentralized applications (DApps). The PoW consensus algorithm powers the Ethereum blockchain, however, Eth2 has begun to roll out and incorporates the PoS architecture.
- Solana (SOL): SOL, a platform for creating the next wave of decentralized applications (DApps), provides decentralized financial (DeFi) functionalities. Solana aspires to create a secure, highly decentralized, scalable network without sacrificing its high speed. With over 50,000 transactions per second, the blockchain enjoys a tremendous transaction throughput (fps).
- Cardano (ADA): This blockchain initiative transfers control from opaque systems to peers, improving society’s safety, openness, and fairness. For its blockchain, Cardano uses the PoS consensus method.
- Polkadot (DOT): The heterogeneous, open-source platform called Polkadot (DOT) makes it possible to transfer data or other blockchain assets without any kind of intermediary across several blockchains. The web is now more decentralized and private because of Polkadot’s ability to connect several blockchains.
- EOS: EOS is a blockchain used to support decentralized applications. EOS coins are native to its blockchain, and after being staked, users get rewards. The rate of return for taking a chance with EOS is 3.2% as of April 2021.
- Tezos (XTZ): Wits own cryptocurrency, XTZ, this blockchain is open-sourced. On networks and systems that enable it, Tezos may be staked. At the moment, it is predicted to yield 6%
- Decide on a cryptocurrency wallet for staking
Use a cryptocurrency wallet of your choosing to store your coins so you’re able to stake them and get rewards.
- Reach the minimum stakes requirement
The criteria for staking programs vary across different blockchains. Certain protocols, like Cosmos, do not have a specified minimum quantity of coins needed to stake, whilst other protocols do. A minimum stake investment for Ethereum’s Eth2 upgrade is 32 ETH.
- Decide on your preferred hardware
Staking protocols sometimes impose strict regulations like “slashing,” which may include taking a percentage of users’ stakes or deleting their stakes when they are offline, or undertaking nefarious actions.
As a result, while staking, you’ll need a trustworthy computer with a steady internet connection. As far as energy expenditures go, the perfect gadget should be economical.
- Start Staking
You are now ready to begin staking since you have already selected your staked currency, downloaded your preferred wallet, deposited the least amount of money necessary, if not more, and configured the necessary hardware.
Crypto staking is a way to make money by holding crypto assets for a while. By staking crypto, users can earn rewards from the network that are proportional to the amount of crypto they are staking. This passive income stream can be a great way to generate additional income and make money with crypto. Crypto staking is a simple and low-risk strategy to make money with crypto, provided users have selected a reputable staking platform.