Staking your crypto assets is one of the best ways of earning passive income. Simply locking up your digital tokens in a decentralized finance (DeFi) project can make you super-high interest.
Staking means lending your funds to support the operations within the blockchain and, in return, getting a percentage of the funds that the system generates as the transaction fee.
Today, we have more than 6000 cryptocurrency coins out there. Many staking platforms support the staking of most of these digital tokens. However, the coins differ in characteristics, hence may offer different interests and convenience.
Ways to Stake Crypto
The first step in staking crypto is identifying a token that uses a proof-of-stake consensus mechanism. You can stake crypto in various ways:
You can use a decentralized exchange (DEX) to stake your cryptocurrency assets. A DEX is a trustless online platform that allows buying, selling, and exchanging cryptocurrencies. When you are staking with an exchange, the platform works on your behalf. It is a good way of staking for beginners since investors have little responsibility. Some exchanges ask for commission in exchange for staking services. Some popular exchanges offering coin staking are Coinbase, Binance U.S., and eToro.
⭐️ Read more on: Top Cryptocurrency Exchanges
2. Staking Pools
Exchanges offer the easiest way to stake cryptocurrency. However, some investors may not prefer them since few platforms support an array of tokens for staking. An alternative is to join a “staking pool,” typically operated by another user.
Staking pools allow multiple stakeholders to pull their computational resources to increase their chances of getting a reward. The primary idea of the staking pool is similar to the traditional mining pools, which involves pulling hash rates in a Proof of Work (PoW) blockchain. However, the staking pool only works with blockchains that use the Proof of Stake (PoS) model or protocol design features.
A staking pool has a staking pool operator that manages the pool and stakeholders that join the pool by locking their tokens in a specific blockchain address (or wallet). Some pools may require users to stake their digital assets with a third party. However, many other staking pools allow investors to stake their cryptocurrencies while holding their coins in a personal wallet. Cold stalking enables users to participate in staking while holding their tokens in their hardware wallets. Such staking is considered more secure.
Unlike solo staking, staking pools offer relatively smaller rewards since the reward is distributed among all the participators according to their contributions. On the positive side, a staking pool lowers the risk that the participants are exposed to. The risk is distributed just as the profit is distributed. They also provide more predictable and frequent rewards.
You need to connect your digital tokens to a crypto wallet with a validator’s pool. Ensure the legitimacy of the validators to avoid falling victim to fraud. Check out the official websites of other proof-of-stake blockchains and understand how they work.
3. A Validator
You can also go by yourself and become a validator in a blockchain that uses proof-of-stake. You can be randomly selected to validate a block and earn interest by owning staking coins. A validator’s work is similar to a miner’s in a POW blockchain.
Becoming a validator is one of the effective ways to stake cryptocurrency. However, it is more complicated than using an exchange or a mining pool. As a validator, you must build your staking infrastructure. It is vital to have the proper equipment with sufficient computing power and software. It is also crucial to download the entire transaction history of the blockchain. Becoming a validator may also involve a high entry cost. For example, you need at least 32 ETH (approximately $140,000) to become a validator on the Ethereum blockchain.
Factors to consider when selecting staking coin
Generally, you can make more profit with staking if you stake more. You can opt for ploughing back your profits to increase your earnings. However, you need to check other factors to increase your earnings through staking.
1. Coin Value
Digital assets have different inflation rates. A coin with a low inflation rate is more stable hence suitable for staking. You may earn a high reward with highly volatile tokens, yet you may be left with little to no profit due to inflation.
2. Fixed Supply
Coins with fixed supply are suitable for staking since their limited circulation hedge against inflation. As the demand for the digital token grows while supply remains constant, the value of the assets rises.
3. Actual Application
The demand for any crypto token depends on the actual application of the coin. A token that offers solutions to real-world issues will likely attract more investors. You should consider a token used for various applications such as digital payments since they have a healthy demand and price.
⭐️ If you are interested in crypto staking coins, you also have to know why you need a crypto wallet.
Coins with Best Staking Rewards
HI is a membership token for the hi.com protocol (hiP). The blockchain protocol is a fast, scalable, secure, and adaptable network that offers a platform for developing a robust smart contract for DeFi. The network uses Delegated Proof of Stake (DPoS) consensus mechanism. The platform leverages a WASM-based virtual machine to provide users with a broader support programing language such as C, C++, Java, Rust, and many more. It also offers a near-native programming speed. Additionally, the majority of end-users will enjoy free transactions.
hi allows users to stake high dollars and earn up to 40% APY, one of the highest in the market. With the utility that hiP is promising, the demand for HI is likely to soar moving into the future.
2. Ethereum (ETH)
Ethereum network is undergoing an upgrade (Ethereum 2.0). Unlike Ethereum classic, Ethereum 2.0 will not use the proof-of-work (PoW) and instead use proof-of-stake (PoS). Ethereum 2.0 is faster, more scalable, and energy-efficient. It will support more transactions at a small fee. These updates are likely to drive up the demand for the token. Note that ETH2 is the same as ETH when staked. You can invest and earn by staking ETH2.
Ethereum is one of the most secured cryptos currently available in the market. It is also popular and has high liquidity. The average annual percentage yield of this token is 5% APY. However, hi.com offers a higher interest of 5.5% APY for Ethereum staking.
The platforms that support the staking of Ethereum include Binance Hi.com, Exodus, Coinbase, and Kraken.
Solana is one of the fastest blockchains. Its ecosystem is growing fast, and its native token (SOL) has quickly gained popularity. SOL runs on the Solana blockchain and enables buying, selling, and interactions with decentralized apps (DAapps). Solana protocol combines proof-of-history (PoH) with the underlying proof-of-stake (PoS) to enhance scalability and transaction speed on the blockchain. Solana attracts small-time and institutional traders due to its innovative hybrid consensus model. The primary focus of Solana is making DeFi accessible on a large scale.
The average staking growth of SOL is 8% APY, which is one of the best in the market. SOL staking is supported in Kraken, Solana, Exodus, Coinbase, Binance, and FTX.
4. Tether (USDT)
USDT is a stable coin that offers a hedge against inflation. If you want to stake a digital coin that does not experience a fall in value due to inflation, then USDT is for you. USDT is the first digital token to peg its value to a fiat currency (USD). The token has a massive trading volume that translates to high liquidity. It is suitable for investors since they can easily swap out USDT for more suitable tokens.
Investors enjoy an average of 4% APY for staking USDT. However, you can take advantage of the Hi.com staking program that awards up to 11% APY on USDT staking.
The stability of USDT makes it one of the best staking coins for beginners who want to begin their staking journey with hi.com. Despite offering high interest to investors, hi also enables instant withdrawal with little hassle.
Some of the platforms offering USDT staking include hi, Coinbase, eToro, and KuCoin.
ADA is a native token for the Cardano blockchain. The network is famous for its strong proof-of-stake (PoS), making it faster and more scalable. The network can process hundreds of transactions per second. ADA has high liquidity, which makes it efficient to trade it at any time. However, the reward becomes less valuable over time if too many individuals deposit their tokens into a single pool. Therefore, you should diverse by using multiple staking pools to maximize your returns. Cardano has two official wallets that you can use, Yoroi and Daedalus. The average annual interest for staking ADA ranges between 5% and 9% APY. You can also stake ADA on Kraken and Exodus wallet.
LUNA is the native token for the Terra blockchain. The blockchain protocol uses fiat-pegged stablecoins to power price-stable global payments systems. Terra combines the price stability and wide adoption of traditional currencies with Bitcoin’s censorship resistance to offer first and affordable transaction settlement.
LUNA stabilizes the price of all the stablecoins in the ecosystem. LUNA is also a governance token – token holders can submit and vote on governance proposals.
Staking LUNA can earn you between 5% and 25% APY. You can stake LUNA on the platforms such as Binance, KuCoin, OKEx, Ledger, Terra Station, and Ledger.
Staking Risk Vs. Reward
While staking, you have to balance between risk and reward. Some tokens such as Etherum (ETH) have been around for quite some time hence are more consistent and trustworthy. Such tokens may offer relatively lower interest on staking, yet they present a lower risk. On the other hand, some tokens such as ADA may promise higher returns yet has higher risks. However, with good research, you can find a good token with both high yield and low risk. hi allows you to stake a more secure ETH and highly rewarding USDT and hi Dollar tokens. The platform has an easy-to-use interface that is suitable for users of all levels of experience. Join the platform today and begin your staking journey in an easy and secure manner.