3. Become a validator

Validators are nodes that store the entire blockchain for a cryptocurrency, verifying transactions and adding them to the ledger. It is similar to how a bank processes transactions.

Instead of keeping transaction records on its servers, validators hold all cryptocurrency transactions in an encrypted digital ledger.

Validators collect fees from every transaction they approve. They also receive newly minted cryptocurrency at regular intervals in return for performing this work. In addition, if they’re operating in a proof-of-stake system, they also earn interest on their holdings of crypto (this interest is paid out in additional cryptocurrency).

However, being a validator requires setting up a staking infrastructure, which might be costly. Also, entry costs can be a bit high.

How to Stake Cryptocurrency?

To get started with staking crypto, here are some of the steps one is supposed to follow:

1. Choose cryptocurrency or coin to stake

As a user, you will be required to select your preferred cryptocurrency from the many platforms that integrate the PoS mechanism. Here are some of the best crypto to stake:

• Ethereum (ETH) – This is the first-ever crypto issued on a programmable blockchain that supports the development of decentralized apps (DApps). Ethereum blockchain runs on the PoW consensus algorithm but has started rolling out Eth2, which integrates the PoS model.
• Solana (SOL) – This is a platform for building the next generation of DApps to provide decentralized finance (DeFi) tools. Solana aims to build a scalable network that is secure and highly decentralized without compromising on its high throughput. The blockchain boasts high transaction throughput, over 50,000 transactions per second (fps).
• Cardano (ADA) – This blockchain project decentralizes power from unaccountable systems to peers, creating a more secure, transparent, and fair society. Cardano deploys the PoS consensus mechanism for its blockchain.
• Polkadot (DOT) – This is an open-source and heterogeneous platform that facilitates the trustless transfer of data or blockchain assets across diverse blockchains. Through Polkadot, many blockchains have become interoperable, making the web more decentralized and private.
• EOS – EOS is a blockchain deployed to reinforce decentralized programs. EOS tokens are indigenous to its blockchain, and users earn a reward after staking the tokens. As of April 2021, the rate of return for risking EOS is 3.2%.
• Tezos (XTZ) – This blockchain is open-sourced with its native currency, XTZ. Tezos can be staked on supported networks and platforms. Its current expected return rate is at 6%

2. Select a crypto wallet for staking

Select a crypto wallet of your choice where you will store your coins so that you can stake and earn rewards.

3. Meet the minimum threshold for staking

Different blockchains have unique requirements for their staking programs. While some protocols like Cosmos have no minimum requirements for staking, others require a set minimum amount of coins so that you get to stake. Ethereum, for its Eth2 upgrade, requires a minimum investment of 32 ETH for stakes. 

4. Select hardware of choice

Staking protocols often implement tough rules like slashing, which may involve taking a proportion of users’ stakes (slashing), or removing their stakes, when they are offline or attempt malicious operations. 

As such, you will require a reliable computer with an uninterrupted internet supply when staking. The ideal device should also be cost-effective in terms of energy costs. 

5. Start Staking

Since you have already chosen your staked coin, downloaded a preferred wallet, which you have transferred the minimum amount of cash required, or even more, and you have set up the proper hardware to use for staking, you can now start staking.

How to Select a Good Pool/ DeFi Platform for Crypto Staking

The decision to stake using a staking pool comes with many benefits, but how do you go about it? Here are some valuable tips to help you identify the best pool for crypto staking:

1. Performance

This is probably the most critical parameter when selecting a staking pool. The goal is to pick the pool or decentralized finance (DeFi) platform that can have higher chances of getting more returns. One way of determining this is by checking the pools’ hardware. A good pool should have computers with high processing capability and suitable power supply so that staking can continue throughout the selected period uninterrupted. Again, the pool should be running on dedicated servers to ensure that the internet does not tip down and reduce the returns for stakers.

2. Communication and Transparency

When stakers commit their crypto coins, the goal is to get more returns, but how do you know the returns? This is why you need to go for a platform that is committed to transparency. Take some time to read through the platform’s site to understand their commitment to stakers. You can even extend this to previous stakers who used the pool in the past. If they indicate that they felt scammed or got returns that were not commensurate with their stakes, take caution to avoid similar disappointments.

3. The Pool Fees

When you join a pool, the platform charges a fee for using its resources. Here, you should look for the pool that charges affordable rates. If the fee is very high, there is a risk of the earnings you get from the staking process getting eaten away. Most pools charge a fixed fee and 2-4% margin.

4. High Security

Maximum security is an essential factor because many crypto coins are pooled together; hackers will no doubt be attracted and try to steal them. Therefore, you should go for the pool with a relentless focus on strengthening security. Check back to see the pool management’s efforts to protect the staked coins. Are they effective? For example, is the system and communications encrypted to reduce the risk of attacks?

5. Good Customer Support

Good customer support is an indication of a reliable organization. If you are stuck trying to stake more coins or accessing personal information on the staking account, the support should be there to assist you. So, check the selected pool’s website to ensure they have multiple communication channels, from phone numbers to live chats. You might also want to test the support with a direct call to ensure it is fast and professional.

Pros and Cons of Crypto Staking

This model allows you to earn passive income by staking your coins in a wallet. Once your coins are staked, they will “mine” the next block and earn new coins as rewards. This method of verifying transactions in the blockchain is known as Proof of Stake (PoS). The more coins you stake, the higher your chance of mining a new block and receiving the rewards. Although the reward often comes in the same coin/token you used to stake, some projects allow you to stake one coin and get the other as a reward.

The Pros

Staking enables you to earn interest on your crypto holdings. It’s pretty easy to stake cryptocurrency since you don’t need any equipment to get started. When you stake cryptocurrency, you help maintain the security and efficiency of that coin’s blockchain network. Also when you lock up your coins for a specific period, you help encourage others to invest, thus further increasing or stabilizing the coin’s price.

There are several benefits that come with staking cryptocurrency.

• Earn passive Income: Not only does it provide a way to make passive income, but it also helps secure the network. By lending your coins to the validation process, you make it more difficult for an individual or group to take over the network.
• Reduces network congestion: When there are no stakers on the network, it creates a backlog of transactions, causing high transaction fees and long wait periods before your transaction is validated. By staking your coins, you are helping to clear out these transactions, making the network more efficient.

• Make money while you sleep (and don’t have to worry about the price fluctuation)
• Receive free coins from other users who want help validating their transactions on your network (if it supports this feature)
• Make money from transaction fees paid by users who want to use your network for their transactions.

The Cons

It is advisable to only invest in crypto staking once you have a good grasp of blockchain technology and cryptocurrencies. You should research the market before deciding which coins to stake to maximize your returns. It is worth noting that fluctuations and significant movements in the market can cause unexpected losses. If your crypto coins are on an exchange, you are also at risk of an exchange hack or exit scam (i.e., the exchange shutting down with all your money).

Some of the disadvantages and risks of staking include:

• Costly Staking Requirements: Most blockchains have set minimum amounts that a user has to stake. This is disadvantageous to users who want to risk but cannot do so because the minimum requirement is more than they can afford.
• Hacking: Decentralized finance (DeFi) staking is risky as some staking platforms use insecure, smart contracts, making it simple for hackers and scammers to steal participants’ funds. Errors in code in DeFi can also cause system failure, leading to various unwanted outcomes like locking up user funds. Users must research the appropriate secure staking platform to avoid such vulnerabilities before opting into the staking program.
• Crypto Price Volatility: There is always the likelihood of staked assets losing value in cryptocurrency staking. This will lead to a loss in earnings on the user’s part.
• Long unstaking period: During the staking period, you have to lock up your coins which means you can’t do anything with your staked assets until the time elapses. The unstaking period may take longer than expected, locking you from withdrawing your funds or selling the assets.

Conclusion

Like many other investments, staking presents a way for users to earn from their inputs. The opportunity presents risks, which can be extensively limited by ensuring due diligence before investing in a staking program.

One platform to start your staking is on hi. The platform runs a PoS consensus mechanism that supports staking for participants. hi offers flexible earnings for stakes, with eligible payouts in 7, 180, or 365 days. The platform also supports earnings for users who hold their crypto assets on hi, with up to 20% annual percentage yield (APY).