Crypto Currency Staking
Mining cryptocurrency can be rewarding, but the setup cost can be a hassle and the software integration, pool selection, testing and other things can make it difficult. Don’t worry there is another way to earn passive income the same way as mining, it is through Skaking
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Staking in cryptocurrency is locking away your crypto currency for a certain period of time and earning rewards or interest. It is similar to depositing money in a bank as an investor and earning interest over it.
Staking offers crypto holders a way of putting their digital assets to work and earning passive income without needing to sell them. By staking, you participate in the running of blockchain and maintaining its security. In exchange for that, you earn rewards calculated in percentage yields. As of April 2022, $280 billion worth of crypto has been staked.
Staking is only possible on Proof-of-Stake consensus mechanism blockchains like Cardano, Tezos, Solana, Luna, Dot and soon Ethereum 2.0. In proof of stake protocols, there are generally ways to stake coins in official wallet apps. For example, for Cardano (ADA) it recommends Yoroi wallet. Different coins have different time durations for which you must stake. Similarly, the minimum amount of crypto required to be eligible to stake is also difficult for coins. For example, Eth 2.0 requires 32 ETH minimum for staking in the mining pool.
The main question comes, how profitable is staking?
Staking is a good option for long term investors who are not affected by short term fluctuation. According to data, the average staking reward rate of top 261 staked assets is above 11% annual yield. But the rewards can change over time.
A fee is also deducted by the pool through which you join staking. It can also vary from pool to pool and from chain to chain.
The rewards you get by staking are:
Additional Tokens – you get a percentage of coins you staked and this can be an advantage as your number of coins gets a push. After some time, you can rejoin the pool by more coins (earned through staking) and earn more yield.
Voting rights and participation – This is similar to owning stocks in a company, you get the right to vote in upcoming events.
Ok, so where there is reward, there is also risk. Let’s look what risks staking has:
- Crypto is volatile, it fluctuates very easily based on news and events, price swings are common.
- There is a lockup period before which you cannot take your coins back and have no access to them.
- Staking outside exchanges can be difficult and sometimes you might lose some of your coins, this term is called slashing. It is against users who set up their own node and perform poorly.
- As mentioned above, there are fees you have to pay, but it can vary and you can choose from options which cost less so you can earn more.
