In 2020, Decentralized Finance (DeFi) emerged as a thriving new sector within the cryptocurrency industry following the launch of Compound’s token in June. Many DeFi protocols quickly followed suit, offering investors the opportunity to generate passive income by staking their assets in smart contracts that provided attractive incentives such as interest on investments and governance tokens with significant increases in value. As a result, the DeFi market capitalization has grown exponentially, challenging the traditional finance space. Although the NFT market stole the limelight in 2021, DeFi has continued to evolve and present new passive income opportunities for savvy investors seeking protection against the volatile crypto markets. With a proven track record, DeFi offers a reliable means for investors to maximize their crypto earnings, while newer fields like Web 3.0 and the Metaverse are currently generating more hype than actual substance.
Staking refers to an act in which a user confines or grips their funds within a cryptocurrency wallet to participate in sustaining the operations of a proof-of-stake (PoS)-based blockchain system. This practice, akin to crypto mining, aids a network in achieving a consensus while also conferring rewards to participating users.\
The authorization to validate transactions in staking is integrated into the number of coins that are “confined” inside a wallet. However, similar to PoW platform mining, stakers are incentivized to discover a new block or add a transaction to a blockchain. Incentivization aside, PoS blockchain platforms are scalable and exhibit high transaction speeds.
The proof-of-stake (PoS) consensus mechanism is employed to authenticate transactions and maintain agreement in a blockchain network by employing validators. The network incentivizes users to establish validator nodes and immobilize their coins, which supports the network while also providing interest on their holdings.
The specifics of how PoS systems function vary based on the protocol, but generally, the algorithm randomly selects blocks and assigns them to a validator node for assessment. The validator scrutinizes the transactions to ensure their legitimacy. If everything checks out, the validator appends the block to the ledger and receives the block rewards and transaction fees. However, if a validator adds a block with incorrect data, their immobilized assets will be penalized.
PoS is recognized for its superior energy efficiency, more accessible entry barriers, and better scalability than PoW. In fact, the Ethereum PoS model also provides robust support for shard chains, one of the most auspicious scaling solutions to date.
The crucial distinction between mining and staking is the underlying blockchain consensus mechanism used to validate transactions. Mining is associated with Proof-of-Work (PoW), primarily used in Bitcoin. In contrast, staking is generally used for Proof-of-Stake (PoS), such as in Ethereum 2.0 – Ethereum’s transition from PoW to PoS consensus mechanism.
Here are some of the differences between mining and staking:
Mining: miners solve complex mathematical puzzles.
Staking: network nodes validate new blocks by locking up their funds.
Mining: the first miner to solve the mathematical puzzle adds a block to the blockchain.
Staking: nodes validate a new block by locking up native tokens in a smart contract.
Mining: requires specialized mining hardware (e.g. GPU), which consumes a lot of energy.
Staking: is widely considered to be more environmentally sustainable, saving over 99% of energy consumption according to Vitalik Buterin.
Mining: more computational power (work) yields a higher chance of solving the block and getting rewarded.
Staking: more native tokens staked (stored value) increases the likelihood of being selected to validate new blocks.
In 2022, there are numerous options available for staking cryptocurrencies, which can be done either on major crypto exchanges like Binance, Coinbase, and FTX, or on dedicated native wallets or hardware wallets for specific blockchains. While there are several options worth considering, some of the best ones include Fantom, Avalanche, and Solana.
RoboFi Staking
RoboFi is a DeFi platform that operates on blockchain technology and offers different staking services for various cryptocurrencies, such as VICS and Ethereum (ETH). Users who use RoboFi’s staking services can earn rewards on their staked assets. The amount of rewards users receive from RoboFi staking depends on the cryptocurrency staked and the duration of the staking period. Longer staking periods typically result in higher rewards, while shorter periods offer more flexibility and liquidity. This allows users to choose a staking strategy that aligns with their investment goals and risk tolerance.
Apart from staking rewards, RoboFi also offers other DeFi services such as decentralized exchanges and liquidity pools. These services provide users with more access to the cryptocurrency markets and multiple ways to earn rewards. Overall, RoboFi is a comprehensive platform that meets cryptocurrency holders’ various needs and offers numerous opportunities to earn passive income on their investments.
ETH Staking
Currently, Ethereum validators fall into two categories: miners and stakers. Miners validate transactions on the execution layer (formerly known as Eth1), while stakers verify blocks on the consensus layer (formerly known as Eth2). To stake, Ethereum stakers must first transfer their ETH from the execution layer to the consensus layer. It’s important to note that your ETH cannot be withdrawn until the Ethereum mainnet merges with the Beacon Chain.
To become a validator node, users must have at least 32 ETH to stake. While hardware requirements are not as high as in Bitcoin mining, a fast computer with large storage space that is connected to the Internet 24/7 is required. If you are still interested in becoming an Ethereum validator after considering all of this, head over to the Ethereum Launchpad.
If you have less than 32 ETH, you can still participate in the Ethereum proof-of-stake system through staking pools that offer a lower minimum stake. Another option is to purchase tokenized staked ETH such as ankrETH, which allows you to use the coin for DeFi activities without withdrawing your stake. These alternatives also offer ETH holders the opportunity to stake without the hassle of setting up and maintaining a validator node.
Sanitatis Staking
Sanitatis Staking is a platform that allows investors to earn passive crypto income and grow their portfolios without actively trading or monitoring the market. One of the platform’s main advantages is its strong focus on providing top-notch security for investors’ digital assets, using robust security protocols to protect against volatility and security breaches that are common in the cryptocurrency world.
Sanitatis Staking employs proven low-risk trading tactics, such as arbitrage, to minimize investors’ risk while generating steady returns on their staked cryptocurrency. In addition, the platform’s user-friendly interface makes it easy for investors to access their rewards, track their staked assets, and withdraw their earnings with just a few clicks. Overall, Sanitatis Staking offers a convenient, secure, and reliable way for investors to earn crypto income and grow their portfolios.
Chainlink (LINK) Staking
ChainLink’s CEO, Sergey Nazarov, has emphasized the company’s intentions to launch LINK staking next year, 2022. Although there is no specific date set in stone for the launch, the company is working towards implementing this feature. In addition, the oracle network has introduced a new concept for crypto security, called super-linear staking. This innovative concept allows for the scaling of security features in a hybrid smart contract system, based on the system’s needs. As a result, this approach can efficiently enhance the security of the system, ensuring that it remains protected against potential vulnerabilities.
Terra (LUNA) Staking
Terra permits its users to accrue interest on their LUNA tokens by locking them up in designated wallets, such as Terra Station. In order to achieve this, one must simply create a wallet, transfer their LUNA tokens, choose a validator, and proceed to lock up their tokens. Nonetheless, there exists an alternative path to earning even more lucrative returns: farming.
A fruitful farming methodology on Terra involves leveraging Anchor’s fluid staking protocol, which enables users to acquire bonded LUNA (bLUNA), a tokenized embodiment of staked LUNA that continuously accumulates rewards. In this manner, idle bLUNA tokens can continuously generate profit even while held in the owner’s wallet. But why limit oneself to this?
One can further augment their passive earnings by depositing liquidity into DEXs (decentralized exchanges) present in the Terra ecosystem, such as TerraSwap and Loop Markets. By purchasing equal amounts of LUNA and bLUNA tokens and depositing them into LUNA-bLUNA pools on DEXs, one can earn rewards from transaction fees. In this farming scheme, one can profit in three distinct ways simultaneously:
It should be noted, however, that yield farming carries some inherent risks. Staking rewards can be slashed in the event that the validator overseeing the staking process errs or attempts to deceive the system. Additionally, a DEX’s liquidity pool can be drained via a bug exploit or hack.
Polkadot Staking
Polkadot implements a consensus algorithm called nominated proof-of-stake (NPoS), which involves nominators supporting multiple validators they deem to be trustworthy by staking their tokens as collateral. Both types of network participants can earn staking rewards for their contributions. However, it is important to note that nominators may suffer losses if they support a malicious validator.
To become a validator, there are certain hardware and server requirements that you need to fulfill. This option is typically recommended for advanced users as it can be more technical and burdensome. On the other hand, nominators can stake their DOT by nominating a validator and receive a share of the rewards. The amount of rewards you receive will depend on the performance of your validator, so it is important to make a wise choice. Keep in mind that you can unstake your DOT at any time, but there is a 28-day unbonding period before you can transfer your funds.
Unlike other protocols, Polkadot distributes staking rewards equally among stakers. This means that the validator pools are paid out equally for their work, regardless of the size of their stake.
Staking Stablecoins
Staking stablecoins can be a good option for earning yields without worrying about market volatility. As of March 2022, here are the latest stablecoin yields offered by some of the top exchanges:
It’s important to note that these rates are subject to change and may vary depending on the exchange and market conditions. As with any investment, it’s important to do your research and assess the risks before staking your stablecoins.
Staking on Icon (ICX)
The Icon (ICX) project is a sophisticated blockchain platform from South Korea that provides another means for staking natively. However, Icon stands out from Algorand and Tezos due to its implementation of the delegated-proof-of-stake (DPoS) consensus algorithm. Unlike the other two platforms, a select group of users called delegates are responsible for creating new blocks and verifying transactions, while other users delegate their coins to these delegates.
The native token of the Icon platform is ICX, which is used for staking and other functions. As of March 2022, Binance Staking offers an annual staking reward of 14.27% for ICX staking. This makes staking on Icon a lucrative option for those looking to earn passive income on their crypto assets. Furthermore, the DPoS consensus algorithm utilized by Icon is known for its high efficiency and security, making it a reliable choice for investors and developers alike.
Staking on Algorand (ALGO)
Algorand (ALGO) is a blockchain project with a primary goal of facilitating low-cost cross-border payments. As a proof-of-stake (PoS) protocol, the network requires stakers for both security and transaction processing. Unlike Tezos, Algorand uses a pure proof-of-stake (PPoS) consensus mechanism. However, stakers still need to run full nodes to participate in the network.
Additionally, there are third-party services that support ALGO delegation. These services offer staking rewards ranging from five to ten percent annually, depending on the platform used. For example, Binance Staking provides an annual percentage yield (APY) of 2.9% for ALGO staking, as of March 2022. It’s important to note that the rewards offered can vary based on the staking platform, so investors should research and compare their options before making a decision. Overall, Algorand’s focus on low-cost cross-border payments, coupled with its PoS consensus mechanism, makes it an interesting project for both investors and users looking for a more efficient and cost-effective payment solution.
Staking on Tezos (XTZ)
In June of the year 2018, a significant commotion was ignited by the arrival of Tezos, which amassed more than 230 million dollars in investment as the most massive initial coin offering (ICO) to date. The platform adopts a version of proof-of-stake (PoS) called liquid proof-of-stake (LPoS).
Tezos has its own native currency known as XTZ and refers to the staking process as “baking,” whereby those who take on the role of bakers are compensated with XTZ coins. Notably, bakers found guilty of malpractice will have their stake seized.
To participate in Tezos’ staking process, users must possess 8,000 XTZ coins and operate a full node. Fortunately, third-party services have emerged, allowing small coin holders to delegate small XTZ amounts and partake in baking rewards. The annual percentage yield for XTZ staking ranges from five to six percent.
Cryptocurrency exchanges have recognized the potential of staking as a revenue stream for both themselves and their users, given the large number of users on their platforms. By staking their crypto assets on exchanges, traders can potentially earn rewards while also contributing to the security and growth of the networks they support.
Several leading cryptocurrency exchanges offer staking services to their users, including but not limited to:
DeFi Staking
If you’re interested in checking the yields from DeFi staking, you can visit the staking calculator webpage. One of the most prominent decentralized finance protocols on the Ethereum blockchain is Maker (MKR). It allows users to borrow stablecoins against a volatile cryptocurrency like Bitcoin. DAI is the primary stablecoin on this network, and yield farmers deposit DAI that is lent to borrowers. In exchange, they receive rewards from the interest charged on loans.
Another DeFi platform that’s gaining traction is Synthetix (SNX), which has a native currency called SNX. Synthetix is primarily used for the issuance of synthetic assets, also known as Synths. These virtual assets represent real and physical assets, such as stocks, cryptos, and fiat.
Yearn Finance (YFI) is a DeFi aggregator that came into existence in February 2020. Instead of facilitating lending and borrowing, it distributes deposited funds into platforms that offer the best yields and have lower risk profiles. For instance, whenever Yearn Finance finds that Aave and Compound provide the most rewarding and less risky yields, it distributes funds between them.
Compound (COMP) is a DeFi protocol that enables users to borrow or lend a small range of cryptocurrencies such as ETH, USD Coin (USDC), Basic Attention Token (BAT), Ethereum (ETH), and DAI. The platform uses lending pools and charges interest on loans. To secure collateral, the protocol requires borrowers to deposit a given amount of supported coins.
Staking-as-a-Service (SaaS) Platforms
Staking-as-a-service platforms are dedicated solely to staking, unlike cryptocurrency exchanges and wallets that serve as both trading and storage avenues. However, these platforms charge a percentage of the rewards earned as fees. Soft staking refers to staking on these platforms.
Stake Capital supports staking for Loom Network (LOOM), KAVA, XTZ, Aion (AION), Livepeer (LPT), and Cosmos (ATOM). MyCointainer offers three levels of staking charges: Power Max, Power Plus, and Basic. Basic users pay as little as $1, while those on the Power Max plan pay more than $10 per month. The platform supports the staking of over 50 cryptocurrencies with on-chain staking support.
Cold or Private Wallets
Another form of staking is known as cold staking, which involves staking cryptocurrencies while they are held in an offline or private wallet. However, to earn staking rewards, the staked coins must remain in the same address, as moving them would break the lock-up period and cause the staker to lose their rewards.
Some popular offline/private wallets that support staking include:
BlockFi
BlockFi is a platform that provides a range of cryptocurrency services, including trading, interest-bearing accounts, and crypto lending. One of its offerings is the BlockFi Interest Account (BIA), which enables users to earn up to 10% annual percentage yield (APY) on their deposited assets. Unlike other similar accounts, there is no minimum balance requirement to start earning interest. To benefit from this service, users only need to create an account on the platform and deposit any of the supported assets. The interest earned is paid out every month, allowing users to benefit from their crypto assets without having to sell them.
Celsius
Celsius is a peer-to-peer lending platform that enables investors to lend their assets and earn weekly rewards in return. Lenders can choose to receive their rewards in the same currency as their lent asset, or they can opt for CEL tokens to increase their earnings. However, it’s important to note that boosted CEL rewards are only available to non-US users and accredited US investors to avoid regulatory scrutiny from the SEC.
With Celsius, investors can lend their cryptocurrencies to borrowers who need them for various purposes, such as trading or investing. In return, they receive rewards based on the amount they lent and the term of the loan. The rewards are paid out weekly and can be withdrawn or reinvested in other lending opportunities.
By opting for CEL tokens as rewards, lenders can potentially earn higher returns due to the token’s appreciation in value. However, this option is currently only available to certain users based on their location and accreditation status. Nonetheless, Celsius provides a compelling option for investors looking to earn passive income on their crypto assets while also providing borrowers with access to much-needed liquidity.
Gemini Earn
Gemini Earn is a lending program that enables users to lend their crypto assets to institutional borrowers and earn interest. The program offers daily interest rates that vary based on the supply and demand of each crypto asset in its lending market. This means that users can potentially earn higher returns on their investments when demand is high and lower returns when demand is low.
One of the benefits of using Gemini Earn is its user-friendly platform. Users can easily view their Earn balance and combined trading balance in one place, making it simple to track their earnings and investments. Additionally, the program is integrated with Gemini’s overall trading platform, which allows for seamless transitions between lending and trading.
By participating in Gemini Earn, users can earn passive income on their crypto assets while also contributing to the growth of the digital asset lending market. Overall, this program provides a convenient and potentially profitable option for crypto investors looking to diversify their portfolio and earn returns on their investments.
Coinbase Staking
Coinbase is a prominent US-based cryptocurrency exchange that is listed on the NASDAQ. The platform offers a range of cryptocurrency services, including the ability to stake certain cryptocurrencies. Alongside staking for ETH 2.0, Coinbase also accommodates staking for other coins such as ALGO and XTZ.
Staking on Coinbase allows users to earn rewards by holding and locking up their crypto assets to support the network. In exchange for their participation, users receive staking rewards in the same cryptocurrency they staked. The amount of rewards varies depending on the coin being staked, as well as the duration and amount of the stake.
Binance Staking
Binance is currently the largest digital currency exchange in terms of trading volume, and as a result, many investors consider it as a top choice for staking their crypto assets through trading platforms. In December 2020, Binance launched a staking service for proof-of-stake coins such as Ethereum 2.0, enabling users to earn rewards by holding and locking up their assets on the platform.
In addition to supporting staking for Ethereum 2.0, Binance also offers DeFi staking, where users can stake cryptocurrencies such as DAI, Tether (USDT), Binance USD (BUSD), BTC, and Binance Coin (BNB). By participating in staking on Binance, users can potentially earn passive income on their crypto assets while also contributing to the growth and security of the networks they support.
Before rushing to stake your coins, it’s important to choose a reliable staking platform. Here are some best practices to follow:
The method of staking cryptocurrencies can vary depending on the chosen staking option. Cold staking differs from directly becoming a validator on a PoS platform, and using staking-as-a-service platforms follows a different process than third-party or exchange-based staking.
Let’s take a look at how you can stake your cryptocurrency using an exchange, specifically using Binance and Ethereum as an example.
To start, you’ll need to have a Binance account and some ETH coins. If you don’t have ETH coins, you can exchange your other coins for ETH on Binance.
Once you’re logged in, navigate to Finance>Binance Earn>ETH 2.0 staking. It’s important to note that staked ETH coins have a lock-up period of up to 24 months. Binance tokenizes the staked ETH and distributes rewards in the form of BETH.
Click “Stake Now” and specify the amount of ETH you want to allocate to staking. Review the terms and conditions that pop up on the second window before clicking “Confirm” again.
In March of the year 2022, a selection of exchanges have emerged as the superior platforms to secure elevated staking rewards.
Hardware Wallet Staking
The process of staking your cryptocurrency on a hardware wallet such as Ledger is an uncomplicated process. To begin, the initial step requires you to install the designated app for the coin you intend to stake, for instance, ALGO.
Next, you must create a new account on Ledger Live and transfer the coins you wish to stake via Ledger Live. Once you have finished this step, you have completed the process.
However, this is not the only option available. It is possible to use coins that are stored in your Ledger wallet and manage them via alternative wallet applications. In such a case, the staking process follows the same initial steps as previously mentioned, but following step one, you must select a third-party crypto storage provider.
Afterward, it is necessary to transfer funds from your chosen wallet to Ledger and commence staking. It is worth noting that the third-party wallet you select will manage your cryptocurrency.
In the current month of March in the year 2022, there are a couple of the finest hardware wallets that offer the highest staking rewards which are:
First, we have the Ledger hardware wallet which can grant you a staking reward of 6% for XTZ, 7% for TRX, 8-10% for ATOM, 5-6% for ALGO, and 10% for DOT. Please bear in mind that these yields are just an approximation, and they have not taken into account the validator’s fees or commissions.
Second, we have the Trezor hardware wallet, which does not support direct staking on its UI. Nevertheless, you can connect to wallet applications such as Exodus. By using this option, you can earn staking rewards like 8.98% for ATOM, 4.91% for ADA, 5.46% for XTZ and many more.
From the alluring returns mentioned above, it becomes evident why staking has gained tremendous popularity among cryptocurrency holders, as it furnishes them with additional income from their crypto holdings. Moreover, with some protocols boasting astounding hundred percent returns, staking has undoubtedly solidified its position in the realm of cryptocurrency. However, prior to taking the plunge into staking, it is essential to mull over the upsides and downsides.
Some of the benefits of staking cryptocurrency include the generation of passive income, with yields ranging from attractive to downright prodigious, appealing to individuals with varying risk appetites. Additionally, staking is a low-entry venture, and with prominent exchanges offering staking services, the process is easy and can be completed with a few simple clicks. Users are not required to possess a significant amount of cryptocurrency to commence staking, and the process is also energy-efficient.
However, the question arises – is staking cryptocurrency safe? Consider the following risks of staking crypto:
The possibility of hacking or cyberattacks on the protocol or exchange is the primary reason some crypto investors prefer to stake their holdings on hardware wallets.
The possibility of the coin’s value dropping, especially in volatile market conditions. During the staking period, you are unable to liquidate your holdings when the price falls.
If validator nodes fail to uphold 100% uptime in processing transactions, your staked tokens may be penalized.
Get ready, set, stake! As discussed earlier, staking is a more environmentally and economically sustainable alternative to PoW-based mining. Consequently, it is gaining popularity and an increasing market share in the crypto industry. Ethereum’s official adoption of staking in December 2020 further strengthened this trend.
In 2022, both centralized and decentralized staking have reached an all-time high in popularity, particularly in the DeFi sector where staking continues to thrive.
However, caution should be exercised when considering DeFi staking, especially when newly-created protocols promise abnormally high rewards for yield farmers or liquidity providers. Keep in mind that crypto staking carries significant risks, so conducting thorough research and investing wisely is crucial.
About RoboFi
Robofi is a Defi platform that envisions a marketplace for revolutionary Dao crypto trading bots. Through its IBO (Initial Bot Offering) system, community members can maximize their earnings in an easy, simple, and secure way. We create a safe and transparent environment based on blockchain technologies that help developers bring crypto trading bot platforms to the market. In addition, individuals will have easy access to these bot applications, thereby generating more earning opportunities. RoboFi ecosystem is fueled by the VICS token.
About VICS
VICS token has a distinctive and enticing concept. VICS is the BEP-20 token, built on the Binance smart chain. It is a core utility token in the RoboFi ecosystem, the reliable crypto trading bot marketplace. One important utility is to own the governance token of DABots and participate in an IBO (Initial Bot Offering) to receive additional incentives. VICS is available on major exchanges for trading.
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I'm Carina, a passionate crypto trader, analyst, and enthusiast. With years of experience in the thrilling world of cryptocurrency, I have dedicated my time to understanding the complexities and trends of this ever-evolving industry.
Through my expertise, I strive to empower individuals with the knowledge and tools they need to navigate the exciting realm of digital assets. Whether you're a seasoned investor or a curious beginner, I'm here to share valuable insights, practical tips, and comprehensive analyses to help you make informed decisions in the crypto space.