Staking is crypto’s answer to the bank’s seeming inability to give people something back for their money. Interest rates have been pitifully low for more than a decade. Worse still, ‘savers’ sitting on cash are seeing their holdings eaten away by inflation. The only way to mitigate against this legitimised theft is to find a way to earn enough interest to outpace the hungry inflation beast, which means seeking out returns of 8% or more. And this is where staking crypto comes in.
By choosing the right coins and allocating them to a staking pool, either on the blockchain itself or through a cryptocurrency exchange, returns of 20% are not uncommon. Of course, there are risks. But there are also risks associated with leaving money stuck in a bank doing nothing. The point being, if you don’t use your money, you lose your money. Use it or lose it.
In this guide, we’ll be taking a closer look at staking, what it is, what’s involved, how you could earn a good passive income from it, plus—what the risks are. By the end of this guide, you should have a good understanding of what the best coins to stake are, and will be able to make an informed decision about whether or not cryptocurrency staking is right for you.
To buy any of the coins listed above, visit any one of the recommended exchanges, below.
Here are some of the top coins to stake right now.
Built on Ethereum, Chainlink is one of the most successful blockchains in the crypto space. As an oracle, it fulfils a vital role within the cryptocurrency ecosystem, accessing and accumulating a vast amount of real-world, off-chain data and bringing it into the blockchain. Why is this important?
Competitors include Band Protocol, API3 and WINKlink, but Chainlink is by far the most established and well-known within blockchain communities.
You can think of oracles as the unseen backbone of decentralised finance (DeFi), without which many current DeFi apps wouldn’t be able to function. Ultimately, blockchains need data like plants need water. Without this data, they are unable to function. Chainlink and other networks like it, collect and deliver this data.
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Chainlink’s tentacles reach far and wide feeding vital information relating to everything from decentralised insurance products to lending markets and algorithmic stablecoins. In essence, oracles are what allow dApps and blockchains to work interoperably. Without this interoperability, as one crypto expert put it: ‘…blockchains are like computers without internet access.
Find out more about Chainlink staking.
BNB is one of Binance’s native tokens, the other being BUSD. Both can be staked on Binance to earn a passive income.
Binance is the biggest cryptocurrency exchange in the world with billions of dollars transacted through it every day. As its ecosystem expanded, one of the things Binance wanted to do was establish itself as a worthy competitor to Ethereum.
This it did with aplomb creating the Binance Smart Chain (BSC). Today, not only is BSC a platform on which leading developers can build leading dApps and launch new projects, it is also a place where people can carry out multiple transactions at a fraction of the cost of Ethereum. They can also stake their BNB and earn additional income.
BNB has experienced meteoric price growth and continues to be accumulated by retail traders and institutions alike. Holding BNB is essential for those that transact on Binance as it affords them a multitude of benefits, from discounted trading fees to preferential treatment when it comes to new launches. For these reasons, owners of BNB tend to hold on tight to their bags. And what better way to do so than stake them for all of the mentioned benefits plus a healthy return.
To say Cardano is thorough is an understatement, and this has been both a blessing and a curse to the blockchain community. Peer-reviewed papers have slowed the development of the blockchain down, and although this is with good reason, those connected to the project have become impatient.
Charles Hoskinson, one-time cohort of Ethereum’s Vitalik Buterin, takes the long view when it comes to all things Cardano. Each part of the blockchain’s development has been painstakingly researched and tested and the Cardano team boasts some of the biggest brains in computer science to be found anywhere on the planet.
The company was founded in 2014 and the mainnet went live in 2017 making Cardano one of the earliest new blockchains to be created and, along with Polkadot, one of the main offshoots of the Ethereum network. Ouroboros is Cardano’s PoS consensus mechanism devised by the team. While staking returns are lower than some coin staking options, there are side benefits to these lower returns.
With Cardano, there is no minimum stake, no lock-up and no slashing risk. It’s also one of the more robust projects with strong, visible leadership and an active community. Ironically, we also chose Cardano because of its low staking yield. While this might be viewed as a negative, in our opinion, it points to a project that isn’t getting ahead of itself.
With these realistic expectations, investors can expect a slow and steady appreciation rather than a ‘mooning’ token. When it comes to staking ADA, it’s also worth bearing in mind the blockchain’s saturation curve. This incrementally reduces the level of rewards the more ADA a validator stakes.
This is to preserve the security of the blockchain and prevent a surfeit of ADA sitting with any one validator, giving them an unfair advantage through increased voting rights. Because of this, delegators will need to move to different validator nodes every now and then.
Find out more about Cardano staking.
An excellent alternative to traditional banking, Nexo is an ideal choice for people who want to earn a passive income from their cryptocurrency holdings. A fully regulated blockchain, this Switzerland-based company allows individuals and businesses to borrow and lend crypto and fiat currencies without the need for a traditional bank.
Lenders who provide liquidity are rewarded with some of the best APY and APR interest rate returns in crypto. For more cautious people worried about losing money because of the volatility of cryptocurrencies, there is also the option to stake stablecoins—crypto assets pegged to fiat currency such as USD—and enjoy a steady return.
In short, Nexo is like a bank, but better. With robust regulations in place, and insurance backing the operation to the hilt, even the most risk-averse can park their funds in stablecoins to enjoy excellent returns.
Nexo is one of the most trusted staking available offering bank-beating compounded returns on deposited crypto. It also allows users to borrow money against staked crypto without triggering a taxable event through selling held crypto or converting it into a fiat currency.
For people who are wary of market volatility, there is also the option to stake any one of a number of stablecoins including USD, UST, USDT, DAI, GBPX and others for up to a 12% return. Staking is easy. Simply set up an account, deposit your preferred fiat or cryptocurrencies and start earning.
Find out how to buy Nexo to get started with staking.
Ethereum is currently going through The Merge, also known as Ethereum 2.0 or Eth2. This process marks the blockchain’s transition from Proof of Work to Proof of Stake. The move means that crypto miners are being replaced with crypto stakers. The advantage of this shift is that it will increase the network’s computational throughput and, at the same time, reduce its energy consumption by a whopping 99.9%.
Ethereum staking can be done in a variety of places, including crypto exchanges, third party staking platforms, and also Ethereum’s own website. There are multiple avenues to stake Ethereum and earn yields on the asset. The best way to earn from staking is to become a validator. However, this requires a down payment of 32 ETH, a price too high for most people.
The good news is that people without these funds can earn similar yields to validators through delegating. This means that people with just a fraction of an ETH can still stake and earn rewards.
We chose Ethereum for its longevity and proven track record. In a volatile industry where certainty is rare, Ethereum stands as a true beacon of hope. Ethereum also has the best chance of forming the basis for a trustless, permissionless Web3. As the world’s second most popular crypto after Bitcoin, with a huge number of dApps built on its network, it is the blockchain most likely to survive any crypto winter.
Find out more about Ethereum staking.
Staking is a fairly simple way to put any idle crypto you’re holding to work. It’s a bit like putting your money into an interest-bearing account. While your money sits there, it earns interest which is periodically added to the principal sum.
Banks tend to add interest to an account on a yearly or monthly basis. With staking, however, in addition to the percentage gains being much higher, those gains are often compounded daily. This means that each day, you can earn interest on your interest for as long as you keep your capital staked.
Typically, there are two types of staking. These are flexible staking and locked staking. The first means that you can withdraw your staked crypto at any time. The second is where you lock your crypto up for a fixed period. During that time, you will be unable to access your funds. The main advantage of doing this is that you will earn higher rewards.
In addition, there are two styles of staking, depending on your risk appetite, available capital and dedication to the cause. These are:
Validator staking – In PoS validators need to lock up the native crypto of the blockchain for a period of time to earn newly minted coins. This is the validator’s reward for securing the network through staking. To become a validator, you need to have more capital than a delegator and you need to invest in high-end equipment to ensure your validator status. Any downtime as a validator could see you getting your yield slashed. On the upside, you earn greater yields as a validator and have greater voting rights.
Delegated staking – Delegation is where people who don’t have enough money to invest in the hardware required to run the validator nodes delegate their funds to validators in return for a share in the rewards. Usually, delegators have to lock up their coins for the same period as validators and are also prone to something known as slashing—where their rewards are taken away—if the validator they choose turns out to be a bad actor. A bad actor is somebody who owns the hardware and has staked a significant number of coins who then tries to game or manipulate the system. If they are found out to be doing this on the blockchain, they run the risk of being slashed, which will also impact those who have delegated to them. This is something to consider when staking coins and is the main reason for checking validator performances out and going with those that have a high rating.
You should choose a cryptocurrency staking coin based first and foremost on its longevity and reputation for security. There are literally thousands of cryptocurrency coins available and picking the right one is vital. Consider the following things when picking a coin:
In short, for solid coins with real use cases and sensible vesting schedules that provide realistic staking returns.
How to sign up for a cryptocurrency staking coin in 3 simple steps
Pick a staking coin. Use this article to decide on which crypto staking coin is best for you. Pick the one that has the coins you want to buy and stake and decide if you want to do flexible or locked staking. To sign up for an exchange (if you haven’t already) you’ll need an email address or phone number, proof of address with a recent date, photo ID and your mobile device to help you through the steps.
Deposit some money. To do this, you’ll need to go to your main account and follow the instructions and add funds. You can do this using a debit or credit card or by carrying out a bank transfer. Check out the fees for depositing and use the cheapest method. Most staking provides a free deposit method.
Buy and stake your crypto. Once you’ve checked the rates and bought your crypto, head to the staking section of your exchange and stake your coins. Remember to check if it’s flexible or locked staking first. Only choose locked staking if you are confident that the price will appreciate and you won’t need to access your funds at short notice.
There are thousands of cryptocurrencies with a large number available for staking. In deciding which coins to select as the best ones for staking, we took a number of things into consideration. We looked at dozens of coins, and if they didn’t meet at least three of the following criteria, they were struck from the list. The criteria were as follows:
Does the coin have a track record? If the coin was too new, it didn’t make it onto the list. The reason for this is that new projects have soft shells and are more vulnerable to attacks, hacks and meltdowns. A good example of this is Terra (LUNA), and the associated stablecoin, UST. Even though UST and LUNA had excellent use cases along with clear utility, they were not battle-tested and dissolved quickly under stress.
Are both flexible and locked staking options available? Locked staking is risky. In a bear market, the underlying value of the staked assets can fall dramatically. We looked for coins that could be unstaked quickly in a downturn.
Does the coin have a use case? A coin without a use case is like a house without a roof. We looked specifically at coins backed by solid tech, with real-world utility. Without this, the coin didn’t make the list.
Does the coin promise yields of 3% and above? If a yield of 3% or higher couldn’t be achieved, the coin didn’t make the list. For a coin to be attractive, bearing in mind cryptocurrencies are risky assets, the returns needed to be bank-beating by several multiples.
So long as three or more of the above criteria were met, we looked at other attributes such as…how long the coin had been around, its market cap, its tokenomics, what its circulating supply was, the team behind it, the likelihood the project would survive a bear market plus a few other things besides. The coins chosen were the ones that lived up to their own claims, and our hopes and expectations for their future performance.
Staking is a way for people with little knowledge of crypto to earn a passive income. Knowing the mechanics of staking is important but choosing the right coin to stake that gives you (a) the strong likelihood of coin price appreciation and (b) delivers a decent yield is even more so.
For anyone with cash sitting in a bank right now, the buying power of that cash is ebbing away due to inflation. The only way to combat this is to put the cash into appreciating assets. These are usually stocks and shares, bonds and property. Each of these options carries its own set of problems. Then there is the other option, which is to invest in crypto.
The problem with crypto is that it is inherently volatile and therefore risky. For those with a high appetite for risk, buying volatile assets and staking them could deliver two benefits: asset appreciation and interest returns. For those with a low-risk threshold, however, one of the easiest ways to put idle money to work is to convert it into stablecoins on an exchange and then stake it. In the current economic climate, this is perhaps one of the best, if not the only, way of making money on your money and having a reasonable hedge against inflation.