What Can Staking Do For My Coin – All You Need To Know

Staking is one of the cryptocurrency activities that is quite profitable to a user’s holdings. The process helps some protocols and networks to confirm and execute crypto transactions easily. Also, it maintains the platform’s security and ensures the smooth functioning of the network.

By staking your tokens, you are using the coins to support a blockchain’s operations for the given process period. The protocol, in return, will compensation you with interest that most times comes as an increase to your coins. Hence, staking adds more crypto coins to your holding.

This article has answers to what staking can do for your coin. Also, you will learn the process of staking, its benefits, and top cryptocurrencies to stake for increased profitability.

What Is Staking and How Does It Work?

Staking is the process of locking your cryptocurrency holding for a given period to earn some rewards. The staking process is obtainable on networks that use the Proof-of-Stake consensus mechanism. Such platforms are high energy efficient and more eco-friendly. They have little or no need for mining equipment and resources for their node operations and new blocks additions.

When you set aside some crypto tokens, it enables the protocol to validate transactions on its platform. Also, the process will ensure the security of the network.

To stake, you will first acquire or buy the cryptocurrency tokens you wish to stake. It’s always advisable that you research the credibility of an asset before venturing into it.

There are certain factors you should consider before staking your crypto coins. Some of them include

• The staking interest rate.
• The price-performance of the crypto coin to be staked
• Staking period and its unlocking time
• The staking platform to use
• Using a rigid or flexible staking method

Your staked coins support the verification and security of transactions with a network. Moreover, it eliminates the interference of third parties in the running of the protocol’s activities, unlike traditional banking. Hence, the blockchain can maintain tits decentralized characteristics.

Furthermore, staking will progressively allow blockchains to add more blocks to the network. It takes the involvement of staked tokens to achieve that of which your coins are part.

Proof-Of-Stake Versus Proof-Of-Work

Staking is only obtainable in networks or protocols that use the Proof-of-Stake consensus mechanism. The need for staking is increasing as it helps to combat the high energy demands from Proof-of-Work protocols like Bitcoin.

The Proof-of-Stake (PoS) is a consensus mechanism that allows the validation of transactions on blockchains through the help of staked tokens. The participants are the stakers that lock their crypto tokens for a given period. Then, according to the protocol’s operating mode, it will select a validator that validates data on the added block.

Most of the time, being a validator on a blockchain will depend on the number of staked tokens and the staking period. The higher the number of staked coins and staking time, the greater the chances of becoming a node validator on a network.

On the other hand, Proof-of-Work (PoW) is a crypto consensus mechanism that blocks a blockchain by solving some cryptographic puzzle. It will validate transactions between users from different places to ensure no double-spending of the same fund. So, it creates a means of maintaining security and sustainability of the network with miners solving some problems or puzzles. An example of a blockchain with PoW is Bitcoin.

The winner will be the first person with the solution to the puzzle, which will enable him to add a new block on the blockchain. In return, he will receive some crypto tokens. Hence, a PoW blockchain doesn’t support the staking of coins.

Comparing Proof-of-Stake and Proof-of-Work

Here are a few comparisons between the Proof-of-Stake (PoS) and Proof-of-Work (PoW).

• Participation within a PoS blockchain is through the staking of some crypto tokens. But for a PoW blockchain, miners participate by competing in solving some cryptographic puzzles.
• In PoS blockchains, the participant creates a new block by staking his crypto holdings on the network. However, a first miner with a solution to the puzzle on a PoW blockchain creates a block on the blockchain.
• There’s a belief that creating blocks on a network through staking ensures higher scalability for the platform than solving a puzzle. Hence, PoW networks tend to be faster in executing transactions than PoW networks.
• In PoS networks, all stakers are rewarded with validators with higher staked tokens receiving more. But in PoW networks, only the miners having more computing power will possibly solve puzzles and receive rewards.
• PoW networks are highly energy-efficient and eco-friendly, while PoW blockchains operate with special mining machines that consume lots of energy.

How Much Can You Make Staking Coins

The amount to earn from your crypto coins staking depends on some factors such as:

• The cryptocurrency you staked.
• The number of tokens staked.
• Some platform fees for staking
• The staking interest rate on the network.

Irrespective of all the factors, you can earn between 5% to 20% on your staked coins.

10 Best Coins for Maximum Passive Income

Crypto staking is a great means to earn passive income with your holdings. But if you plan to stake an asset, you must research to know if the cryptocurrency is a good investment. This will help you strategize and maximize your holding and potential risks with some coins.

Here are the ten best coins for staking for maximum passive income.

1. StakeMoon (SMOON)

StakeMoon is a decentralized network that rewards customers for long-term token holding. It operates on the Binance Smart Chain (BSC) using its unique technology from staking and liquidity provision.

In achieving its aim, the network uses two fundamental approaches below:

• First, stakeMoon places a taxation rate of 15% on token selling transactions to discourage daily trading of its SMOON tokens. The protocol uses this means to disfavor short-term investment strategies from market speculators on primarily trade daily on the cryptocurrency’s price.
• The network rewards staking its native token, SMOON, generously encourages customers on long-term holding. As a liquidity platform, it uses this approach to help StakeMoon achieve its aim. Thus, it could confirm blockchain transactions with the help of the staked tokens.

The rewards for staking come from 5% of the network’s taxation fee on trading transactions. Moreover, fees from senders of the platform transactions are allocated for rewarding stakers.

To start staking the SMOON tokens, you do not need to have Bitcoin in your account. Instead, you can directly buy the SMOON tokens by transferring funds to your account using a Visa or Mastercard deposit option.

2. Ethereum (ETH)

Ethereum’s popularity is the first blockchain running with smart contract technology. Through its operability, lots of developers have built applications on the blockchain. Hence, Ethereum has several applications that operate on and depend on its functionality.

In the bid to increase its scalability, the blockchain moved from the Proof-of-Work consensus mechanism to that of Proof-of-Stake. Its move makes its token ETH to be used for staking. Hence, ETH is one of the most popularly staked coins. The staking process empowers the operability and security of the network, and the stakers are rewarded with dividends for their staked coins.

Staking a minimum of 32 ETH gives the staker a validator position. So, he can add new blocks on the Ethereum blockchain as he processes transactions with his validator node. Also, there is the opportunity to stake fewer ETH tokens on the blockchain.

3. Cardano (ADA)

Cardano is launched on peer-reviewed research as a Proof-of-Stake blockchain. It supports the safety of decentralized systems and applications through its functionality with combined pioneering technologies.

Its native token, ADA, is a viable crypto coin for earning passive income through staking. Yield from its token staking is added to the stakers holding at the end of the staking period. Moreover, stakers become part of the governance of the blockchain. The leave of protocol participation depends on the number of ADA tokens staked by the customer.

4. Polkadot (DOT)

Polkadot runs on the Nominated Proof-of-Stake (NPoS) consensus mechanism. The protocol aims to ensure the interoperability of a collection of blockchains.

The DOT tokens empower the running of the blockchain. Staking the tokens will place you either as a nominator or validator. The former can nominate a validator responsible for maintaining the operations of a node 24/7. The blockchain has a 10% annual yield reward for staking, which excludes the validator’s commission.

5. Polygon (MATIC)

Polygon is developed to support and connect most blockchain networks that are Ethereum-compatible. It runs with a Proof-of-Stake (PoS) consensus mechanism and is reputable for its high scalability and low transaction gas fees. The blockchain has remained a giant competitor to Ethereum as several customers are moving from Ethereum due to scalability issues and high gas fees.

Staking Polygon’s token, MATIC, allows the customers to gain passive income from the staking rewards inform of the MATIC coins. Stakers can either be delegators or validators.

6. PancakeSwap (CAKE)

PancakeSwap runs on the Binance Smart Chain as an Automated Market Maker. It aims to avail users with unlimited liquidity to facilitate transactions seamlessly. The network is notable for its high-interest rates on staked tokens.

Users can stake their CAKE coins by utilizing any of the liquidity pools on the PancakeSwap. In addition, the protocol allows the users to earn passive income by receiving CAKE tokens as rewards. Also, they will get some portions of the network’s trading fees.

Staking interest in CAKE is determined by the liquidity pool used for the process. Therefore, by considering the APY rates of the pools, you can strategy your staking process for higher dividend earnings.

7. Solana (SOL)

Solana is a remarkable decentralized blockchain due to its high scalability. The block processes transactions as they come on the platform without waiting for a block execution. Also, the network facilitates user-friendly applications.

Staking of the Solana token, SOL, allows the delegation of validators. This process will increase the validators’ weight of voting. Some factors determine the staking yield, including the number of tokens staked, the current blockchain inflation rate, and others.

A portion of the protocol’s inflation is used for rewarding stakers. The blockchain had an initial inflation rate of 8% APY. This later goes down by 15% YOY to be at an annual inflation rate of1.5%

8. Kusama (KSM)

Kusama is a decentralized network that functions as a sandbox for Polkadot. In addition, it serves as Polkadot’s public pre-production system. So, developers use Kusama to experiment with their Polkadot’s blockchain applications which they designed before its launch on the protocol.

The operability of Kusama is the same as that of Polkadot since both exhibit similar underlying codes. But Kusama is more flexible as it supports developers to produce Polkadot apps.

Staking the Kusama token, KSM makes the user be either a validator or a nominator. Nominators are the ones that nominate a validator of the given node. The validator is the staker in charge of running the node by validating transactions.

9. Tezos (XTZ)

Tezos is a decentralized project that operates with smart contract technology for executing peer-to-peer transactions. Its native token, XTZ, serves as the governance token of the blockchain.

Staking on the Tezos is also called baking, and the stakers can stake their crypto tokens either as a validator (self-baker) or delegator. The rewards released for a given node are distributed among the delegators and their validator.

To be a delegator, there are no specific XTZ coins that a user needs to stake. He is free to stake any number of coins. A customer will become a self-baker by staking a minimum of 8.000 Tezos tokens. Hence, the staker will operate as a node validator to execute transactions on the node and add blocks to the blockchain.

10. Cosmos (ATOM)

Cosmos is a decentralized network that facilitates high scalability and interoperation of blockchains. Its functionality is based on the Proof-of-Stake (PoS) consensus mechanism.

When you stake ATOM, the native token of Cosmos, you will get rewards based on the percentage interest of the staked coins. The ATOM tokens staked ensure to maintain the security of the network. The staking process offers users the right to vote and make other decisions concerning the protocol. Moreover, they will become part of the governance of the blockchain. Staking on Cosmos avails customers up to 9.7% APY.

What Are The Risks Of Staking Crypto?

Staking your crypto coins comes with risk due to the impact of some factors on the safety and performance of the tokens. Here are some risks of staking crypto coins.

Price Fluctuation

The volatile nature of cryptocurrency that allows constant price fluctuations is a major risk with the staking of coins. Though you may stake your assets with a high APY rate, there could still be a possibility of incurring losses. This is because the price of the tokens may dip as low as half of its value before the staking period. Hence, the holding will be even below what you had before engaging in the staking process.

Lockup period

The staking period that you choose for your crypto coins matters. With rigid staking, you can’t withdraw or access your tokens until the completion of the lockup period. Any attempt to do so will attract a penalty from the network.

Moreover, there could be a specific waiting period for the unlocking process of the coin. So, you should consider both the staking period and its unlocking time before selecting the staking tokens.

Reward Duration

The staking reward period could be a risk for the users. This is more applicable when protocols delay in availing their staking reward pay-outs. So, participants will have a longer waiting period and possibly lose time to a new staking process with their yield. So, the best means of avoiding this delay is to engage your staking process crypto tokens that provide daily staking reward pay-outs.

Loss from Cyber Fraud

There could be a loss or theft of your staked crypto coins through cyber fraud. This is more obtainable with online wallets and crypto exchanges. Using a hardware wallet could be a possible means to avoid this staking risk.

Liquidity Risk

Liquidity risk is attached to the volatility of the crypto coins in the market. When staking is with a crypto token with limited liquidity on crypto platforms, you will likely experience difficulties selling or swapping the coins for another crypto token. So, most customers will always stake with crypto assets with high trading volumes in the crypto market. This serves as a subtle means of combating liquidity risk on staking.

Validator Risk

By staking, validators are selected to be in charge of running and managing a node. Therefore, a validator should be fully equipped with the right knowledge on what is expected to maintain the operations of a node. A gap in his functionality leads to slashing, which is a situation where a network penalizes a validator by reducing the staked coins under his management.

Usually, a slash on a validator’s stake results in a loss of tokens for the stakers under the given validator. Disruption from the uptime for a validator’s node is a notable factor in creating validator risk. So, he must maintain 100% uptime for his node.

Conclusion

Going through this article gives you a clearer understanding and answers on what can staking do for my coin. You maximize your assets to receive passive income by staking your crypto tokens. Also, you can only stake your coins if there are Proof-of-Stake cryptocurrencies.

Moreover, you’ve learned the best strategies to employ for a more profitable staking process. We also included the top cryptocurrencies that you can use for staking.