Cryptocurrency staking has grown as one of the most enticing ways to earn passive income using your crypto assets. It involves investing a portion of crypto tokens in a liquidity pool and receiving payments daily, weekly, monthly, or whenever they wish to receive the tokens. Once this time reaches, the tokens are sent to the user’s wallet.
Some of the best crypto assets you can stake include Ethereum, Cardano, Solana, Polkadot, Algorand, Stakemoon, Binance token, Cosmos, etc. Also, you can stake Tezos and Tether, as they are among the list of very profitable digital currencies to stake in this year 2022.
This article outlines the basic knowledge about staking that you need to know, the benefits, and how staking works. In addition, we will go into detail on the individual cryptocurrencies you should consider staking in 2022.
Table of Contents
- 1 What is Staking?
- 2 How Does it Work?
- 3 Pros of Staking
- 4 What kind of crypto asset can be staked?
- 5 How to stake
- 6 Conclusion
What is Staking?
Cryptocurrency staking comprises users locking a portion of their crypto tokens in a smart contract to facilitate transaction validations for some blockchains. The specialized blockchains use the Proof-of-Stake algorithms for validating transactions. Therefore, the more crypto tokens you deposit in the blockchain, the larger the blockchain becomes.
Therefore, locking your tokens in the network will reward you with more tokens to stake into the platform. That way, you’re able to receive some passive payments as you wish from staking your coins.
As we’ve earlier stated, the tokens you lock in the network are used to validate transactions. So, the staking process is not complicated. However, each crypto protocol has its unique requirements, minimum tokens you can stake, and modes of operation. Also, you must note that the number of tokens you receive as rewards depend on the number of tokens you lock into the blockchain. Therefore, if you want more token rewards, you’d have to stake a more significant amount of tokens in the network.
How Does it Work?
When you stake your tokens, that process provides stability and liquidity to the network and is used to confirm/validate transactions. If the protocol uses your staking commitment to ensure transactions, you are rewarded with extra tokens as the transaction validator.
PoS blockchains depend on crypto staking as their transaction validation means. However, other blockchains that use PoW (Proof-of-Work) mechanisms like Bitcoin, in turn, require additional equipment to mine tokens. Whereas, PoS blockchains don’t need extra equipment and rewards users for lending their tokens to the network.
While the PoW consensus mechanism, like PoS, doesn’t need any third-party interference, there are other notable differences between the two algorithms. The most significant distinction between the two transaction validation mechanisms is their energy consumption. PoW, as we’ve established earlier, requires the presence of additional mining equipment, which requires some ample energy consumption. However, for the PoS algorithms, the absence of other equipment leads to an eco-friendly transaction validation process.
That said, it’s worth noting that you first need to purchase the staking tokens to get started with the staking process. After obtaining them, you can determine the amount you want to stake in the smart contract. Also, it’s possible to earn additional income via yield farming, which is a bit more complicated than crypto staking.
You can lend some tokens to several crypto networks in yield farming, and the more crypto you lend, the higher your returns.
Pros of Staking
Many advantages of staking crypto assets over crypto mining, or PoW. Let’s look at them in brief details below.
- Straight-forward process
One prominent feature of staking is that you can stake your digital assets ‘cold.’ This implies that you can be connected online constantly. Asides from it, you can store your tokens in your crypto wallet while enabling this feature.
- Participation is affordable
Staking in PoS blockchains is cost-effective and easy to maneuver. In addition, as you don’t need to purchase any additional equipment, it is affordable to facilitate and earn some other tokens.
- More effective than PoW (Proof-of-Work) or Mining
The Proof-of-Work consensus mechanism requires you to obtain a mining device to mine tokens and earn some crypto in the process. However, that’s not the more effective means of validating transactions, as currently, the amount of energy consumed to mine tokens is very massive. Also, the statistics show that the current electricity consumption of Bitcoin surpasses that of most countries globally. But on the flip side, PoS algorithms don’t consume as much energy as PoW.
The staking consensus mechanism is environment-friendly, cost-effective, and more effective than the PoW algorithm.
- Easy means to earn passively
Staking enables you to earn passive income on your locked tokens. Thus, boosting profitability, and you doing so seamlessly. After staking, everything else is done automatically unless you have to withdraw the staked tokens to your wallet. So, via staking, you can receive more tokens for doing nothing more than providing liquidity for the network.
- Offers Better Scalability
In contrast to the PoW consensus algorithm, the PoS mechanism offers a better possibility of scalability. It allows for higher transaction processing, lower gas fees, and faster processing. Some of the unique blockchains that provide this are Solana, Cardano, Stakemoon, and EOS.
- More Secure and Distributed
The PoS algorithm provides a more stabilized, secure, and distributed network control than the PoW algorithm. In PoW, a miner that governs over 51% of the blockchain’s hash rate efficiently controls the entire blockchain and can manipulate the transactions to his benefit.
What kind of crypto asset can be staked?
While thousands of cryptocurrencies are available globally in the DeFi ecosystem, it’s good to know the best cryptocurrencies to stake. That said, below is the list of the best crypto assets you can stake to earn some passive income.
- Stakemoon (SMOON)
- Avalanche (AVAX)
- Solana (SOL)
- Algorand (ALGO)
- Ethereum 2.0 (ETH)
- PolkaDot (DOT)
- Tezos (XTZ)
- Binance Token (BNB)
- Cosmos (ATOM)
- Tether (USDT)
Now that we’ve stated them let’s go into details about the top 10 cryptocurrencies you can stake.
1. Stakemoon (SMOON)
Launched in 2020, Stakemoon is one of the most recent yet rewarding crypto protocols available. The protocol focuses on rewarding long-term investors and token holders in two distinct ways. Also, it’s worthy to note that the motive of rewarding token holders inspires Stakemoon for staking their tokens via the process called Burning.
Last year, Stakemoon got recognition from major crypto platforms like CoinGecko, and its price is $0.002644 at Coinmarketcap.com. However, unlike other staking protocols, Stakemoon uses a 15% taxation process to discourage short-term traders from buying the protocol for short-term benefits. In addition, Stakemoon uses the SMOON governance token to facilitate governance and incentivize the network.
Always consider the risks involved when buying cryptocurrencies. Digital assets are highly speculative and volatile.
2. Avalanche (AVAX)
Similar to leading blockchains like Polkadot and Cosmos, Avalanche is one of the unique crypto assets on our list today. The relatively new token has recurrently proven its efficiency, as it can scale up to millions of validators at once. To stake in the protocol, you need a minimum of 25 AVAX tokens, whereas, to be a validator, you need a minimum of 2000 AVAX. Also, after staking your tokens, you need to lock them up for a minimum of 2 weeks before withdrawing your incentives. The AVAX protocol provides an APY from 8 to 14%, and you can stake the tokens in any compatible wallet.
3. Solana (SOL)
The ‘new kid on the block’ Solana was developed with the inspiration of scalability. Thus, Solana introduces meager transaction charges and quick transactions to scale up. Based on market capitalization, Solana is ranked #7 globally, given its super-fast transaction processing and low gas fees.
Also, in Solana, there are over 640 validators whom you can choose to stake your tokens. To stake in Solana, delegate your tokens to validators and receive rewards after the set time. It’s worthy to note that Solana has outperformed most of its peers in the past month. The token surpassed its All-Time-High price of over $210 per SOL in the past few months.
Solana provides an APY of 7-11%, and you can stake your tokens using Trust Wallet, Exodus, Atomic Wallet, MathWallet, or other compatible wallets.
4. Algorand (ALGO)
Algorand is another high-efficient, robust, and powerful blockchain that provides efficient scalability via instant transactions and validator nodes. In addition, Algorand is one of the best tokens you can stake, as the minimum amount of ALGO tokens required to become a staker is only 1 ALGO. However, this introduces Algorand stakers to several benefits and limitations.
One limitation of staking Algorand is that, while it’s the blockchain with the most amount of validators, there is a possibility that some validators aren’t as active as expected. Algorand blockchain provides users an APY of 5-10% of their entire stored tokens.
5. Ethereum 2.0 (ETH)
Ethereum is the second-largest cryptocurrency by market capitalization worldwide, following Bitcoin. In addition, Ethereum is one of the best staking crypto assets available, providing you up to 17% APR.
However, the minimum amount of Ethereum required to stake is 32 ETH. While this posed a challenge for most retail investors, contending protocols like Polygon and Aave, hosted on Ethereum Layer 2, provided staking features without a minimum requirement.
Initially, ETH used the Proof-of-Work consensus mechanism to validate transactions before porting them to the PoS algorithm. As a result, over $12B has been staked in ETH since it transitioned to the PoS algorithm.
6. Polkadot (DOT)
Polkadot is among the best and considered the best crypto protocol. The protocol enables intercommunication and data exchange between diverse blockchains to share security and value. Former Ethereum co-founder Dr. Gavin Wood developed Polkadot as a heterogeneous, multi-blockchain technology.
Inevitably, Polkadot uses the Proof-off-Stake consensus mechanism and provides an APY of 14% of your staked value.
7. Tezos (XTZ)
Another profitable coin on our list today is the Tezos crypto. Its ICO took place in June 2018 and raised over $230 million. Tezos uses an on-blockchain governance model to curtail changes in the ecosystem. Also, the protocol uses a unique staking mechanism called LPoS (Liquid Proof of Stake) and punishes fraudulent stakers by confiscation.
Furthermore, Tezos uses the XTZ token as the local governance token created via a ‘Baking’ process. Yes, that’s right. In Tezos, the process of staking tokens is called Baking; this is where the blockchain incentivizes bakers for staking their XTZ tokens. Although to bake, bakers need to possess an entire role of the protocol to bake XTZ, which is 8,000 XTZ.
Also, Tezos offers an APY of 5-6%, and bakers use their full node to stake. In addition, the returns crucially depend on market factors.
8. Binance Coin (BNB)
We already know that Binance is the largest and most famous crypto exchange globally. This ‘fame’ also influences the BNB token, as it is, as well, one of the most staked tokens worldwide. However, one great perk of BNB is that it has no minimum staking requirements for delegating the BNB tokens. Also, its staking period lasts for only seven days.
BNB provides an APY of 6-9% for stakers, although, given its high volatility and transaction charges, you can earn as much as 30%. You can stake your BNB tokens directly on the Binance Exchange or any compatible exchange and wallet.
Howbeit, staking your BNB tokens on the Binance platform gives you a particular assurance that other staking tokens don’t provide.
9. Cosmos (ATOM)
This unique, distributed, and highly scalable crypto protocol provides startups the best platform to develop their mainnet services. Cosmos functions as the internet of blockchains, connecting various blockchains and enabling communication between them.
Cosmos uses a unique Proof of Stake Consensus mechanism known as the DPoS (Delegated Proof of Stake). In DPoS, delegators determine which validators should confirm/verify transactions or add new blockchains. Also, Cosmos uses a unique feature the enables governance even in an ecosystem that contains malicious nodes.
Cosmos has ranked the #25th largest cryptocurrency worldwide based on market capitalization. However, the token offers an APY of around 8.32% on Coinbase, Binance, and other crypto exchanges.
10. Tether (USDT)
Ranked #10 in our list of top 10 best crypto assets to stake in 2022 is the Tether stablecoin. It is a stabilized digital currency that invariably offers the best stablecoin for staking and earning passive income. Thus, we recommend it to you today. Besides its stability, they rank Tether the #4th largest cryptocurrency based on market capitalization globally.
The stablecoin’s huge trading volume allows it to be one of the most liquidized protocols and most rewarding. However, Tether provides an APY of 3.5% of the amount of your investment.
How to stake
As a user, you can stake your PoS tokens through three processes. They include:
- Staking via a crypto exchange
- Staking through a crypto wallet
This article, The best staking guide in 2022, outlines all you need to know about staking crypto assets in 2022. First, note that staking involves a user locking up a portion of their staking tokens in a Smart Contract to provide liquidity for a network. In turn, the user receives some token incentives for the assets they staked.
We recommend the top crypto assets for you include Stakemoon, Ethereum, Tezos, Avalanche, Tether, Solana, and Binance token. Also, Algorand, Cosmos, and Polkadot. You can purchase any of these tokens and stake them through exchanges or compatible wallets.