Cryptocurrencies need to maintain the operations of blockchains through transactions validation. Staking is one of the processes for models that run with a proof-of-stake consensus mechanism. It involves the locking of crypto coins by investors. Subsequently, they will receive rewards from the blockchain or network.
Staking your crypto coin allows you to earn passive income with little or no work. Once you understand the proper steps of staking, you will ripe from your holding and scale through the risks in the process.
This article takes you through how to stake my coin. Also, you will discover the best crypto coins that you can stake and the benefits that come with crypto staking.
Table of Contents
- 1 How Crypto Staking Works
- 2 What Is Proof Of Stake?
- 3 Should I Stake My Coins
- 4 How to Stake My Coins – Detailed Steps
- 5 Best Cryptocurrency Coins To Stake
- 6 Benefits Of Crypto Staking
- 7 Risks With Crypto Staking
- 8 How Much Can You Make Staking Coins
- 9 Conclusion
How Crypto Staking Works
Crypto staking is only possible for blockchains or networks running with the Proof-of-Stake (PoS) mechanism. This method will enable the validation of transactions within the blockchain.
When investors lock up the crypto coins, they will become participants within the blockchain or network. Also, the staking process will remove those tokens from circulation within the crypto industry. As a result, the protocol will have more coins available for its use and more flow of liquidity. This is what empowers the authorization of transactions in the blockchain’s nodes.
Each blockchain node has a validator. The validators are selected from participants that provided their coins for staking. Depending on how the cryptocurrency functions, the validators can be chosen by the blockchain or nominated by other participants. In most cases, the higher you staking coins, the greater the chance of being a validator.
Validators are in charge of managing the nodes in the blockchains. They will validate transactions and oversee the continuous uptime of the node without disruption. As transactions are validated, new blocks are added to the blockchain.
Also, through the validation process, new crypto coins are minted within the network. The minted tokens are usually distributed as part of rewards for staking.
Staking rewards are always given to participants as additions to their crypto coin holdings. While most cryptocurrencies will reward stakers with the same coins as their staking coins, some use different crypto coins for crypto staking rewards.
What Is Proof Of Stake?
Proof-of-Stake (PoS) is a cryptocurrency consensus mechanism that uses the staking process to validate transactions in the blockchain. Among several other crypto consensus mechanisms, the PoS is gaining popularity due to its ease of operation and more eco-friendly functionality.
The Proof-of-Stake (PoS) mechanism quickly overtakes the first mechanism, Proof-of-Work (PoW). With PoW, the blockchain could validate transactions through mining, which requires solving cryptographic puzzles. The first miner with the correct solution will create a block added to the blockchain. In return, he will be rewarded. An example of a blockchain with a PoW mechanism is Bitcoin.
PoW will require special mining machines that enhance the capacity of the miner to solve mathematical puzzles. Also, it consumes lots of electricity and results in environmental pollution. Hence, PoS is a preferable mechanism, and most new crypto models in the industry run as PoS.
Through staking, PoS validates transactions and rewards the participants for providing their crypto coins for the process. The blockchain selects validators that take the responsibility of managing the nodes of the blockchain.
Should I Stake My Coins
Staking your crypto coins is a method that will allow you to reap from your holding with little or no work. In addition, it offers you the opportunity of getting passive by locking your crypto tokens over a given time.
Though staking could be beneficial for investors, you must understand the functionality of a cryptocurrency and its staking rates and process before committing your coins.
What to Consider in Crypto Staking
Here are some of the factors you should consider in crypto coin staking.
- Crypto coin to stake
If you must get the best from crypto staking, you must learn to commit your holding with the right crypto coins. Unfortunately, not every cryptocurrency has excellent potential for price growth. That is why you must research the coin before staking.
Lots of investors will only buy prominent crypto coins with excellent price performance. So going for assets that offer higher rates but with a lower market value could pose a risk for your staked coins.
- Number of Coins to Stake
The number of crypto coins that you stake goes a long way in determining the capacity of your passive income earnings. It would help if you remembered that cryptocurrencies give their rewards with crypto coins. So, by staking more crypto tokens, you receive more added coins as rewards to your holdings.
- Staking Rates
Different cryptocurrencies offer different rates for staking their tokens. As the staking rate increase, you are likely to earn more income after the lock period of the coins. Though some cryptocurrencies may have high staking rates, their coins could lower market value. With such tokens, you get a loss on your holding as it could be pretty tricky to sell the coin at the end of the staking period.
So, you should not just focus on the available rate to stake your coin. Instead, the popularity and wide usage of the coin should go concurrently with its staking rate.
- Fees From crypto Staking platform
Depending on the staking platform you decide to use, fees could cut deep into your staking earnings. This is most applicable when you are staking your coins through crypto exchanges. So, it would help if you considered the platform charges before committing your holdings.
How to Stake My Coins – Detailed Steps
You could use different steps to stake your coins depending on the staking method of the platform you decide to use. However, the basic steps are similar for them all.
Basic Staking Steps
- Select Your staking Coin
It would be best to consider some factors before selecting a crypto coin for staking. Such factors include the staking period, APY rates, number of coins to the stake, price growth and performance of the token, etc. But, again, adequate research will help you.
- Decide Your Level of Staking
Opting for staking doesn’t just end there. First, you will have to decide if you’ll be staking as a validator or not. This will help you get the required crypto coins and equipment to support you. You should have the necessary knowledge, equipment, and uninterrupted internet connectivity as a validator.
- Choose Your Staking Ground
You may choose to stake directly on the protocol or blockchain. Also, you can use your private wallet or employ the services of a crypto exchange for staking.
Staking From Crypto Wallets
Here are the steps for staking from a crypto wallet.
- Ensure you have the crypto coins
The crypto coins to be staked must be within your crypto wallet. You must ensure that the wallet is compatible with the crypto coins.
- App Download
Download the web or mobile app of the crypto protocol that you want to stake its tokens. Some wallets such as Ledger will allow the download and installation of the crypto app on your device.
- Link Your Wallet
Where the downloading process is not possible, you should link your wallet directly to the staking pool or platform to enable your staking.
- Stake Your Coins
Set your staking process by inputting the number of crypto coins to stake. Check other parameters like the staking period where applicable. Then, confirm your stake.
Staking From Crypto Exchanges
Here are the steps for staking through a crypto exchange.
- Sign up for an Account
You need to have an online account with the crypto exchange by visiting the exchange’s official website. Then, use your details and sign up for an account.
- Get Your Crypto Coins
Follow the available process on the platform and purchase a PoS crypto coin of your choice for staking.
- Navigate to the Staking Page
From your exchange account, move to the staking page on the platform. If the exchange has different staking pools available, you will select any pool that supports the crypto coins you have.
Stake Your Coins
Input the number of coins for staking and confirm your stake.
Best Cryptocurrency Coins To Stake
Learning how to stake demands that you use the best crypto coins to maximize your profit while reducing the risks in staking.
Here are the best five cryptocurrency coins to stake.
1. StakeMoon – SMOON
StakeMoon is a DeFi protocol that runs with a PoS mechanism. The network is built on the Binance Smart Chain (BSC) with the specific aim of supporting staking and providing liquidity for the easy execution of transactions.
The network employs two fundamental approaches in achieving its goal.
- It poses a 15% taxation rate on transactions involving daily trading and speculation of SMOON tokens. This serves as a means of discouraging investors from short-term investment in SMOON. The network distributes 10% to its token holders and allocates the 5% left to its liquidity pool.
- StakeMoon incentivizes investors that engage in staking and a means of supporting long-term token holdings. As it validates transactions, fees from the senders form part of the rewards for the stakers of the SMOON coins.
The SMOON tokens are viable crypto coins for staking that give investors favorable rates.
2. Ethereum – ETH
Ethereum is the world’s second-largest and most valuable digital asset coming behind Bitcoin. It initiated the use of smart contract technology. However, it operated with the PoW mechanism, its new version of Ethereum 2.0 shifts the blockchain to a PoS.
With a market cap above $504 billion, staking ETH is an excellent means of earning passive income. Though you can stake with any number of ETH coins, becoming a validator require a minimum staking of 32 ETH.
Through the crypto exchange, staking ETH could yield up to 8.5% APY on your tokens.
3. Cardano – ADA
Cardano is a DeFi blockchain with a PoS mechanism. The popularity of the blockchain is rising due to its high maintenance of scalability and speedy execution of thousands of transactions in a second.
Investors enjoy flexibility in the staking process of the native coin, ADA. This means that you will have the opportunity of accessing your coins at any time. The crypto has a market cap of over $62 billion. Also, investors can earn staking dividends up to 8% APY from staking ADA.
4. Polygon – MATIC
Polygon is a PoS Blockchain that supports speedy transactions while providing low fees for the processes. Its functionality connects several Ethereum-compatible applications.
Hence, it’s straightforward for users to transfer coins and data between Polygon and Ethereum blockchains. In addition, the native token, MATIC, supports operation on the blockchain.
Moreover, MATIC is a viable crypto coin that offers good yields to investors through staking. With the crypto’s market cap over $11 billion, many platforms for staking MATIC, such as Crypto.com, Binance, and others. You earn as high as 14% APY by staking, depending on your staking platform.
5. Solana – SOL
Solana is the notable competitor of Ethereum. It boasts higher scalability and transaction speed. It offers the same services as Ethereum, but its speed, low cost, and scalability distinguish the blockchain from Ethereum.
Staking SOL offers you a reward of up to 5% to 6.5%. Also, you will receive the participatory right in the governance of the blockchain.
Benefits Of Crypto Staking
You have lots of gains or benefits when you stake your crypto holdings.
Earning passive income has become the most popular reason investors engage in crypto staking. You will do little or no work to get additional coins to your holdings with the process. Therefore, your available crypto coins could be more beneficial to you through staking than to leave them without any purpose for it. Depending on the cryptocurrency you are staking with, you can earn up to 5% to 20% of the crypto holding value through staking.
Though most people will focus on passive income as a reason for staking, your locked-up coins enable your participation within the given network. This makes you fully committed to the running and governance of the protocol. You will then receive the right to participate in decision-making and vote proposals for the network. Hence, the staking process integrates you within the governance and operation of the network.
Maintain Blockchain Operations and Security
Proof-of-Stake (PoS) protocols use staking as the process for validating transactions. The prompt and faultless transaction validation keeps the blockchain running smoothly with hitches. So, the staking process helps maintain the security and stability of the blockchain.
The staking process poses no risk to the environment. Unlike mining, it does not need a machine that uses electricity for operation. There is no use of fossil fuels to generate energy, leading to possible pollution of the environment. So, staking is highly energy-efficient and more eco-friendly.
Seamless Growth of Investors’ Holdings
As you commit your crypto coins to stake, you will receive rewards with more coins added to your holdings. Continuous participation in the staking process will invariably bring more coins to you in the form of your staking rewards. So, the process offers you the opportunity of growing your holdings seamlessly.
Risks With Crypto Staking
Despite its benefits, staking has some related risks in the process.
Cryptocurrencies are volatile, with constant price fluctuations. This stands as the main risk to the staking of crypto coins. A fall in the price of a token could bring a loss in your holding even when you have high yields through the staking process. When there is a dip up to the tune of half the value of the staked coins, your holding will reduce far below what it was before the staking.
Cyber hacking and fraud are potential losses to your staked crypto coins. The use of crypto exchanges and online wallets is more susceptible to cyber loss. You can curtail this risk by staking your holding through a hardware wallet.
When staking from protocol or exchanges that delay providing their rewards to stakers, it could pose a risk. This is because the delay will cut you off from reinvesting your holdings immediately to the next staking round. Instead, you should use platforms that offer daily rewards.
The staking period for your holdings plays an important role. When you decide to go for rigid staking, you won’t access your funds till the staking period is complete. A breach in the period will lead to a penalty from the cryptocurrency.
So, you may consider using a flexible staking protocol where you quickly move your holding whenever you want. Also, you should note the waiting period during the process of unstaking your crypto coins.
How Much Can You Make Staking Coins
Some factors will determine what you can make by staking your coins. You can earn between 5% to 20% APY through staking with all the elements considered.
However, here are some factors that could influence your earning through staking.
- The Cryptocurrency price growth and performance.
- Your crypto coin staking and unlocking period.
- Staking rate available from the protocol.
- The staking platform fees (When staking through an exchange).
- Your choice for the staking process (Rigid or flexible staking).
This article gives directives on the question of how to stake my coins. The staking process depends that you lock up your crypto coins for a given period which will reward you with passive income earning. This puts your coins to facilitate transactions validation, security, and stability on the blockchain.
You can stake your crypto coins directly on the crypto protocol, a crypto exchange, or your private wallets. However, online crypto exchanges remain the best method for staking as a beginner. Though they may apply some fees, they will remove the stress of ambiguity you may experience through the staking process.