Cryptocurrency gives users more control over their finances and financial transactions. It also provides an alternative means of income for them. One of the alternative incomes of crypto is staking, which occurs on the PoS algorithm. It is a process that enables investors to earn passively through their crypto coins.
Some of the best cryptocurrencies to stake include Stakemoon, Pancake, Cardano, Polkadot, Ethereum, Terra, Polygon, Solana, Cosmos, and Algorand coins. These, among others, provide users with several means to earn passively from cryptocurrency.
That said, in this article, we have considered the essential terms in staking, including the benefits and risks in staking. Also, we have outlined the top 10 best crypto coins to stake in 2022. Check the details below.
Table of Contents
- 1 What is Staking?
- 2 How Does Staking Work?
- 3 Why Stake?
- 4 Risks of Staking
- 5 Top 10 Best Crypto to Stake
- 6 Conclusion
What is Staking?
Cryptocurrency staking is the process of locking funds in a virtual wallet to support transaction validations for Proof-of-Staking blockchains. Therefore, by providing liquidity for blockchains, they get rewarded (or, in other words, incentivized). Crypto staking provides users with a more advanced way of earning than traditional financial systems.
The Proof-of-Stake consensus algorithms arise as an effective alternative to the previous one, the Proof-of-Work. This consensus algorithm uses electrically powered mining devices to mine coins, and the miner gets rewarded.
One perk of cryptocurrency is that it doesn’t rely on central banks and follow their direct controls. Instead, all transactions are recorded on a public ledger known as a “blockchain,” which permits everyone to view all the transactions. Each block on a blockchain comprises transactions that require a consensus mechanism to verify them. Examples of mining mechanisms include staking or mining. So, by partaking in creating new blocks, the user gets rewarded.
How Does Staking Work?
There are basically two ways of staking—using a crypto platform or by setting up your own staking node. Howbeit, most individuals are more acquainted with the former than the latter.
Staking via a crypto platform, such as a crypto exchange, is the simplest method. It requires you to deposit your crypto coins into the platform and then go on ahead to stake them. Some famous crypto exchanges include Coinbase, Binance, Kraken, and Exodus. These exchanges provide various options for users.
The next staking means setting up your staking node. This process, however, requires some amount of experience and exposure. Therefore, staking by yourself will lead you to stake rather costly minimums. But this shouldn’t be a concern on a well-known platform.
Now that we’ve considered the above factors, we’ve already agreed that staking crypto has several benefits. That said, let’s look at the following reasons why you should stake crypto.
- You can earn more passive income and better rewards.
Staking crypto provides you a proficient way to diversify your assets while accessing lower transaction charges on the mainnet. In addition, if you’re seeking other ways to earn additional income, then by staking, you can increase your revenue within a shorter amount of time.
- Consumes less energy
Compared to the PoW consensus mechanism that consumes an enormous amount of energy, the PoS algorithm doesn’t consume as much computational power. Therefore, it doesn’t consume as much energy. Following the entrant of the PoS mechanism, the crypto sector dominated more financial sectors.
- Executed at Crypto Exchanges
You can easily stake your crypto assets on crypto exchanges. So, you have better profiting chances. Also, some of the exchanges that provide more preferable staking accessibilities include KuCoin, Coinbase, and Binance.
- Cold Staking
Another superior feature of staking your crypto assets is that you can stake your crypto coins ‘cold.’ What do we mean by cold staking? It means that you don’t need to be connected to the internet all the time. This way, you can store your crypto assets in a wallet with this “cold” feature turned on. Also, you can still earn your crypto assets passively while not being connected online.
This is very effective and allows you to stake whenever you like.
Risks of Staking
As we have seen, there are several notable reasons why you should stake your crypto assets. Now we’ve considered that, let’s consider the few risks in staking in crypto coins.
1. The validator can forget to pay incentives.
There are cases where validators in a liquidity pool can forget to pay back on your coin’s interests. So, just like you’d follow up on your bank refund, you’d need to follow up with the network validators on your interest payments. This is because there can be cases of network glitches, and no one wants that.
2. Network Centralization.
While it’s true that cryptocurrency and the whole blockchain concepts all emerge for decentralization of control, there are still cases of centralization. This basically occurs in situations wherein a DAO, the token holder with over 51% of governance in the network, can monopolize the network for his benefit. Sometimes, this can be detrimental to other token holders in the network.
3. Lost Account
This is also a possibility, as sometimes hackers can go about blockchain networks seeking those with weak security. If this occurs, they will also lose all the accounts in that blockchain in the same process.
4. Coin Price Decline
Another scary possibility in staking is price decline. While staking, you store up some crypto coins in the network for a while. Now, while locking the crypto assets, the coin might be worth $4 (for instance), but given the volatility of some coins, you might get rewarded coins that might be worth less than the expected amount.
5. Slashing Consequences
While this is not very common, it’s still a risk that happens occasionally. For example, if in the process of staking your coin and expecting some rewards, your validator gets penalized, it’d affect you. Usually, validators are penalized for an unwanted act or behavior; for example, a technical problem happens.
Top 10 Best Crypto to Stake
As we’ve already observed, there are several cryptocurrencies that you can stake and earn passively. However, we’ve outlined these 10 best crypto assets for you among the crowd in this section. So let’s check them out.
The number one on our list for today is the Stakemoon protocol. Stakemoon provides a versatile and robust platform for users to stake several coins. Currently, the project is undergoing a development that enables you to access over 100+ crypto assets. Thus, making Stakemoon, the number 1 platform users consider when talking about staking.
Stakemoon is currently available on Pancakeswap, so you can locate the exchange and purchase your Stakemoon tokens. The protocol aims to incentivize users via its taxation policy. Interestingly, Stakemoon scares off short-term investors, thus rewarding existing coin holders and providing them with versatile staking rewards. It implements a 15% taxation policy, in which 10% goes to dividend payments, whereas 5% goes to liquidity providing.
In addition, Stakemoon focuses on providing a platform where users can access over 100 crypto assets that they can stake. They include all these amazing features in the protocol’s Whitepapers, and it enables you to stake several other crypto coins, asides from Stakemoon.
This is one of the new kids on the block. PancakeSwap is one of the new protocols that offers several additional benefits. Although being a new coin, PancakeSwap is the most popular crypto protocol hosted on the Binance Smart Chain. One of the significant features of the PancakeSwap protocol is that, after staking your tokens, you have the option of either choosing to earn more CAKE tokens or other tokens. These, among others, make the PancakeSwap token one of the ideal coins for you to stake in 2022.
Also, it’s worthy to note that you’d need to connect any compatible wallet to the PancakeSwap network. Some compatible crypto wallets include MathWallet, MetaMask, Trust Wallet, Token Pocket, even the Binance Smart. Another outstanding feature of the PancakeSwap token is that it provides users with relatively cheaper transaction charges because it’s hosted on Binance Smart Chain.
After claiming your rewards, you can either claim them back or choose to reinvest them back onto the platform. Also, the CAKE coin provides an annual return of 31 to 42%, thus making it outstanding in the market.
3. Cardano (ADA)
The Cardano coin is also considered one of the Ethereum “killers.” It arose to facilitate the development of the Ethereum blockchain further. Cardano is a PoS protocol that can execute a vast amount of transactions per second. Also, unlike Ethereum, the Cardano protocol has been implementing the Proof-of-Stake mechanism much longer.
The Cardano protocol rose to this stage of high recognition because it enables you to withdraw your staked assets whenever you wish. So, if you’re a beginner who’s yearning for a PoS network to go into, Cardano is your guy.
However, it’s also worthy to note that while staking in Cardano, your rewards reduce as time goes on if a pool contains too many individuals. That said, you must diversify your staking protocols to get maximum rewards. Also, there are two official Cardano wallets, Daedalus and Yoroi. In addition, the protocol provides an average return for the ADA coin of 5-9%.
One distinct staking platform is the Polkadot blockchain. In fact, the only way you can facilitate token staking is executed through slot auctions. Basically, the Slot auction comprises you lending your DOT tokens to liquidity pools in the Polkadot blockchain. That way, making the pools parachains by enabling them to bid in an auction.
Parachains are autonomous chains that operate parallel with the Polkadot network. So, when your project wins, you will get incentivized with the native token. One great thing about the Polkadot protocol is that many exchanges enable you to partake in Polkadot slot auctions, such as Huobi, Binance, Kraken. Also, you can as well earn from Polkadot by assisting projects and providing them with the opportunity to become a parachain.
If the project you choose wins, you will earn some tokens as rewards. However, if your project loses, you will still get back your lent funds from the project. Also, one thing to note is that in Polkadot, the least amount you can stake is presently 40 DOT tokens, or circa $1600. In addition, if you want to create your validator node with the Polkadot blockchain, you’d need a minimum of 350+ DOT tokens.
Furthermore, Polkadot offers an average revenue of 14%, which is huge when compared to others.
Ethereum is currently the second-largest cryptocurrency in the world based on market capitalization, after Bitcoin. Also, it’s one of the most favorable coins to stake for profitable income. Initially, the Ethereum blockchain used the PoW consensus mechanism before porting to the PoS algorithm recently. Just within the few months of swapping to the Proof-of-Staking mechanism, investors have staked over $12 billion all around the world.
One more thing to note about the Ethereum 2.0 is that it’s currently still in its testing phase. This means that all the tokens you’ve staked will remain in the blockchain until it completes this phase. Based on preparations, the Ethereum Foundation plans to deploy Eth 2.0 within the first quarter of 2022. Several exchanges facilitate Ethereum staking, thus enabling you to earn from 5%-21% annually from Ethereum, and its average return is 8.5%.
Another way to earn from the Ethereum protocol is by being a validator, but you need a minimum of 32 ETH before you can stake in this coin.
One of the best cryptocurrencies to stake in 2022 is the Terra coin. Terra enables you to stake stablecoins that are collateralized by cryptocurrencies. Every stablecoin’s price value is pegged from the various fiat currencies they represent. It’s also worthy to note that there are marketplaces where you can swap each stablecoin for Terra’s native coin, LUNA, at their current market prices.
Terra is a smart-contract-powered blockchain that facilitates the usage of the Cosmos project known as the CosmWasm. There are two coins for the Terra crypto, the LUNA and the TerraUSD (UST) coin. The UST coin is pegged to the USD fiat currency. However, when the UST ever decreases below USD, you can swap your available UST for the $1 equivalent of the LUNA coin.
Furthermore, LUNA provides an annual yield of 12.1s%, which is significant for staking. Also, you can purchase the LUNA coin in any of the major exchanges, such as Huobi or Binance.
Polygon is one distinct crypto coin developed to enhance the Ethereum protocol. The real aim of Polygon is to provide wide compatibility with Ethereum blockchain by creating a platform that connects all the Ethereum dApps. Also, it’s important to note that they facilitate all Polygon transactions through network validators. Therefore, it is one of the more advance and favorable coins to stake in. This is partly because the crypto enables up to 65,000 TPS (Transactions Per Second), which enables Ethereum to execute transactions much better.
In addition, Polygon allows delegators to stake only one coin before they can partake in the network, whereas the staking process itself requires a minimum of two coins.
To stake in Polygon, you simply need to connect your compatible wallet to your Polygon wallet. Also, although your expected annual income depends on the number of coins you’ve staked, the max yielding is 14%.
Another “new kid on the block” is the Solana cryptocurrency. Within less than two years of launching, the Ethereum-killer has arisen up to the 7th largest blockchain worldwide by market capitalization. One perk of Solana is that it performs several hundreds of transactions at ultra-fast speed. In addition, it charges super-affordable transactions.
Also, although you don’t handle your own node, there are over 640 validators in the network with whom you can stake your coins with.
To partake in the staking in Solana, you delegate your SOL coins to validators. The SOL coin has experienced massive growth within the past months, reaching $210 per SOL. Furthermore, staking in Solana provides you with an annual yield of 7%-11%. You can also stake the SOL coin using Exodus, MathWallet, Ledger, or even Atomic Wallet.
The Cosmos crypto is a decentralized, interoperable, and customizable crypto network that enables new startups to develop their own blockchain services. Furthermore, it connects various blockchains, ensuring data sharing and communication between them. This solves the challenge of communities collaborating with several blockchain providers.
Cosmos implements the DPoS (Delegated Proof-of-Stake) consensus mechanism as one of the best cryptocurrencies to stake. In the DPoS algorithm, delegators decide which validators can verify their transactions and create new para chains. Currently ranked the 25th largest crypto asset by market cap, Cosmos provides an annual return of around 8.32% on exchanges like Coinbase, Binance, etc.
The last coin on our list of 10 best cryptocurrencies to stake in 2022 is the Algorand coin. Algorand provided scalability, security, decentralization, and a borderless economy. Also, Algorand provides super-fast, extremely affordable transactions.
The Algorand blockchain uses the PPoS (Pure Proof of Stake) consensus algorithm, securing the network from malicious actors. Staking in Algorand is very favorable, as there are no minimum amount of ALGO tokens to be staked. Also, the average return for Algorand is 5-10%, which is a significant amount in contrast to central banks.
Now that we’ve seen the Top 10 Best Crypto to Stake in 2022, you’d recognize that it’s super easy to stake your available coins and earn passively from them. As we’ve observed, sticking came as a better solution to the mining or PoW consensus algorithm. After noting the different favorable coins to stake, you can choose to stake in any of them.