We initially looked at crypto staking in our article on the top crypto passive income strategies. Staking crypto is another way to make passive income. This article is the beginners’ guide to crypto staking. However, you can still read it to know the best applications for staking rewards and recent information on staking if you’re experienced.
For beginners’, I’ll break down what staking is, how to stake, and show you the best platforms you can use for staking.
How Does Crypto Staking Work?
Staking works similarly to a fixed savings account – you lock cryptocurrency to receive crypto rewards.
Staked crypto is used to support the security and operations of a blockchain network. The staking rewards come from distributions generated from network transaction fees. Sometimes it comes from cryptocurrency that is automagically minted each year and distributed proportionally to all holders.
Staking crypto works with a system called proof of stake, a replacement for proof of work.
If you are familiar with blockchain and crypto mining, you would know what proof of work is. Proof of work needs miners to compete to solve complex mathematical puzzles to get the right to add the next block to the blockchain. However, that isn’t energy-efficient because it involves a lot of computation. So, proof of stake came in.
What Is Proof Of Stake?
Proof of Stake validates new blocks through the process of staking coins. Here, people lock up their coins to be randomly selected by the protocol to create the next block. The probability of being chosen depends on the number of coins you have locked up – the higher the amount, the higher your chances.
Do you need to bother with these technical terms to make passive income through staking? No. On a practical level, you don’t have to do anything. Some platforms handle all those. All you need to do is keep funds in a suitable wallet that supports staking, for example, Binance.
However, there are still areas where you will need to do the work; for example, with Ethereum 2.0, you will have to do a bit of work. I will explain this later in this article.
Having a lot of coins to stake might not be feasible for you. In such cases, there is something called a staking pool, which can help. This also helps beginners.
What is A Staking Pool?
A staking pool includes a group of coin holders merging their resources to increase their chances of being randomly selected to validate blocks and thus receive rewards. Remember that the higher the number of coins you have, the higher your chances.
Asides from the benefits of higher staking power, being in a staking pool can also help those with low technical expertise in staking. The staking pool providers, in this case, usually charge a fee from the staking reward that it distributes to everyone in the pool to handle the technical stuff.
Although you can come together with friends to build a staking pool, setting up and maintaining one requires a lot of time and expertise. In general, joining a staking pool might be ideal if you are new to the staking concept.
As I mentioned above concerning Binance, there are some platforms that you wouldn’t need to bother with the technical details. So, you wouldn’t need to bother with a staking pool.
How are staking rewards calculated?
The answer isn’t straightforward, as every blockchain network calculates that differently. There is a fixed percentage for some networks, so you can calculate precisely what reward to expect. On some other networks, how they calculate it varies by block, and the factors can include:
- How many coins you are staking
- How long you have been actively staking
- Inflation rate
- The number of coins that are staked on their network in total
Should I Stake My Crypto?
A currency, token, or asset is only worth staking if you believe in the project since you are both holding and earning the underlying asset. Also, be aware of the risks of staking so you can be prepared for both the negatives and positives.
Projects That Offer Staking Rewards
This is a short list of some great projects that offer staking rewards:
- Ethereum (2.0)
- Cosmos (ATOM)
- Celo (CELO)
- Binance (BNB)
- Kyber Network (KNC)
- Kava (KAVA, BNB, BTC)
1. Ethereum (2.0)
Ethereum 2.0 is here, and there are many ways you can delegate your stake and earn 10-13% APR on your ETH holdings.
For Ethereum, you will deposit 32 ETH to activate validator software. When activated, you are responsible for storing data, processing transitions, and adding new blocks to the blockchain. You earn rewards in the process of doing all that or validating the work of other validators (others like you).
If you perform malicious actions, go offline, or fail to validate, you can lose ETH. IF ALL OF THAT SOUNDS COMPLEX, don’t do it. You can use less than 32 ETH to join a staking pool.
Here are some pools to stake ETH:
2. Cosmos (ATOM)
Cosmos(ATOM) uses a hybrid of the proof of stake protocol to secure its network. That allows those that stake to earn up to 10% a year in passive income. To stake Cosmos (ATOM), you have to store ATOM and participate in validating transitions on the network. You can participate in validating transactions easily by delegating your ATOM to a validator for staking.
3. Celo (CELO)
Much like Cosmos (ATOM), to stake on Celo, you can delegate your funds to validators and earn rewards on them. On some platforms, such as Coinlist, all you need to do is have Celo coins in your wallet. On some other platforms, including Staked.us, you will have to run a command line to vote for the validator group.
So, if you know nothing about staking but want to make money from it without sweat, look for platforms like Coinlist.
4. Binance (BNB)
Staking BNB on Binance is pretty easy. As long as you’re holding your coins on Binance, you have added them to the staking pool. The platform handles all the technical requirements of staking, and you get the rewards, which are usually distributed at the start of each month.
5. Kyber Network (KNC)
To stake Kyber Network (KNC), you can delegate voting power to a staking pool from kyber.org. You must use the same address used for delegation when claiming rewards. Staked.us also has a pool for this and explains it in great detail here.
6. Kava (KAVA, BNB, BTC)
To stake on KAVA, you will need technical expertise that’s because you have to run a validator node to stake. Those are nodes that validate the blockchain in exchange for block rewards. If you know nothing about validator nodes, you can’t stake on KAVA.
Best Applications For Earning Staking Rewards
There are a ton of applications that you can use to earn staking rewards. Some are so easy to use that you only need to have cryptocurrencies in your wallet to earn staking rewards. Some of them require a bit more work. Let’s look at the best applications for earring staking rewards.
Allnodes is more complex than most of the other best applications for earning staking rewards. Allnodes provides VPS management services for your nodes. For staking, you delegate your coins to their node and earn rewards.
Earning staking rewards on Cosmostation is pretty easy. All you have to do is sign up and connect your crypto account or create a new one. By having coins in your accounts, you can delegate your crypto to validators to stake and get rewards. All you need to do in the app is select a validator and delegator your fund to them.
With Cosmostation, you get access to the Cosmos Network of Blockchains and can stake Cosmos Atom & Kava.
3. Binance Launchpad
In this article, I mentioned that by holding coins in your Binance account, you are already staking. To earn better staking rewards, you can invest in a project on Binance Launchpad.
When people have great ideas around crypto, they can raise capital through Binance launchpad. Binance verifies each project before listing it.
As a user, you can look at the projects lined up and do your research before deciding to take part in a token sale. You can use Binance Coin, Bitcoin, Ethereum, and some other coins to buy tokens. Buying tokens is like investing in a business. After the Binance review process, you can directly trade your token or withdraw it to your wallet.
4. NEON and Exodus Wallet (stake NEO)
To stake NEO, you will need a NEO wallet, and the NEON Wallet is an excellent option to consider. You can also use the Exodus NEO wallet. The latter’s advantage over the former is that you can exchange your NEO (GAS) earnings for other cryptos.
With either, you will need NEO in your wallet to stake. On Exodus, for example, you should enable GAS and have some NEO in your wallet, then check your wallet periodically to claim your GAS.
5. Stake Capital
Stake Capital offers staking as a service and provides decentralized staking for several blockchains and assets. You can view the supported networks here. You can also look at the yield you’ll get if you delegate your token to the supported networks and the commission that Stake Capital takes.
What Else Would You Like to Know About Staking?
That’s the beginner’s guide to crypto staking. We would always provide articles around cryptocurrencies and touch on subjects around staking in future articles. Do you have any questions about staking? Let us know in the comments or contact us. Do you have any requests for future articles? Let us know.