Cryptocurrency owners now have many promising strategies, and one of them is crypto staking. You don’t need to understand how the crypto exchange works or buy expensive devices for mining. The high earnings and returns on crypto staking are attracting more and more people.
Even those who used to be far from the world of cryptocurrency. Today crypto staking is a greener way to get cryptocurrencies. Nevertheless, it is necessary to consider the risk that may face a user who keeps coins in his portfolio for a long time.
Now we will tell you what crypto staking is and how a stacking pool works. If you’re new to the cryptocurrency field, you’ll be able to quickly apply the info you get to receive passive income. More experienced users will also find here helpful material about the best crypto staking platforms this year. Be sure to read this crypto staking guide to the end.
How does staking work?
The field of cryptocurrencies is experiencing a boom in DeFi and coins issued by independent blockchains. So, crypto staking is fundamentally different from mining and plays a big role in the development of the new generation of cryptocurrency. The demand for crypto staking is evidenced by the total number of cryptocurrencies placed on DeFi platforms.
Let’s start with a general definition of crypto staking. In the world of cryptocurrencies, this general word unites different ways of investing with some common features:
- Funds are placed in a crypto wallet for a long period at a certain interest, during that time they are used for various technical or financial tasks.
- After the end of the placement period, the user receives his deposit back, as well as the passive income in the same or another cryptocurrency, depending on the specific conditions.
The system of staking pools is familiar to many from BTC, where computing power is combined and increases the probability of mining a block, then dividing the coins according to the efficiency of each participant. The PoS algorithm allows the same trick, but the coins are collected in one staking pool.
Many cryptocurrency exchanges offer staking to users. The main principle is universal – a certain amount of crypto holdings must be blocked on the account and the higher it is, the bigger the profit of the owner. There are several types of crypto stacking:
- Limited. The user specifies in advance the period during which he will hold a digital asset on his account. It is impossible to increase this period. As a rule, this щзешщт implies a high-interest rate, that is, it allows getting the maximum profit relatively quickly.
- Perpetual. The contract is not limited by a specific period. That is, the user can terminate cooperation and withdraw tokens from the wallet at any time. As soon as this happens, the accrual of interest stops.
- Decentralized. The user makes a kind of bank deposit, keeping the funds in the wallet. These assets can be used by other participants for different operations. All processes on the staking platforms happen automatically.
There are thousands of different PoS projects and staking programs – which one to choose, you decide for yourself, weighing the pros and cons. This way you can earn much more than from crypto trading today.
Advantages of staking pools
Thanks to a stacking pool, anyone can connect to one of the validators and give it even a small amount of cryptocurrency to work with, receiving income with the deduction of a small commission, for its services.
The entry threshold is the main advantage of a staking pool. You don’t have to have dozens of coins. Also, any user can join the staking pool. It’s elementary to place coins in a pool with a few clicks, and then crypto starts giving passive income to you. This is very handy if you plan to invest for years to come.
Since the staking pool always monitors the state of its servers, all participants can safely count on a stable, round-the-clock profit. And often withdraw it at will at any time. Although there are also contracts with a freeze for a certain time.
How do you stake crypto?
In simple terms, staking is a passive way of earning money from keeping your funds, and the PoS algorithm is used in this process. This is one of the ways to protect blockchains from third-party interference and placing unreliable information. PoS works as simply as possible:
- Users store their coins in wallets.
- The assets support the processes running in the system.
- The wallets of the owners receive regular remuneration.
Members of the network keep blockchains running without putting any effort or time into it. So, the earnings here are passive without any tricks. The larger the amount the users keep in their wallets, the more blocks he generates and the higher their income. Before we talk about crypto exchanges that offer stacking, let’s go over the basics a bit more.
What is proof of stake?
It is a method of protection in crypto in terms of the probability of creating a new block depending on the current balance and the total number of assets. In simple words, PoS is the ability to be rewarded by owning a particular crypto. Validators take part in staking and freezing some of the assets. The algorithm randomly selects one validator from the total number. There are some variants of PoS:
- Proof-of-Activity. Offers a hybrid model for creating new blocks while using PoW and PoS.
- Proof-of-Burn. To find a block, the validator sends funds to a random address obtained by hashing. No one has access to this wallet, so the coins are simply burned.
In PoS, the staking reward between validators is distributed randomly, because the algorithm can take into account not only the number of coins but also other data.
What exchanges offer staking?
Today, everyone can use staking for a permanent income, and there are a large number of crypto exchanges, offering users favorable terms. Consider the best staking platforms that meet the requirements of reliability, safety, high percentages of profitability, and user-friendly interface:
- Kraken. A well-known crypto exchange with a staking service, it supports 18 types of crypto. To get a profit passively, all you need to do is register on the platform, make a deposit, and choose which assets you want to send to the stack. You can disconnect from the service instantly at any time.
- Coinbase. This crypto exchange offers a regulated and easy-to-use platform for staking. The crypto exchange helps customers start nodes, synchronize them with the network, and comply with the volume limit for staking. It supports 6 types of crypto. Users don’t need to buy assets on this crypto exchange to be eligible for staking rewards, as they can transfer tokens from an external wallet.
- Gemini. It is one of the leading platforms that offer over 40 cryptocurrencies for staking rewards as part of the Gemini Earn program. People can claim their cryptocurrencies back at any time, though they may have to wait up to five working days due to Gemini’s liquidity limitations.
- KuCoin. This is one of the largest crypto exchanges in terms of trading volume. The platform offers multiple staking offers and large pools where users can get staking rewards. The platform runs two staking programs – Soft Staking and Pool X.
We’ve listed the best platforms that you can confidently use. They differ in terms of asset mix, interest rates, and commissions. Compare them to each other before deciding what’s right for you.
How do I get my staking rewards?
Any user can get staking rewards when you stack some assets over some time. Simply choose the option you want, and once staking is complete, you can receive benefits. The payout period can vary depending on the platform and the terms you select. For example, on Kraken, you receive staking rewards twice a week.
What are the risks?
This is a risky type of investment. Like any other actively developing sphere, it attracts many fraudsters. In many projects, widely advertised at the start, the actual yield, in the end, turned out to be much lower than the nominal. At launch, the price of an asset can be higher than at the final settlement. In such cases, users get almost nothing, and many work at a loss.