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Beginner's Guide on Cryptocurrency Staking

Mandala Exchange

Mandala Exchange

Jan 28 . 5 min read

Last year, the cryptocurrency industry saw a steady rise, a surge even, in the number of people staking cryptocurrencies to earn money through interest or yields from farming rewards. However, the number of miners on proof-of-work blockchains slowly fell for altcoins, but this isn’t because of falling interest. The leading coins on the market are experiencing a greater surge of interest from stakers. More than a billion dollars were staked on leading crypto exchange platforms alone, making for a multi-billion dollar industry across the board. This is the main proof that the demand for staking is higher than ever.

What Is Crypto Staking?

Staking is when a user locks or holds their funds inside a cryptocurrency wallet to participate in operation maintenance of a proof-of-stake (PoS) based blockchain system. It is very similar to mining cryptocurrencies as it also helps a network achieve consensus and rewarding its users through their participation. In staking, the validation of transactions is based on how many coins the users place inside a wallet. The stakers are also incentivized to find new blocks or make a transaction through the blockchain. Other than these incentives, PoS blockchain platforms are very scalable, and transactions are done very fast.

What Can You Stake?

With the popularity of the cryptocurrency market in 2022, there is a wide array of choices for users who want to earn income passively by simply living their assets idle in wallets. Some of the most popular coins used for staking are the same ones dominating the market. Among these are Ethereum 2.0, Tezos (XTZ), Algorand (ALGO), Icon (ICX), etc.

Where Can You Stake?

Staking can be done through different platforms. Among these are exchanges, cold/private wallets, Stacking-as-a-Service platforms, and DeFi Staking. Exchanges Thanks to the huge number of users on different exchanges, they have become one of the preferred platforms for staking. By staking, traders can diversify their income sources and monetize the idle funds they put into these exchanges. Among the exchanges that support staking are Binance and Coinbase, the most well-known exchanges for staking today. Cold/Private Wallets Staking through these cold/private wallets is known as staking. However, a staker needs to keep their coins in the same wallet to avoid breaking the lock-up period, which means they lose staking rewards. Among the leading, offline/private cryptocurrency wallets include Ledger, Trust Wallet, Coolwallet S, and Trezor. Staking-as-a-Service Platform Staking through these platforms is known as soft staking. These are unlike the cryptocurrency exchanges and wallets that function both as avenues for trading and storage. Stacking-as-a-Service platforms are dedicated to staking only. These platforms are also known for taking a percentage of their users’ earnings to cover their fees. Among the more famous platforms for this staking is Stake Capital and MyContainer. DeFi Staking DeFi staking yields gains differently. Staking through these platforms essential lets the users earn profit from different stable coins without actually owning them. Among the platforms that offer DeFi staking are Maker (MKR), Synthetix (SNX), Yearn Finance (YFI), Compound (COMP), etc.

How Should You Choose a Staking Platform?

Like with other industries, investing your coins in staking has its risks you need to consider, and the platform you choose is just as important as the rewards they offer. Making a wise choice will be the difference between getting great rewards and losing your coins altogether. Here are a few tips you need when choosing a staking platform to use.
  • A platform’s annualized rewards are not the main measure of its success. First and foremost, you have to consider their reputation and age as the most crucial factor for your choice.
  • When it comes to staking on a DeFi platform, it is best not to take the founder’s or team’s word for the services and rewards they offer. It is best to check out the other people’s reactions regarding the platform through Reddit and Twitter. These social media platforms usually have people who are more versed in staking, and their opinions will matter a lot.
  • Stick with reputable platforms even if they will cost you more than others. These platforms are generally safer to use compared to others offering extremely high staking rewards.
  • Use different analytics to check information on the PoS-based platforms you will use, but ensure that these sites are reliable before taking their word.
  • Read the terms and conditions that the platform has. These will generally be the guide you will need to know just what to do while using the platform and spot different things that you may find problematic in their user contracts.

Conclusion

Staking is a healthy way of earning money through your coins, and it is continually gaining momentum and rightfully so. They are experiencing an increasing market share in the cryptocurrency sector, and joining them now will earn you great rewards. With their popularity peaking in 2022, both centralized and decentralized staking guarantees that the market will continue growing. Just remember to look out for red flags and proceed with caution. Happy Staking!