In crypto, there are several tactics you can use to earn an income, including crypto staking. While you might know about staking in the centralised financed world, it is completely different in crypto. So, what is crypto staking?
Staking is one way to gain rewards while you keep your tokens in your wallet or on a platform. It can be extremely passive or require technology knowledge, depending on its type and the reward you want.
In this blog post, we will delve deeper into staking and then give you the steps you need to start staking. Let’s move on!
An Overview of Crypto Staking
Crypto staking is an alternative to mining that requires locking up your tokens for a period of time. According to reports, Sunny King and Scott Nadal first implemented this system in 2012. For the first time, it allowed token owners to participate in the blockchain and validate transactions without having to solve complex Maths problems.
Furthermore, each blockchain that allows staking has its own requirements and rewards rates. It is only after you have met these requirements that you can stake your tokens and gain the right to participate in the blockchain’s proof of stake. This allows you to validate transactions.
Note: Staking differs from bank interest on a savings account in that your tokens are not traded while staked. They are only locked, and you are unable to trade or sell them.
What are the Types of Crypto Staking?
You can stake crypto in a variety of ways. You can opt for different ways to earn, such as locking up your tokens and gathering the tokens necessary to meet the requirements of the blockchain.
The following are the main types of staking:
- Custodial staking: This refers to staking whereby you lock up your tokens externally with a platform.
- Noncustodial staking: If you opt to lock up your tokens in your cryptocurrency wallet, it is noncustodial.
- Active staking: This form of staking requires you to actively participate in the validations.
- Passive staking: Some blockchains will offer you a reward for only locking your tokens to keep the blockchain secure. However, this type of staking usually leads to lower yields.
- Delegated staking: You can opt to let someone else do the validator task and split the reward with them.
- Pool staking: You can pool your tokens with others and share the reward.
The Importance of Crypto Staking
Crypto staking is not only beneficial to you due to the rewards it offers, but it is also helpful to the blockchain. In particular, complex blockchain can have bottlenecks which affect the speed of transactions. Through this process, you can increase the speed of these transactions while lowering the fees.
In addition, this concept increases the safety of the blockchain, especially against attacks. It also requires validators to do their work correctly and in good faith to avoid penalties.
The Risks of Staking Crypto
When you lock crypto, you become susceptible to several risks. The most obvious one is that your crypto will not be accessible for a period of time. In fact, even if you are in an emergency, you will not be able to regain access to your crypto. Therefore, if there’s a fluctuation in price, you cannot sell your crypto before it loses value. This is why it is essential to stake safer and more long-term crypto.
Another major issue is that if you or your delegate make mistakes, you may lose some of your tokens. Likewise, the blockchain may change over time, leading to a change in rewards offered.
Lastly, an attack on the blockchain could lead to a loss of staked tokens.
How to Start Staking
As you now have had the chance to compare the risks and benefits of staking crypto, you can now learn how to do it.
The following steps will detail how you can stake crypto:
1. Choose a Cryptocurrency
To start staking crypto, you will first need to choose a cryptocurrency. You should base your choice on a market data analysis and a research into the requirements and rewards of the different crypto.
Note: Although Bitcoin is a popular blockchain, it is impossible to do any staking bitcoins. The blockchain is fairly simple and so it does not need this system.
2. Meet the Requirements
Once you have chosen a cryptocurrency, you will need to meet the requirements for participation. These may include minimum staked tokens, technical knowledge, and hardware and software to safely perform validations.
3. Stake Tokens
When you have met the requirements, you will need to stake tokens.
4. Operate as a Validator
After you have staked your tokens, you will need to validate transactions or delegate the task. Alternatively, you may only need to keep your tokens staked for a period of time.
5. Earn Rewards
Finally, you will earn your reward. This is usually a percentage of your staked tokens.
Where Can I Learn about the Best Crypto to Stake?
Since the first step in staking your crypto is to find the right one, you will need a reliable source of information. Crypto Cracker is your trustworthy source of information. You can learn using simple graphics how different crypto is fairing in the market. This information will help you ascertain which crypto is likely to accrue in value or at least remain fairly stable while you keep your crypto staked.
When you stake your cryptocurrency, it is important to manage it well so that it stays safe. Since staked coins are usually locked, you cannot trade them during this time. In this scenario, CryptoCracker helps by blocking trades on coins you have staked. As a result, your assets remain secure and focused on earning rewards. Moreover, this feature prevents mistakes that could interrupt your staking process.
Final Note
Conclusively, crypto staking is one way to earn income by locking up your crypto for a time period. Although it seems simple, it comes in a variety of forms with varying levels of required involvement. Active staking requires more technical knowledge yet yields more than passive or even delegated staking. Whichever path you choose, you will need the steps above to begin staking.
When you are ready to start staking, finding the right crypto to stake and researching it on trusted platforms such as CryptoCraker is very crucial. So, we suggest using our tools to quickly and simply review different currencies and choose the best one to stake.
Frequently Asked Questions
How much can you earn staking crypto?
You can earn as much as 28% of your staked crypto. For instance, if you staked 10 ETH, you would yield $890 in income. However, most blockchains offer rewards below 7%.
Does staking crypto pay daily?
Yes, staking crypto can be paid daily. The rate at which you will receive payment will depend on the blockchain. Still, you should keep in mind that even though you may receive payment, your crypto will remain staked until the end of the agreed period.
How long does crypto staking take?
Crypto staking can take as little as a day or over a month. You can choose how long you want to stake your crypto. Nonetheless, blockchains have their own regulations on staking periods.