What Is Staking Crypto In Finance?

In being accredited with the first proof-of-stake (PoS) model, the creators of Peercoin wanted to solve the risks investors saw in bitcoin. Long-term autonomy and efficiency were the objectives that Sunny King and Scott Nadal had in mind with their PPCoin. As the best in staking crypto, 2012 gave these partners a proven substitute for proof of work (PoW). 

The results were less risk and less energy used by the network supporting blockchain.

Finally, Crypto Staking Explained

Now you might wonder why this shift made sense in a world of crypto. It all has to do with bitcoin, which, though still operating, has a few risks that could change its market share. Both the autonomy and resources that sustain bitcoin are under a unique threat. It takes only 51 percent control of all of its nodes to be able to fraud the infamous bitcoin blockchain. 

Even more, the amount of energy it consumes per year is equal to that of Argentina. The ability to scale its resources and autonomy are limited, so a new form of consensus had to be created.

The protocol now confirming transactions, currency quantities and user accounts is a consensus algorithm. Bitcoin finds consensus through miners and is where investors see risk. In the best staking crypto below, you’ll see how to stake, instead, as a means of creating a consensus. Here’s a look at what consensus is and why staking crypto is at the heart of it.

What Is Crypto Staking?

How to Start Staking Crypto

Read Below If You Want to Know What Staking Crypto Is

Crypto staking is when investors hold their money into a blockchain with the objective of validating the transactions the blockchain has. Staking involves locking cryptocurrencies in a smart contract to participate in the work of a blockchain. Just like mining, it allows users to receive rewards by actively participating in the security of the decentralized network.

The reason investors do this is because platforms that offer staking also pay interests. 

How Does Staking Crypto Work?

For a better look at what crypto staking is, you need a strong understanding of blockchain. 

The physiology of staking is best understood when we study what the first consensus protocol did. Blockchain validation is the process of confirming the change, sending or receiving of information. As an example, 30 bitcoins transfer from Mike to Karen, and the change of data has to be validated before it’s recorded in a cryptic way. 

Proof of work was the first to do this, and its revolution means that staking crypto is also safe.

In proof-of-work, however, are a number of challenges. Though these have more to do with efficiency or utility, some challenges of PoW reveal how the autonomy of a blockchain gets exposed to fraud. The core problems in proof of work is the competitive nature it has and the inefficiency of its miners working this way. Ethereum started as a PoW network.

Miners in PoW all exert energy in a race to validate chains of blocks. Not only is their computation power focused on the same task, but only one of them is able to functionally decode the block hash. Now if all of these nodes, which are the computers competing for the hash, are owned by a single entity, that entity can, theoretically, fraud bitcoin. 

This potential is not the risk of PoW but instead the risk of relying on PoW. In grasping the staking-crypto meaning, you have to examine PoW against PoS. Defining what staking crypto means calls for us to cover differences in “delegated proof of stake” (DPoS). To understand what staking means in crypto, we have to cover PoS but its variants also. 

Instead of miners, PoS systems use validators who get chosen for each block of transactions, which means they don’t have to compete. Delegated-proof-of-stake (DPoS) works in the same manner as staking but without a random, chosen validator. In what we call staking, the validator is chosen randomly, which some argue isn’t the best staking crypto method.

In delegated proof of stake, on the other hand, validators are assigned by human actors.

What Are the Rewards?

Earning Potential In Crypto Staking

To know the truth in what staking crypto means, we have to also assess the financial rewards. There are crypto staking rewards for those who invest their capital into blockchain validations. 

Both developers and the people they invite to stake into their chains find mutual benefits, and among the best crypto-staking platforms, you and developers will use and profit from:  

  • Interest rates: Like any borrowing and lending, the transactions of staking incur interests for investors. You’ll pay interests on any crypto you ask for while collecting interests on the crypto you staked out. Crypto-staking platforms often have a pay date for the interest you’ll collect on the funds you staked with them. 
  • Collateral: The financial security built by staking gives blockchains the capital needed to transact with. These networks manage just enough money to exchange and complete client orders as requested. The existing collateral is also a security fund that keeps the deposits of investors like you securely hedged. 
  • Volume and liquidity: The more that a platform is used, the more money and liquidity that site has to use. Since you’re crypto staking, the amount of interest you earn is related to the amount of transactions there are. True liquidity comes from a high volume of users. Liquidity ensures that enough capital flows in and out of a blockchain. 
  • Governance: The amount of crypto you stake into an architecture dictates how much voting power you do or don’t get. Governance tokens often have to be deposited at a minimum amount before you get voting rights based on them. These rights give you power to make decisions on protocols and system upgrades.  
  • Autonomy: The proof of stake method ensures that your investment is actually into an autonomous network of no intermediaries. 

Binance

  • Low fees
  • One of the largest crypto exchanges
  • Fee discount for using native BNB

How Safe Is It to Stake Crypto?

Where to Stake Crypto

Risk, security and autonomy also help us to understand what crypto staking is.

There are some risks involved with staking crypto, and you’ll find many of them similar to any financial investment. The difference is the what, which is what you’re investing in. 

The prices you find for crypto today are volatile. Another, more secondary, risk is related to the possibility that profits will be lower than expected. You should be careful with the promises made by staking platforms. It is true that losses can become greater than the interest you’re shown. 

Is Staking Crypto Safe?

For some, their major risk is hacking. The time of unlocking (unstaking) should also be considered. This refers to the period in which it’s possible to unlock your locked cryptocurrencies. Most platforms provide an unlock period of a few days, but others require several weeks, which may prevent users from taking advantage of market opportunities.

Staking Terms, Rates and APYs

Platforms With Staking

For you, staking crypto is worth it if the returns on your investment remain profitable.

KuCoin

  • Wide range of cryptos
  • Advanced Trading Options
  • Competitive fees

When staking crypto, the annual percentage yield you get corresponds to the APY that the interest paid out on your investment is distributed at. In crypto staking, your APY is typically set, being locked at a certain rate for a specific period of time. A locked rate is recommended because it acts as a hedge against any uncertainty, seeing how volatility might exist. 

From the staking agencies you have access to, you’ll find different rates, terms and obligations. Here’s a look at some of the best crypto-staking platforms out there:

Bitcoin (BTC) staking

In working on the proof-of-work principle, bitcoin cannot be staked but instead lent or used as the token converted into an exchange’s native coin. The exchanges you can lend bitcoin to may operate on PoS, and you can use your bitcoin as a locked deposit with them. Here’s a look at a few of them:

[Rates Subject to Change and Volatility]

BTCYouHolderZengoNexoSwissborgBinanceEarn
APY3%3%4 to 7%1%1.50%
Minimum-USD deposit100100111
Withdrawal fee00000
Blocking duration30 to 120 days15 to 120 days 30 to 120 days30 to 120 days30 to 120 days
PaymentsDailyDailyDailyDailyDaily

Ethereum (ETH) staking

ETHYouHolderZengoNexoSwissborgBinanceEarn
APY4%4%5 to 8%2 to 4.5%1.20%
Minimum-USD deposit100100111
Withdrawal fee00000
Blocking duration30 to 120 days15 to 120 days30 to 120 days30 to 120 days30 to 120 days
PaymentsDailyDailyDailyDailyDaily

Solana (SOL) staking

SOLYouHolderZengoNexoSwissborgBinanceEarn
APY8%Unavailable5 to 8%5.5%Unavailable
Minimum-USD deposit100X11X
Withdrawal fee0X00X
Blocking duration30 to 120 daysX30 to 120 days30 to 120 daysX
PaymentsDailyXDailyDailyX

Cardano (ADA) staking


ADA
YouHolderZengoNexoSwissborgBinanceEarn
APY5.5%Unavailable5 to 8%2 to 4%10.9%
Minimum-USD deposit100X111
Withdrawal fee0X000
Blocking duration30 to 120 daysX30 to 120 days30 to 120 days120 days
PaymentsDailyXDailyDailyDaily

How to Stake Cryptocurrencies

Coinbase

  • Regulated exchange
  • An easy-to-use platform
  • Free crypto training offered

Now that you know which the best crypto-staking platform is, let’s look at how we stake profitably. Staking is an excellent solution for generating passive income with little effort. 

These simple steps will get you started: 

  1. Choose a cryptocurrency—To do this, consider not only your cryptocurrency portfolio, but also the APY offered by the platform, and choose a cryptocurrency that is based on a proof-of-stake protocol. 
  2. Find your exchange—Using a platform like YouHolder, Binance Earn or Nexo allows you to delegate the staking of your cryptocurrencies in a simple and secure way. Make sure to check the APY and conditions of each platform.
  3. Deposit funds—You will need to connect your wallet and validate your platform account before you can start staking. Validation information includes phone number, address, name, bank info and date of birth.  
  4. Leave native tokens on hold—Platforms often impose a lock-up period for staked cryptocurrencies. The duration varies and is on average from 7 to 120 days.  

Conclusion

Is Crypto Staking Worth It

You might now be wondering if staking crypto is really worth it.

The miracle of what are native tokens has pushed the value of crypto and blockchain to unprecedented levels. Few realized how long crypto would run for, but even less realized that blockchain’s survival would come directly through funding. Like the clever firms and funds of Wall Street, new-age developers are pooling capital into the future of money. Staking is how.

If you’re still looking for a few reputable exchanges to stake through after reading this, then consider: 

Your questions answered

How does cryptocurrency staking work?

Crypto staking works on a consensus protocol that validates transactions with the resources people stake for a blockchain network to use. For providing cash to validate transactions with, stakers are rewarded with incentives to keep their stake locked into a blockchain.

Which crypto coins can you stake?

By exchanging one coin into another, you can stake any crypto. However, there are specific blockchains that operate on the PoS consensus and include popular networks like Compound, 1Inch and Cosmos. Each has their own native token that is used for staking. 

What are the staking rewards?

Staking rewards are measured in terms of a percentage paid out as interests. You will also be offered an exact amount of native tokens back for staking your money into a blockchain.

About the author

Joseph Minor

In seeing a digital world explode, Joseph invested his writing in the field of technology over 8 years ago. As a leading-content creator, he believes in clarity, credibility and writing topics people want to read. From blockchain to Web3.0, Joseph sees no shortage of developments as crypto pushes forward. He’s become a voice in technology that people can trust and look forward to hearing more from.