Cryptocurrency mining can be profitable, but the setup costs, software integration, pool selection, testing, and other factors might make it challenging. Don’t worry there is another way to earn passive income the same way as mining, it is through “Staking”.
Staking in cryptocurrency is locking away your crypto currency for a certain period of time and earning rewards or interest. It is quite comparable to becoming an investor and putting money into a bank in order to receive interest on that money.
Staking offers crypto holders of putting their digital assets to use and earning passive income without the necessity of selling their cryptocurrency holdings. Staking allows users to take part in the operation of a blockchain and ensures that its integrity is preserved. In return for this, you will receive rewards that are determined by the percentage yields. As of the month of June, a total of 286 billion dollars worth of cryptocurrency had been staked. See as it is live, how much crypto is staked.
Staking is only possible on PoS (Proof-of-Stake) consensus mechanism blockchains like Cardano (ADA), Tezos (XTZ), Solana (SOL), Polkadot (DOT) and soon Ethereum 2.0. There are typically several ways to stake money in official wallet applications when using PoS (proof-of-stake) protocols. For the cryptocurrency Cardano (ADA), for instance, it suggests using the Yoroi wallet. Different cryptocurrencies have varying durations for which you must stake. Similarly, the minimum amount of crypto required to be eligible to stake is also difficult for coins. For example, Ethereum 2.0 requires 32 ETH minimum for staking in the mining pool.
How Profitable is Staking?
Long-term investors who are unaffected by fluctuations in the market over the short term may find success with the staking strategy. According to the statistics, the average staking reward rate of the top 261 assets that have been staked has an annual yield of more than 11 percent. But the rewards can change over time.
A fee is also deducted by the pool through which you join staking. It can also vary from pool to pool and from chain to chain.
The Rewards You Get by Staking Are
Additional Tokens
You will receive a proportion of the coins that you staked, and this might be a benefit because it will increase the total amount of coins that you have. After some time, you can rejoin the pool with more coins (earned through staking) and earn more yield.
Voting Rights & Participation
This is similar to owning stocks in a company, you get the right to vote in upcoming events.
If There Is Reward, There Is Also Risk
Let’s look what risks staking has:
- Crypto is volatile, it fluctuates very easily based on news and events, price swings are common.
- There is a lockup period before which you cannot take your coins back and have no access to them.
- Staking outside exchanges can be difficult and sometimes you might lose some of your coins, this term is called slashing. It is against users who set up their own node and perform poorly.
- As mentioned above, there are fees you have to pay, but it can vary and you can choose from options which cost less so you can earn more.
