Staking Crypto Explained: All You Need to Know
If you’re new to the crypto world or would like to find out more about staking and what it can offer, we can help. Read our article to find out what staking is all about, so you can take advantage of this concept to earn rewards.
What Is Staking?
A short definition of staking states it is the process of holding coins for your mining pool.
Staking is a process where users hold funds in their accounts to support a blockchain network. When you hold coins, you can receive rewards from your blockchain. Staking, therefore, allows users to earn rewards with their crypto holdings. It has become a popular way for investors to earn a passive income, due to the higher interest rates that it generates. The income earned through the rates being generated is sometimes even higher than you would earn with a savings account – making it a great alternative to traditional investments.
How Does Staking Work?
Staking uses a proof-of-stake model, meaning that crypto users can lock in (or pledge) their coins for some time. The proof-of-stake consensus algorithm allows for a large number of transactions to be processed at a time and uses less cost per transaction than regular models.
The staking period can range from a few weeks to a few months, depending on the type of cryptocurrency you are staking. Users cannot withdraw their coins or do any transactions during this period. If you do transact, you will lose out on your interest similar to traditional investments.
Staking works through various cryptocurrency exchanges. You get to choose the amount you want to stake, although some cryptocurrencies may require you to stake a particular amount. However, you can pull out your stake if you change your mind (unstake your coins). You don’t “lose” your coins when you choose to unstake – they remain in your wallet and you can trade them as usual, later on.
You can become a validator by pledging coins. A validator is someone who is chosen to verify transactions on a blockchain network. Although this is randomly chosen, the more coins you invest, the better chance you have of being chosen as a validator.
Benefits of Staking
Staking serves as a great alternative to banking investments, with far less risk.
The process uses a proof-to-take algorithm, using less energy than regular mining which uses a proof-of-work model.
It’s an easy way to earn interest on your coins, with no equipment or tools needed. When you stake and become a validator, you help to ensure the security of the entire blockchain by
supporting it as a whole. You can earn more than 20% interest in a year, depending on the crypto you are staking.
How to Stake Crypto
Are you ready to stake? The process of staking can be overwhelming at first, but with time and practice, you can earn rewards easily. If you need help getting started, don’t panic, here’s an easy step-by-step guide to help you get started.
Choose a cryptocurrency
Look for a cryptocurrency that uses the proof-of-stake consensus algorithm and buy your coins. You can only stake with crypto that supports this model. It’s also possible to use a crypto trading platform to buy these coins. Before you choose a coin, it is recommended that you do your research to see which coin fits your budget and needs. Crypto can be unpredictable, but it’s a great long-term investment. Even if you choose not to use your coins for staking, they can be used to buy and sell assets. This means you need to choose a currency that is going to be worth your time and money.
Don’t know which coin to invest in? Here’s a list to help you decide which crypto to choose:
Ethereum has the highest crypto value after Bitcoin, making it a great investment. It’s affordable and is considered one of the most fluid liquid assets in crypto. Staking and Ethereum usually go hand-in-hand due to their popularity and lower inflation rates.
Cardano is more energy-efficient than most crypto. It’s also low-priced and a favorite with investors due to it being more programmable than Bitcoin. Staking investors use Cardano for its lower costs, making it popular and environmentally friendly.
Polkadot works on multiple blockchains. It allows data and tokens to be transferred along with blockchains, making it a fast-growing crypto among investors. Polkadot is expected to do well as many high-end investors are now starting to invest in the coin.
Due to its low fees, Solana is considered good crypto to invest in. It is the closest to Ethereum when it comes to speed and affordability.
Terra is a stablecoin that is cheap and allows for quick and easy transactions. Terra’s suite of stablecoins include US pegged TerraUSD (UST) and other coins pegged to the Euro, Canadian Dollar and Japanese Yen.
Tezos is an environmental blockchain. It uses the proof-of-stake consensus algorithm and is considered to be one of the most secure cryptos. Tezos has gained popularity due to the rise of non-fungible tokens (NFT) in gaming networks.
Choose a blockchain wallet
Once you buy your coins, you need to transfer them to a crypto or blockchain wallet. Depending on the platform you use, you can probably stake directly through the exchanges. In most cases, you will have to move your funds to a wallet. Crypto wallets help you to safely store your coins. Wallets are available to download, or you can use them on crypto affiliate programs or platforms.
Staking is simple using ChangeNOW’s NOW Wallet app. The NOW Wallet does not collect any data and you can store funds on your device safely and securely. NOW Wallet keeps adding new cryptocurrencies and NFTs to the range so you can stake using crypto of your choice. It's worth mentioning that the app supports staking of BEP2 NOW tokens. You can download NOW Wallet to your device for easy transactions.
Deposit your coins
Once you have your wallet, it’s time to deposit. You can choose which crypto you prefer and deposit your coins. You will then be provided with a wallet address.
Find a staking pool
After your funds are deposited, you can join a staking pool. A staking pool is a mining wallet where crypto traders combine their resources to earn better staking rewards. You need to do your research to decide which staking pool is best for you, and the crypto you want to stake.
Here are some tips when choosing a staking pool:
- It’s best to choose a staking pool that has reasonable fees.
- Make sure there are no hidden fees.
- The staking pool should not crash and not be slow.
- Choose a pool that's not too small, as fewer investors can be risky.
Once you have found your pool, you are ready to stake it. Staking crypto can be done through your wallet. Simply choose the amount you want to stake to get started. You are now ready to earn rewards!
Don’t be afraid to stake more if you have the funds available. If you aren’t going to use your crypto in the future, it is the best way to earn funds as it requires virtually no effort.
Do your research before you begin. Start by researching the different types of cryptos, as well as useful tips such as the ones provided in this article to help you make decisions.
Be patient. Staking is a long-term investment and as such, it requires time and patience on your part. Try not to pull out your stake unless you need the coins. The longer you stake, the better chance you have of earning a high reward.
Be careful of crypto projects with extremely high-interest rates. Sometimes this may be too good to be true, or it can be used as a tactic to get more investors on board. Staking rates can also quickly drop on these projects, which is why doing your research beforehand is essential.
Choose the exchange you are going to use for staking carefully. Most exchanges are going to make a commission off your stake, so choose the commission that works for you.
Should You Choose to Stake?
Staking is a trend that is here to stay. Today, staking is offered through many exchanges and cryptocurrencies. As rewards become available, more people are choosing to stake to earn a passive income. Investors around the world, as well as financial and retail institutions, will likely join in on the staking trend and find ways to work with crypto holders.
Choosing to stake puts you ahead of the pack. You can earn rewards without doing much, and you can earn more interest per year than traditional investors. Although market rates may vary, it is essential to choose the crypto that works for you. Do your research before you stake to guarantee that you make a profit. As with all investments, staking takes time. If you have patience, the funds, and the discipline to earn rewards through long-term crypto investments, staking is a good investment. Like crypto trading, you should learn as much as you can about staking before you jump in. You can also use risk management to help you decide how far you are willing to go, and where to stop.