Instead of earning from trading, depending on the up and down of a coin, investors can stake as a way to lock in what they have and sell when the price is favorable. While still fairly new to many investors, crypto staking is an excellent alternative to compound your cryptocurrencies.
How do you earn from staking crypto?
Staking is more like putting your money in the bank, where your principal is safe and you earn interest day by day based on your principal. The more you stake, the more staking rewards you get.
The same happens in crypto staking. When you stake, you contribute to a staking pool, which will, later on, become a blockchain validator. When rewards are ready, an operator will distribute the coins to all investors who staked. The more crypto you stake, the more coins you will get at the end of a specific period.
The locked-in period depends on the blockchain network rewarding stakeholders. There are networks offering staking on ETH 2.0 with a minimum of 32 ETH for up to 24 months. Some only require a minimum of 15 days, depending on the coins you are willing to stake. The longer the locked-in period is, the more chances for you to earn coins.
What are the benefits of staking crypto?
There are plenty of benefits to staking. While many people entering the space learn about staking as a way to make passive income, in detail staking can offer the following benefits:
Extra coins as rewards
Staking is an excellent alternative for investors who don’t want to put so much effort into trading cryptocurrencies. Primarily, what you get from staking are coins as rewards. When you trade cryptocurrencies or buy them to hold, you profit from waiting for the price to go up.
Staking, on the other hand, uses a different approach. Rather than earning from the price changes, you will earn based on the number of coins you stake and the locked-in period. For instance, staking Polkadot will give you 27.79% of your total stake if you choose one year as the locked-in period.
More opportunities from the blockchain
When you start staking, you get ideas on where to find more opportunities from the blockchain. Stake in one decentralized exchange protocol, and you are going to find yourself looking for more protocols to stake. Most stakers inevitably go into staking to learn more about various projects and diversify their portfolio, contributing to the blockchain as a whole.
Learn how governance works
You don’t only get coins from staking. Staking can help teach you how governance works in each protocol you stake. Staking for participation is where you are to vote for project leaders and help decide on investment projects. For investors looking for a unique experience on the blockchain, learning what governance is and how it works is undoubtedly good.
Less service fees
Trading and investing crypto in an exchange like eToro and Robinhood can be costly because of high service fees. This leaves you with a small net profit. Commission fees also affect your gain when you trade. The higher the commission fees, the lower yield you will get.
What’s excellent about staking is that you get less service fees. You can take home more coins, and sell them with excellent value. Compared to trading, staking is more rewarding.
Furthermore, to add to the safety of staking, users delegate their tokens to a validator, where a good validator processes transactions on blockchain reliably and efficiently. This prevents frauds from occurring and makes blockchain more safe from attacks.
Effective ways to keep your cryptocurrency safe
Although the blockchain is better than any other computer system, data and security breaches can happen at any time. As an investor, you have to take extra measures so you can keep the network safer. This is why you should always be wary of the following:
Use a hardware wallet
Online wallets are so popular that hackers have been targeting them to steal money and information. Staking offline is the best substitute if you want a safer place for your money. You will need a hardware wallet so you can keep your coins while staking.
Use strong passwords
Using a strong password has always been the most convenient way to keep your account safe from hackers. Make sure you never reuse your password across your digital wallets. Always ensure to create a password that is not easy to guess.
Choose reliable wallets and exchanges
You should thoroughly examine each platform’s security features before picking which to use to fully understand whether your information will be secured. The safety of your data lies in the credibility of the network you are using. You can check out some of the reliable crypto wallets here.
A trustworthy staking provider
The tips above may help you as an investor getting into staking, but what’s most important is to find a trustworthy, reputable staking provider to do the work for you. Staking requires a lot of tech to execute and as such, it is not easily doable by anybody.
Companies need to have a strong, steady tech stack that can serve as a secure validator. Choosing the right platform for your staking journey is something to consider now that there is an increasing number of blockchain projects and protocols. Being profitable is one thing, but being safe is another, which is why staking-as-a-service providers like RockX help investors make money the right way.