As with all cryptocurrencies and products associated with them, there are constantly new and improved ways to continue investing. Staking crypto is one of these and several major crypto exchanges are now providing staking as an option for their investors.
Staking crypto involves holding your cryptocurrency in your crypto wallet for a fixed period of time. The holding period is then when you are able to earn interest or rewards on your cryptocurrency. Staking crypto is a great way to earn higher rates of interest on your cryptocurrency, but it is not ideal for everyone.
How Does Crypto Staking Work?
Crypto staking has become a nearly effortless way to allow yourself to grow your cryptocurrency investments without having to buy more. By simply “staking” specific cryptocurrencies, you’re not only earning interest, but you’re helping provide a more secure network.
Your own cryptocurrency staking helps verify other crypto transactions on the blockchain and overall acts as a support to the blockchain.
What Does Staking Mean in Crypto?
Simply put, crypto staking means you’re making your crypto investments work for you. All the while, you have little hassles to deal with while potentially earning larger returns.
Allowing your crypto to sit, unaccessible to you, for a fixed period of time, may seem inconvenient with ever-changing prices, but this can result in greater returns.
How Do You Earn Money Staking Crypto?
Different crypto exchanges and cryptocurrencies have different return rates and fees, but you can earn great money-back staking crypto as well. With a crypto wallet, you can hold cryptocurrency.
Holding cryptocurrency in your wallet allows for the blockchain to more easily verify other crypto transactions. When your wallet and cryptocurrency is the one chosen to help verify a transaction, you can earn interest.
The longer you hold your crypto, the more likely your wallet is to be chosen. While simple, there is much to consider when thinking of staking your crypto.
Is Staking Your Crypto Safe?
Thankfully, major crypto exchanges continue to provide secure ways for crypto staking to be done as confidently as possible. When you do the required research and continue to invest wisely, crypto staking can be done safely and securely.
Proof of Stake Model
The proof-of-stake model is a model that more and more cryptocurrencies are switching to, in order to allow for their cryptocurrency to be staked. Many cryptocurrencies cannot be staked as they require the proof-of-work model instead.
The proof-of-stake model allows “validators” (those approved for staking) to help verify transactions on the blockchain. The proof-of-work model requires members (along with much equipment) to constantly solve puzzles to complete transactions that are far more energy-intensive, this is often considered crypto mining.
The proof-of-stake model requires less energy consumption than crypto mining and this can allow for greater returns for those staking crypto.
Example of How to Stake Crypto
Crypto staking is a breeze when you’re investing with a trusted crypto exchange. Coinbase boasts one of the largest cryptocurrency trading volumes in the United States, so it’s no surprise they offer secure crypto staking options.
When you have an account with Coinbase, it’s effortless to begin staking crypto. Even if you don’t yet, signing up only takes moments and you could be earning rewards in no time. Coinbase has plenty of resources to help you decide which supported cryptocurrency is best for you to stake.
Say you want to get started with staking Ethereum and you haven’t invested in cryptocurrency before. Your first step would be to open an account and crypto wallet with Coinbase and deposit enough fiat currency to cover your crypto transaction.
There is a minimum requirement of 32 ETH in order to become a validator so that you can begin staking crypto. Once you have the cryptocurrency in your crypto wallet and you ensure you have a dependable internet connection to support staking, you’re ready to get going!
What Are the Benefits of Staking Crypto?
When you do your research and invest wisely, staking crypto can be incredibly beneficial.
- Easy Earning: Crypto staking can be an effortless way to earn interest or rewards on your cryptocurrency.
- Increased Security: By staking crypto, you can help increase and maintain the security of the blockchain.
- More Energy Friendly: Crypto staking requires less energy consumption than crypto mining.
- More Say: Crypto staking can give you more say, similar to owning stock in a company.
What Risks Are Associated With Staking Crypto?
As with any crypto investment, there are risks associated with staking crypto.
- Inaccessibility: Staking crypto often requires a lock-up period which means there could be a time where you cannot access your cryptocurrency. In some cases, you cannot unstake your crypto once you have staked it.
- Volatility: Cryptocurrency is volatile and there are no guarantees with crypto staking.
- Fees: Exchanges are often the most secure ways to stake crypto, but there are fees associated with this.
- Penalties: If you are working on your own to stake crypto (not with an exchange), you could be more prone to making a mistake. “Slashing” can result in a portion of your investments being taken as a penalty.
How Do You Stake Your Cryptocurrency?
While the risks may seem intimidating, staking crypto could be a great investment for you. Ensure you set yourself up for success as best you can and learn the best ways for staking crypto.
- Decide Which Crypto to Stake: Not all cryptocurrencies allow for staking. Ensure you’re interested in long-term investments with the cryptocurrency you would like to stake with. (Below are several major coins that can be staked.)
- Staking Requirements (Minimum): Many cryptocurrencies have different minimum requirements for crypto staking. Be sure to research the crypto currency you are interested in before you begin staking crypto.
- Download a Crypto Wallet: Crypto wallets are a simple way to access your desired crypto. This will make staking with your desired cryptocurrency much easier as buying and selling will be at your fingertips.
- Using the Correct Hardware: A reliable internet connection is a major factor in being able to allow yourself the chance to successfully stake crypto. Most desktop computers will be able to provide you with the consistent connection you require.
- Begin Staking Your Crypto: Once you have your appropriate crypto wallet, any other necessary software, and your hardware configured, you can begin staking crypto. Staking crypto through a crypto exchange can be a simple process for cryptocurrency holders. Be sure to review each exchange’s policies and fees before you get started.
Popular Coins That Can Be Staked
Not all cryptocurrencies can be staked, but many cryptocurrencies are changing their models to allow for crypto staking.
- Ethereum (ETH): Currently the largest cryptocurrency to support staking, Ethereum switched from the proof-of-work model to a proof-of-stake model to allow this. Expected return rate of up to 7.5% annually.
- Solana (SOL): Fast and efficient, Solana continues to provide simplicity for those looking to stake this cryptocurrency. Expected return rate of up to 7% annually.
- Cardano (ADA): Cardano was proudly built by people who listened to their future investors. Here for you, Cardano has an expected return rate of up to 4.6%.
- Polkadot (DOT): Polkadot keeps things efficient by allowing blockchains to connect and work together. With an expected return rate of up to 14%, this is a great option for crypto staking.
- Cosmos (ATOM): Cosmos aims to keep interoperability at the forefront by allowing different blockchains to connect together. Expected return rate of up to 8%.
- EOS: With secure access, EOS keeps ease of function the same for any investor looking to stake crypto. Expected return rate of up to 2%.
- Tezos (XTZ): Working to provide a platform that can upgrade seamlessly, Tezos works to keep things functioning more efficiently. Expected return rate of up to 8%.
Staking Crypto vs. Interest Earning Crypto Savings Accounts
Staking crypto and earning interest in a crypto savings account are both great ways to earn a passive income. However, there are several major differences between the two.
Crypto staking often requires far more of a commitment than investing in an interest-bearing crypto savings account, but your earning potential is greater as well. The rate of return is commonly far more generous with crypto staking than simply earning interest in a crypto savings account.
However, it is important to remember that with staking, your money will be illiquid for a specified period of time whereas with interest-bearing accounts you have the jurisdiction to withdraw your crypto at any time.
Grow Your Investments Where You Can, Wisely
Thankfully, crypto staking has been made far easier with the help of the great crypto exchange Coinbase. Individually staking crypto can far increase the associated risks, but staking crypto through a reliable crypto exchange such as Coinbase can help you increase your earnings immensely.
Crypto staking with Coinbase provides you with a more secure platform to allow you to stake your crypto with confidence. Coinbase provides you with the information and resources you need to make decisions that can help you grow your investments wisely. Crypto staking is a solid move for long-term investments and Coinbase is here to help you take the next step.