One of the most common things you will hear from people who invest in cryptocurrency is that they are in it for the technology. While there is no doubt that blockchain is revolutionizing many industries, and specific crypto projects are making some incredible advancements, the reality is that almost everyone is in it for the money. Crypto investors are always chasing those 10x or 100x (or even more) returns that have been seen so many times before.
Most of the money that investors are making today from crypto comes from buying into a specific coin or token early when the price is low, and then holding (or hodling, if you prefer) until the price goes up significantly. There are other opportunities for growing your bags, however, that investors should be aware of. One of the most important of these is known as staking.
What is Staking?
Staking is one of the most common methods used to validate transactions on a blockchain. It is a proven alternative to the Proof of Work (PoW) (the method used for Bitcoin). Proof of Stake (PoS) works when multiple people deposit a specific coin or token into the right wallets, and register to participate in the validation of transactions.
While there are multiple specific ways that validation can occur, it typically involves the blockchain choosing one of the wallets to validate the next block. Most of the time the likelihood of a specific wallet being chosen to validate will be based on the number of coins or tokens being staked. This means the more someone is willing to keep in the wallet, the more they can earn. The reward amount will also vary greatly based on what is being staked.
To put it simply, staking is used to accomplish the same things as mining. The benefit is that it does not require powerful processors or massive amounts of electricity to stake. Instead, anyone who is willing to hold their coins in a specific wallet can be involved. Some PoS chains have a minimum required deposit amount to participate, and some will also require that you commit to holding the coins for a set amount of time. In general, however, staking is a simple process that just about anyone can use as a way to earn more cryptocurrency.
Staking vs. Earning Interest or Providing Liquidity
The term staking is often mistakenly used to describe any activity in crypto that allows you to use the tokens you have to earn additional tokens. The reality is, however, that true staking is only done with proof of stake cryptocurrencies. Understanding the other opportunities for earning money on your crypto is very important. Not only will it allow you to grow your holdings, but it will also let you find the best staking options to take advantage of.
Earning Interest on Crypto (DeFi)
With decentralized financing (DeFi) becoming very popular, it became necessary for many companies in this industry to offer interest on crypto to those willing to keep coins or tokens deposited on their systems. You can earn interest on many different cryptocurrencies by depositing them into an account, often for a predetermined amount of time. The company then uses those assets to lend out to borrowers.
This works just like when a bank lends out the money that people have in their savings accounts. The amount of interest paid out will depend on many factors including the type of crypto being deposited, the type of loans that are made, how much you deposit, and more.
Funding Liquidity Pools to Earn Rewards
Crypto exchanges need to have a significant amount of many different coins and tokens stored on their internal wallets to allow them to fulfil various trades. They will often offer to pay rewards to people who deposit specific coins or tokens into their wallets so that they can be used for liquidity. This is most often done on decentralized exchanges since they do not have a company with massive assets to provide the liquidity.
Best Staking Rewards in History
The amount you can earn from staking varies greatly based on many factors. In addition, you want to look not just at the current amount being paid out with staking rewards, but also the potential value the earned coins or tokens will have in the future. The rewards are generally listed as a percentage, similar to an APR that is paid out when lending money. Some great staking rewards that have been offered in the past include the following:
- Akash Network (AKT) – This proof-of-stake chain offered as much as 58% in rewards!
- Raydium (RAY) – Raydium markets itself as an ‘automated market maker’ that runs on Solana platforms. They provided a 50% APR to those willing to stake their coins.
- Tezos (XTZ) – Tezos is a blockchain that is available on many different exchanges. They have offered staking rewards ranging from 20-33%.
Best Staking Opportunities Today
There are quite a few great opportunities for staking today. The specific opportunities that are best will constantly change as the market adjusts. Finding the right crypto to stake can take some research, but in the end it can pay off significant. The following are some of the staking opportunities available today that offer the best returns:
- OIN Finance (OIN) – OIN is a DeFi token that uses PoS for validation. Their current max staking reward is 42+%, though it will not likely remain that high for very long.
- BitGreen (BITG) – BITG is a relatively small cryptocurrency, but they are trying to grow by offering huge rewards. They are currently offering a max staking reward of 32%!
- Router Protocol (ROUTE) – Router Protocol is currently offering a 20% max return for staking on their chain.
- Polkadex (PDEX) – Polkadex is another decentralized exchange coin, this one offering almost 19% rewards for staking.
- Polygon (MATIC) – Polygon is rapidly growing in popularity and has many tokens running on its chain. They are paying out over 15% in staking rewards at this time.
If you continue to do your research, you may be able to move your coins or tokens around to follow the top performing staking available. Of course, some options will require that you lock your coins away for a set amount of time, which can make it a challenge.
Is Staking right for You?
Staking is a great way to earn crypto for many people. It is a proven system that has been used on various blockchains for many years. Staking your crypto does, however, come with some additional risk. If you are staking on an exchange, for example, and it is hacked, you could lose all of your coins. In addition, if you are not careful, you could lose your tokens by sending them to the wrong place or making other mistakes.
With proper care, and good research, however, staking your crypto may be an excellent strategy that can help you to grow your investments.