Right now might not be a good time to buy crypto, but for those who might be “hodling” for various reasons, you can earn more crypto until the storm passes. How long will the storm take to pass? No one knows. You might as well make the best of it.
There are various methods to earn crypto. However, we’re going to discuss staking. Keep in mind that everything in life carries a risk.
Different blockchains use different methods to secure themselves. The same as combustion engines, electric vehicles, and others are hybrid – a mix of fossil fuel and hybrid. Regardless of vehicle type, the sole purpose of a vehicle is to take you from one place to another. The same applies to the different ways blockchains secure themselves.
Bitcoin uses proof-of-work, and other cryptocurrencies like Cardano and Solana use proof-of-stake. The Ethereum blockchain is switching from proof-of-work to proof-of-stake since it is more environmentally friendly and less energy-intensive. Even though the European Union attempted to ban Bitcoin for environmental reasons, research shows it’s mined through renewable energy sources.
In simple terms, staking allows you to earn interest on your cryptocurrencies like a fixed deposit account. The interest rate earned isn’t based on a monetary value but a percentage rate of your cryptocurrencies. For example, if you stake 10,000 Cardano at a rate of 5%, you’ll get 500 Cardano yearly.
Unlike fixed bank accounts and except for Ethereum, you can remove your coins from staking anytime you want.
As the name implies, staking only works on cryptocurrencies that use proof-of-stake, for example, Cardano, Solana, Polkadot, Tezos, etc.
How do you stake your coins?
Exchanges are a common way to stake coins. My two preferred exchanges for staking are Coinbase and Kraken. The list of coins you can earn interest on depends on the exchange and your jurisdiction.
For example, Coinbase promotion material states that it allows customers to stake Ethereum, Algorand, Cosmos, Tezos, Dai and Cardano. However, European clients are only allowed to stake Dai and Tether.
Kraken offers twelve coins and allows you to earn interest on Bitcoin (can’t be staked), the Euro and the US Dollar.
The returns differ from one exchange to another too. Coinbase gives you 2.6%, and Kraken gives you 4% to 6% on Cardano.
Exchanges like Crypto.com allow people to stake their cryptos as well. However, you buy the exchange’s native coin Cronos (CRO). Unfortunately, the process to stake with Crypto.com is pretty complicated. So I’d recommend staying away from this exchange.
The most straightforward coin to stake on Crypto.com is Cronos (CRO).
Hardware wallets like Ledger and Trezor allow you to stake your coins. The only coins allowed, however, are limited. For example, one can store Cardano offline on the Ledger, but you can’t stake it. One can stake Solana; however, you won’t be taking it on your Ledger, but you’ll send your Solana coins to a liquidity pool outside your cold storage.
Staking on an exchange is instant. Staking using an offline wallet like Ledger can take up to three days. The advantage of staking using a hardware wallet is that the exchange won’t be able to cease your funds though exchanges are more efficient.
Binance, one of the largest exchanges, offers what’s known as locked staking. It’s like having a fixed account with a bank. Locked staking doesn’t allow you to withdraw before the term deposit expires. The duration ranges from 15 to 120 days. Binance offers different returns for different coins. The coin offerings vary from one period to another. Once an offer reaches several subscribers, you won’t be able to join.
Don’t stake Ethereum (at least for now)
The Ethereum network allows staking. However, there’s one main disadvantage. Once you stake them, you can’t remove them from staking – a significant disadvantage. Your Ethereum token will be permanently locked, which means you won’t have the facility.
Staked Ethereum (ETH) are “swapped” into Ethereum 2.0 (ETH2). To be able to retrieve them, the Ethereum network needs to upgrade to Ethereum 2.0. The Ethereum Foundation expects to launch Ethereum 2.0 in August 2022 after several years of delays.
I recommend following the news in case of another delay, and Ethereum 2.0 can’t be un-staked.
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