You do not need to be a trader or HODLer to earn money in the crypto space today. There are other passive and less stressful means of making money and staking is a good example. The best part is that you only need a little capital to start earning from staking the best staking coins. Investors can stake assets for less than $1; however, the more you invest, the more you earn. According to Staking Reward, investors can leverage any of the 221 yield-bearing crypto assets to earn an average return of 14.95% per annum. While many may be conversant with this topic, many newbies may be asking themselves the big question, “what does staking mean?” Let’s walk you through the best staking 101 class ever, while also showing you the best staking coins that will boost your portfolio over time.
What Does Staking Mean In Crypto?
Staking involves locking funds in a cryptocurrency wallet for a period of time to improve the efficiency and security of a Proof of Stake blockchain network. It is the crypto version of fixed deposits, where people earn a percentage return for locking funds in banks for a given time. Investors receive token rewards for staking crypto, meaning that they can generate passive income with little to no hassles.To begin staking, a user looking to delegate their assets for staking is required to have a supporting and the minimum number of tokens required for delegation. Generally, there are two types of staking: centralized and decentralized staking. Centralized staking entails lending crypto assets to borrowers. Here, centralized staking or lending platforms connect the lender to the borrower, allowing him to earn a percentage interest over an agreed period. It also gives the userrect access to his funds and offers a higher earning potential. On the other hand, decentralized staking refers to the locking of funds on a blockchain. The locked tokens assist in producing blocks, giving the user a chance to earn a reward. Having introduced you to the basics of staking, it’s time to outline the best staking cryptos for maximum profitability.
What Are The Best Coins To Stake?
As mentioned earlier, staking is among the best ways to generate passive income in the crypto space. However, users looking to stakeould consider certain factors, including the annual percentage yield (APY), the lock-up duration, overall volatility of the token, and security of the network before investing their tokens. Below are the best staking coins that perform well in relation to the aforementioned factors:
Polygon’s MATIC is one of the best Proof of Stake cryptocurrencies in the market. It is also Ethereum’s most popular Layer-2 scaling solution. The network hosts numerous decentralized applications (dApps), including AAVE and MANA and these dApps currently store over $3 billion of user funds. MATIC secures the Proof of Stake checkpoint layer of the Polygon blockchain whose function is to create snapshots of the sidechain and send them to the Ethereum network. Crypto users with staked assetsn leverage the Matic Network Web Wallet to stake their tokens, and they can either do this as a delegator or a validator. Also, some crypto exchanges, such as Coinbase and Binance provide users with the opportunity to stake MATIC on the platform. The reward earned by a user who has staked their assetson the amount of MATIC staked and it ranges from 5.2% to 520% per annum. It is worth noting that different platforms offer varying APYs and lock-up duration; therefore, it is important to conduct thorough research to find out the most suitable deal. The current minimum stake across various staking platforms is 1 MATIC.
DOT is among Ethereum’s leading competitors, but that does not come as a surprise because its founder, Dr. Gavin Wood, was an integral part of Ethereum’s development. The network’s architecture is closely similar to the upcoming Ethereum 2.0, which runs on a Proof of Stake mechanism. Polkadot also ranks among the 10 leading cryptocurrencies by market capitalization even though its parachains are still unplugged. Users can stake on the Polkadot network as either validators or delegators. However, rewards are dependent on validator commissions which may vary from time to time. Additionally, users that stake DOT receive rewards based on the amount of tokens they stake and the annual return is currently 14% per annum.
ETH (Ethereum 2.0)
Ethereum’s reputation as the second-largest cryptocurrency in terms of market capitalization makes it one of the best staking crypto. Although Ethereum has not transitioned to Proof of Stake, it has the highest number of validators compared to any other blockchain in the crypto ecosystem. Validators earn an APY of 7%, but it is worth noting that this rate varies depending on the number of validators on the network within a period of time. Sometimes, the rate goes as high as 10% per annum. To stake on the blockchain, you will need a mainnet client, and 32 ETH - which sets you up as a full validator - or join a staking pool where you can pool resources together with other staked funds. Also, exchanges like Gemini and Coinbase allow you to stake any amount, but the APY is lower compared to the aforementioned processes.
Our list of best staking coins would not be complete without mentioning Tezos. It is one of the best staking cryptos in terms of annual percentage yield. Tezos is also among the best price action performers in 2020. It is reputed to be the first Proof of Stake crypto to gain the support of all major exchanges for staking. The Tezos blockchain serves various purposes, including the development of smart contracts and decentralized applications. Users can either stake their tokens by baking or delegating. A baker is a Tezos holder who owns 8,000 coins, giving him access to run a full node independently. Conversely, a delegator uses third-parties services or pools to join resources with other holders and leverage the staking process. Delegating is secure as the user as control over his private keys. Currently, the average APY of Tezos ranges from 5.5% - 6.2% per annum. The delegators earn an annual reward of 5.5% while bakers earn 6.2%.
Crypto experts consider Cosmos to be one of the most efficient, decentralized and individualized networks in the industry. It operates on a delegated Proof of Stake mechanism, where delegates determine which validators will join the network. Also, validators are required to add new chains and verify transactions. Crypto users with staked assets are paid their rewards in ATOM; however, they can use the token on any blockchain that exists within the network. The Cosmos project is becoming increasingly popular in the crypto space, thereby attracting and gaining the confidence of numerous investors. As of writing, the current annual reward for staking ATOM ranges from 8% to 11% per annum.
As crypto users continue to seek ways to generate income passively, so does the popularity of staking increase. Investing in the best staking coins allows users to actively participate in crypto governance, while also earning rewards. This is a win-win scenario. Although staking offers numerous advantages, it comes with a certain level of risk. Investors can lose their funds if there is a hack, bug, or technical failure on the staking platform. Also, they run the risk of incurring huge losses if there is extreme market volatility in the market. To reduce risks, always conduct your research before investing your money and ensure that you stake an amount that you can afford to lose.