Crypto staking was born and gained a lot of attraction from investors. It set up a new way for passive income in the cryptocurrency space. What exactly is staking, how can you stake and what are the best staking coins in 2021?
Let’s deep dive into the staking. I chose the top staking coins for 2021 based on their performance and my own fundamental research. I will give you an overview of Proof of Stake to better understanding how you can start staking.
Decentralized Finance (DeFi) had a great performance in 2020, and many predict that this year in 2021 will be the year of staking coins.
Table of Contents
- 1 What Is Crypto Staking
- 2 Proof of Stake
- 3 How Does Staking Work
- 4 How Are Staking Rewards Calculated
- 5 Earn Passive Income with Crypto
- 6 Best Staking Coins in 2021
- 7 Where Can I Stake
- 8 Future of Crypto Staking
What Is Crypto Staking
Staking usually involves keeping funds in a wallet and performing various network functions (such as validating transactions) to receive staking rewards. Staking is the act of locking cryptocurrencies to receive rewards.
To stake = To hold
Staking networks use Proof of Stake as their consensus algorithm.
A staking pool allows stakeholders to combine their computational power and increase their rewards.
To understand better what staking is, you should understand how Proof of Stake works.
Proof of Stake
Proof of Stake consensus algorithm was introduced in 2011 as a way how to avoid heavy usage of resources needed to perform mining during Proof of Work.
Proof of Work (PoW) uses computational resources to solve cryptographic problems to secure the network and validate blocks. Bitcoin is cryptocurrency based on PoW.
Proof of Stake (PoS) algorithm uses an election process that selects the node that will validate each block. This election process can use a number of factors such as randomization, the number of coins being held in the staking wallet, the staking age of coins, or other factors.
One of the earliest projects that runs on Proof of Stake was Peercoin. Its network was launched with a hybrid PoW/PoS mechanism.
How Does Staking Work
Proof of Stake chains produce and validate new blocks through the process of staking. This is a big difference from Proof of Work where blockchains rely on mining to add new blocks to the blockchain.
During staking the coins are locked in a wallet and over time more coins are added to that wallet as a reward.
The more coins are being staked, the bigger is the staking reward.
What Are Staking Coins
It is quite similar to how someone would receive interest for holding money in a bank account or giving it to the bank to invest. Staking is being compared to bond interest payments or dividend payouts.
How Are Staking Rewards Calculated
There are few factors that influence how much reward the validator earns.
- how many coins you are staking
- how long have you been actively staking
- how many coins are staked on the network in total
- the inflation rate
- other factors
Earn Passive Income with Crypto
According to Staking Rewards, there are more than 166 yield-bearing assets with an average reward rate of 18.61%.
Why I Should Start Staking
Anyone is interested in earning extra income, moreover if it is a passive stream. Diving deeper into staking will push you into evaluating cryptocurrencies and that’s a great way how to learn more about blockchain and crypto start-ups.
- Generate extra income
- An additional way how to invest in crypto
Best Staking Coins in 2021
There are many options for users who want to earn passive income with cryptocurrencies. We cover below some of the biggest cryptocurrencies offering staking rewards.
There is no point in staking coins that have no future and loses their value significantly. You may stake more coins but even if you sell them you won’t cover your losses due to the coin price decrease on the market.
Ethereum 2.0 (ETH)
Ethereum is one of the most popular and hottest staking options.
You’ll need 32 ETH to become a full validator or some ETH to join a staking pool. You’ll also need to run an ‘Eth1’ or mainnet client. This process, known as proof-of-stake, is being introduced by the Beacon Chain.
The total amount of ether locked in Ethereum 2.0 has recently surpassed $3 billions, according to data from Etherscan. As of press time, ether was trading at $1,920.
The annual reward for staking ETH ranges between 7 – 10%.
Tezos blockchain implements a version of Proof-of-Stake called Liquid Proof-of-Stake (LPoS). There are two ways to earn passive income and staking rewards with your Tezos.
- Delegating Tezos
- Baking Tezos
Tezos calls the staking process baking. To become an independent staker (baking) on Tezos, a user needs to hold 8,000 XTZ coins and run a full node.
There are third-party services that allow users to join with a smaller amount of coins and take advantage of the staking process. It is delegating Tezos. Delegating is a secure process while investor keeps control over his private keys.
Annual percentage yield on XTZ staking ranges anywhere from 5 – 6 percent.
Cosmos is a decentralized network enabling data exchanges between different blockchains. The project started in 2017 as an ICO with its vision to create an internet of blockchains.
Cosmos blockchain consensus is achieved via Tendermint.
The annual reward for staking ATOM ranges between 8 – 11%.
Kava is a DeFi lending platform for digital assets. It is a multi-chain DeFi Lending platform that offers USDX stablecoin loans and Chainlink oracle data to major blockchain.
Kava blockchain consensus is achieved via Tendermint.
The annual reward for staking KAVA ranges between 4 – 6%.
VeChain is a cryptocurrency and smart contracts platform focused on supply chain management. VeChain blockchain consensus is achieved via Proof of Stake + Masternodes.
The public blockchain derives its value from activities created by members within the ecosystem solving real-world economic problems.
The annual reward for staking VET ranges between 1 – 2%.
Algorand is an open-source public blockchain based on a pure proof-of-stake consensus protocol that supports scalability. Algorand blockchain consensus is achieved via Pure Proof of Stake.
The annual reward for staking ALGO ranges between 5 – 7%.
Where Can I Stake
Are you interested in staking? Let’s talk about the process.
All the technical requirements will be taken care of for you.
The staking rewards are usually distributed at the start of each month.
The leading cryptocurrency exchanges that support staking include:
According to Coindesk, Kraken users are staking more than $1B in crypto. The fast growth of staking value reflects the many long positions of crypto investors.
Staking at Binance
Binance staking supports a wide variety of coins that will earn you staking rewards. There are more options for what coin and how to stake.
- DeFi staking – staking DeFi cryptocurrency on a user-friendly platform
- Flexible staking – you can use your coins and trade with them, lower return
- Locked staking – you cannot trade or withdraw your coins, higher return
- and others such as ICX, CELR, AVAX, KSM, IOST, CRV, OAX, NAV
Cold staking is a form of staking that requires you to hold staked coins at the same address on a cold private wallet. You can’t move the coins within a lock-up period otherwise, you lose staking rewards.
The leading cryptocurrency wallets supporting staking include:
- Trust Wallet
- CoolWallet S
- Trezor via third party apps (e.g. Exodus wallet)
Soft staking is known as staking as a Service Platforms. This form of staking is dedicated to staking only. You can use the following platforms:
- Stake Capital
Future of Crypto Staking
Staking coins gains popularity because it is a quite simple way how to earn a passive income. Proof-of-stake and staking come with an original thought to participate in the consensus and governance of blockchains. Moreover, it provides bonuses for stakers with a reward system.
It’s worth saying, though, that crypto staking comes with significant risk. Locking up funds in a smart contract might end up in the loss of your coins due to a bug, hack, or another technical or human failure. Always do your own research and invest your time in due diligence in cryptocurrencies and third-parties projects.
Best Staking Coins 2021
There are many coins to stake and we cover only the best in our view. It is a very dynamic market and you should do your own research before investing. Here is our pick for best staking coins for 2021:
While staking may play an important role in investor’s returns, you shouldn’t choose and stake a cryptocurrency just because of staking returns.
If you find it hard to go through the staking setup process you can start staking on Binance exchange. It is now the easiest way how to stake coins.
Staking can help to lower the volatility in your crypto portfolio and it provides a way to earn a passive income stream.