If you think that Crypto Day trading is a risky venture, don’t worry. Here’s a way to earn passive income through your Crypto Holdings: Crypto Staking. By committing your digital assets to support a blockchain network’s operations, you can earn rewards through newly minted coins.
Crypto Staking eliminates the high energy costs and complex hardware requirements of cryptocurrency mining, making it an environmentally friendly and accessible alternative. With the potential for attractive yields, staking presents an enticing opportunity for investors to grow their crypto portfolios. Intrigued? Discover how crypto staking works, its benefits, and why it could be a game-changer for your investment strategy.
What is Staking in Crypto?
Staking allows you to earn rewards by holding on to certain cryptocurrencies, all while contributing to the stability of the blockchain you believe in.
At the simplest level, Crypto staking is similar to Earning Interest on your Savings account. If your cryptocurrency allows it, you can STAKE your holdings and earn rewards on it. It works like this:
- You lock up a portion of your Cryptocurrency holdings,
- This is used to support the operations of a blockchain network.
- In return, you’re rewarded with additional tokens.
Which are the Cryptocurrencies you can Stake?
Not all cryptocurrencies can be staked. This is because staking is inherently tied to the Proof-of-Stake (PoS) consensus mechanism. PoS allows holders to validate transactions and secure the network by locking up their coins. However, not all cryptocurrencies use PoS.
Bitcoin, for example, relies on the Proof-of-Work (PoW) mechanism, where miners solve complex puzzles to validate transactions. PoW coins cannot be staked because there’s no validation process through coin locking.
The coins listed below are all based on the Proof-of-Stake (PoS) consensus mechanism and hence you can stake them.
| # | Coin | Ticker | Price(USD) | Market Cap (USD) | ATH | ATL |
| 1 | Ethereum | ETH | $3,102.52 | $373,359,723,012 | $4891.70 | $0.42 |
| 2 | BNB | BNB | $574.34 | $84,765,826,674 | $690.93 | $0.10 |
| 3 | Solana | SOL | $178.52 | $80,137,423,958 | $260.06 | $0.51 |
| 4 | Steth | StETH | $3,104.62 | $28,940,404,609 | $4982.43 | $551.78 |
| 5 | Toncoin | TON | $6.40 | $22,228,238,678 | $7.65 | $0.39 |
| 6 | Cardano | ADA | $0.47 | $16,730,099,750 | $3.10 | $0.02 |
| 7 | Avalanche | AVAX | $36.24 | $13,876,171,079 | $146.22 | $2.79 |
| 8 | TRON | TRX | $0.12 | $10,663,413,993 | $0.30 | $0.00 |
| 9 | Polkadot | DOT | $7.04 | $10,125,437,639 | $55.00 | $2.69 |
| 10 | Polygon | MATIC | $0.69 | $6,816,908,282 | $2.92 | $0.00 |
Different Ways of Crypto Staking
Staking can be classified into Active and Passive Staking.
- Active Staking: Staking your crypto to participate in the network actively and earn rewards for validating transactions.
- Passive Crypto Staking: is a non-time-consuming way of staking crypto. All you need to do is lock up your crypto, which will be used to keep the blockchain secure.
How to Start Crypto Staking
1. Acquire Stake-able Cryptocurrencies: Research which coins are stackable and meet the requirements of the networks you’re interested in. Once you’ve identified the coins, purchase or acquire them through an exchange or cryptocurrency.
2. Set Up a Wallet or Platform: Staking typically requires a compatible wallet or platform supporting your selected cryptocurrencies’ staking process. Many popular exchanges and wallet providers now offer built-in staking services. Evaluate your options, and choose a wallet or platform that meets your needs in terms of security, user-friendliness, and supported coins.
3. Begin the Staking Process: With your stake-able coins and wallet/platform ready, you can initiate the staking process. This generally involves committing your coins to the network as a validator or delegator, following the specific instructions provided by your chosen wallet or platform. The process may vary slightly depending on the cryptocurrency and network.
4. Monitor and Maintain Your Stake: Monitoring and maintaining your stake is important once you initiate staking. Keep your wallet online and connected to the network to allow continuous staking and reward earning. Review reward payouts periodically and consider re-staking any earned rewards if desired.
Additionally, be aware of any maintenance requirements, such as updating your wallet software to ensure compatibility with network upgrades.
Importance Of Staking In The Blockchain Ecosystem
By Staking, coin holders can become active validators and contribute to the network’s security and efficiency. This helps the blockchain create an energy-conserving replacement for mining, thereby making PoS blockchains more environmentally friendly. Staking incentivizes participation, as validators earn rewards for their contributions, fostering a robust and engaged community.
Proof of Stake Blockchains: What is Proof of Stake?
Proof of Stake is a Second Generation Blockchain consensus Mechanism as opposed to Proof of Work, which pioneered as the first-ever blockchain consensus mechanism in the Bitcoin Blockchain.
Proof of Stake (PoS) relies on Staking to choose blockchain validators. Participants lock up a certain amount of their cryptocurrency, and validators are then chosen in a partially-randomized process.
The process takes into consideration
- the number of coins staked,
- time for which the coins have been staked(Coinage),
- reliability, validation history, and reputation of the validator, and
- The overall contribution of the validator in the governance of the network.
Advantages of Staking
While the crypto boom and bear run are opportunities for wealth creation, people who want to tap into them might be worried about the risks of volatility, deterring people with a lesser risk appetite from participating in Crypto investment and Trading Activities.
Here are 2 advantages of Crypto Staking
- Risk Mitigation: You can mitigate some of the risks of Crypto Trading through Staking.
- Good Entry Point into Crypto: If you are fascinated by Crypto but the time commitment and risk appetite required for Crypto day trading or investments seem too high, you can choose to create a Crypto staking pool consisting of compatible coins and use that to earn passive income.
Risks and Challenges of Staking Crypto
| Risk/Challenge | Description | How it Affects Stakers |
| Volatility Risk | The price of the staked cryptocurrency can fluctuate significantly. | If the price drops, the value of staked assets decreases, potentially resulting in losses. |
| Slashing Risk | Some blockchains penalize validators for downtime or malicious behavior by “slashing” a portion of their staked tokens. | Stakers can lose a portion of their stake if the validator they delegate to is penalized. |
| Lock-up Periods | Staked tokens are often locked for a specific period, meaning they cannot be traded or sold during that time. | This reduces liquidity and limits flexibility for stakers. |
| Technical Risks & Platform Security | Smart contract vulnerabilities or platform hacks can lead to loss of staked funds. | Stakers need to choose reputable platforms with robust security measures. |
| Potential Fraud & Insecure Platforms | Some platforms might be fraudulent or poorly managed, leading to a loss of staked funds. | Thorough research is crucial to identify legitimate and secure staking platforms. |
How are Staking Rewards Calculated?
Staking rewards incentivizes participants to lock up their cryptocurrency to secure the network. The calculation often involves factors like:
- Amount staked: More coins staked generally lead to higher rewards. Exclamation
- Staking duration: Longer staking periods may offer better returns.
- Network inflation rate: Some networks issue new coins to reward stakers.
Examples
- In its transition to Proof of Stake, Ethereum rewards users who stake their ETH on the Beacon Chain, helping secure the network and validate transactions.
- Cardano simplifies staking through delegation, allowing ADA holders to earn rewards by supporting stake pools without the technical overhead of running a node themselves.
- Polkadot incentivizes DOT holders to actively participate by nominating validators, contributing to network security while earning staking rewards.
Also : Learn how to earn from cryptocurrency
Is Staking Better than HODLing?
Both HODLing and Staking can be employed as passive income streams. The Proof of Stake coins you Buy and Hold can also be staked. But these two crypto investment strategies are inherently different. Here’s what you need to know about the differences between the two of them:
| Feature | HODLing | Staking |
| Core Idea | Long-term investment based on belief in crypto’s future value. | Earn rewards by actively participating in network validation or delegation. |
| Timeframe | Long-term (years). | Can be short, medium, or long-term, depending on goals. |
| Active Participation | No active trading. | Often involves active participation in network validation or delegation. |
| Primary Goal | Capital appreciation through price increase. | Earning rewards (passive income) and potential price appreciation. |
| Risk | Price volatility, the potential for long-term loss if the prediction is wrong. | Slashing risk, lock-up periods, platform risk. |
How to Stake Your Crypto Using Mudrex’s Earn Feature
If you feel staking is challenging, Mudrex is here to help you. Mudrex Earn is your gateway to effortlessly maximizing your crypto holdings, offering a secure and rewarding way to grow your digital wealth and earn daily returns.
Here’s How you can Grow your holdings using Mudrex Earn–
- Download Mudrex app and Complete Your KYC
- From the Home screen choose Coins > Earn
- Choose the coin from the list and press Subscribe to Earn
Why Choose Mudrex Earn?
- Streamlined Staking Process: Easily participate in staking, regardless of your experience level, and start earning rewards effortlessly.
- Flexible Staking Options: Tailor your staking experience to your specific needs. Daily Interest returns with no lock-in periods or hidden fees.
- Industry-Leading APR Rates: Maximize the growth of your crypto assets and enjoy substantial returns.
- Best in Class Security Features: Have complete peace of mind knowing that your assets are protected by the highest security standards.
Conclusion
Crypto staking presents an exciting opportunity for investors to earn passive income while supporting blockchain networks they believe in. By locking up your digital assets, you contribute to network security and decentralization – core principles of cryptocurrencies.
While staking has its risks, like volatility and lock-up periods, the potential rewards make it an appealing option, especially for those seeking lower-risk crypto involvement. As blockchain technology continues advancing, staking could play a pivotal role in shaping a more sustainable, participatory, and rewarding digital economy. By understanding the fundamentals and prudently evaluating platforms, staking allows you to be part of crypto’s evolution while potentially growing your portfolio.
Curious About Crypto Investments and Staking?
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FAQs
1. How does crypto staking work?
Crypto staking involves committing your digital assets (e.g., Ethereum, Solana) to help validate transactions on a blockchain network. In return, you earn rewards through newly minted coins for your contribution. The staking process varies between proof-of-stake blockchains but generally requires locking up your tokens for a set period.
2. Is crypto staking worth it?
Staking provides an opportunity to earn passive income on your crypto holdings without trading them. The rewards can be quite attractive, with typical annual percentage yields ranging from 5-20% for many popular blockchain networks. Of course, potential rewards should be weighed against the risks involved.
3. Is staking better than holding in crypto?
For long-term crypto investors or “hodlers,” staking is generally considered better than just holding tokens idle. By staking your digital assets, you put them to work earning rewards and growing your portfolio, rather than letting them sit idly. However, staking does carry some additional risks compared to just holding.
4. Is staking crypto haram?
No scholarly consensus definitively deems crypto staking as haram (prohibited) under Islamic law. However, some Islamic finance experts have raised concerns about staking rewards being akin to riba (interest), which is prohibited. Others view staking as a valid way to earn blockchain rewards. Ultimately, it may depend on the specific implementation and agreement between stakers.
Krishnan is a Bangalore-based crypto writer dedicated to simplifying complex crypto concepts. He covers blockchain, DeFi, and NFTs, with a focus on real-world asset tokenization and digital trust. Previously he has written on Real Estate related assets for NoBroker. Krishnan holds a B.Tech degree from the College of Engineering Trivandrum.
