Explainer: What is ‘staking,’ the cryptocurrency practice in regulators’ crosshairs?

What Is Staking in Crypto

In return for doing this work, a staker gets paid rewards by the network. As a rule, once a crypto user starts staking, the assets are typically locked up and cannot be used or traded until the period ends. Lido aims to address this by allowing users to stake their cryptocurrency and receive a so-called “liquid staking token” (LDO) in return. Liquid staking tokens can eventually be traded or put to work in decentralized finance (DeFi) applications. Validator nodes on the new PoS blockchain require 32 ETH tokens and a lock-up of 365 days.

In terms of returns, staking crypto is considered much better than depositing money in a bank. But, keep in mind that staking your crypto comes along with some risk. And, if you are someone who can’t bear risks, then options like bank FD will work fine for you.

What Is Staking?

Bonds are generally lower-risk and well-regulated, while staking offers potentially higher returns but with more volatility and less regulation. This makes it easier for users to participate in staking and access the benefits of staking rewards without sacrificing liquidity. Established in 2012, Coinbase is a fully-regulated crypto exchange in the United States.

What Is Staking in Crypto

These are exchanges that help you stake your crypto within a few clicks. There are some stakable assets in crypto that have a lock-up period. Which means, if you lock your asset for a period of time, you can’t unlock it until the period is over. Staking crypto has become one of the best ways for investors to earn a good amount as an interest on their stakes. Generally, it can provide you with good returns, but keep in mind that there are some risks as well, and we will discuss them in the very next section. Staking is considered to be a new way that aids in confirming the transactions.

Supporting network security

Staking crypto is now becoming popular day by day as many people are becoming aware of it. It has emerged as another way for crypto investors to make money. Caroline Ellison is arguably the star witness in the government’s case against Sam Bankman-Fried, the former CEO of the bankrupt crypto exchange FTX who’s on trial for fraud. MoonPay also makes it easy to sell crypto when you decide it’s time to cash out your holdings.

  • Users who want to participate in that network would need to acquire the specific staking currency in order to participate.
  • Namely, Ethereum (2.0), Cosmos (ATOM), Binance (BNB) and many more.
  • In exchange for locking up your assets and participating in the network validation, validators receive rewards in that cryptocurrency known as staking rewards.
  • Hence if a coin is locked-in during a staking period and its price starts falling rapidly all of a sudden, stakers run the risk of incurring large losses.
  • Additionally, staking can help to reduce the volatility of the token’s price by reducing the supply of tokens available for trading.
  • Those interested in staking can earn passive income with minimal time and energy.

As with everything cryptocurrency, just be sure to keep the risks in mind. Tezos’ native currency is called XTZ and calls the staking process, “baking.” Bakers are rewarded using the native coin. Furthermore, malicious bakers are penalized by having their stake confiscated. There are a few questions to ask before making a decision about whether to stake your crypto. Binance.US, for instance, was estimating in June of 2023 that annual yield for its highest-yielding cryptocurrency would exceed 8%. Bhat says it’s good to pick an established pool, though you might not want to pick the absolute biggest.

Ways of Staking Cryptocurrency

You can buy Proof of Stake cryptocurrencies via MoonPay or through any of our partner wallet applications with a credit card, bank transfer Apple Pay, Google Pay, and many other payment methods. For newcomers in the cryptocurrency space, it is easy to go down the rabbit hole of trying to find the next 100x cryptocurrency or “10x in one-day” trading strategy. But more experienced and serious investors know that more often than not these are nothing but empty promises that result in large losses. Not all cryptocurrencies are available for staking, so first you’ll need to decide which coin you want to stake.

Apart from staking its native Binance Coin, you can pick from over 12 POS staking options, with APYs up to 13.5% or more. Staking information for Binance can be found here, along with a good explainer video. Cardano is another “Ethereum-killer” What Is Staking in Crypto that has been around for nearly a decade. This PoS blockchain with smart contracts and improved scalability was launched in 2015. As of this writing, it is one of the top ten largest cryptos in market cap, with $8.9 billion.

If you might need your money back in the short term before the staking period ends, you should avoid locking it up for staking. Staking requires users to keep their coins locked in a wallet or validator node for https://www.tokenexus.com/ an extended period. Technical failures, such as software bugs, can result in the loss of staked coins. In some PoS networks, a small number of validators may hold a significant portion of the staked coins.