Earning with staking opportunities in 2022

Earning with staking opportunities in 2022

Share this article

Jonathan
Jonathan

An editor at Coincrop


12 Feb 2022 | 8 min read
35,422 views

C

rypto staking is essentially a process where you are putting your crypto currency to work, put simply staking is a way of earning rewards for holding certain cryptocurrencies.

Staking is where you pledge your asset to assist with a proof-of-stake (PoS) blockchain consensus mechanism. Validators with enough assets ‘staked’ are able to validate transactions on the blockchain network and generate rewards for this service.

Individuals can do this themselves by operating a validator node or contributing to a stake pool where another validator will complete this service and distribute rewards accordingly.

In this guide:

Disclaimer: All of the information written on Coin Crop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

What is crypto staking?

Staking crypto is simply the process of setting aside your cryptocurrency, which then turns an investor into one of the network’s active validating nodes. A buyer simply has to hold the crypto to join the network’s security infrastructure and receive financial compensation.

Crypto staking rewards the stakeholder with interest paid to them. What is important to remember is that Interest rates will vary depending on the network used, there are other factors to consider, such as supply and demand dynamics. Further to this PoS-based networks will also employ different PoS protocols:

    • group staking (staking pools)

    • staking providers

    • fixed staking

    • cold staking

This is done with the aim to democratize access to the staking space and the opportunities it offers. And it will allow even retail investors with small numbers of coins to benefit from crypto staking.

How crypto staking works

Before you can start to Stake, first you need to own crypto tokens on a Network. Once you have bought tokens for staking, you need to lock the holdings, each network has its own procedure. What you will find is crypto staking is a straightforward and a streamlined process, so you shouldn’t have any problems with it, but carefully follow your wallet’s instructions.

Types of crypto staking

Each exchange will have different staking options to choose from such as staking pools, this is where multiple investors’ coins are staked together. The more tokens that are staked, the more transactions this node is assigned to validate. This increases the node’s ranking, which furnishes them with greater compensation, which in turn increases the investors’ crypto staking rewards. With the promise of a higher income has made the staking pools the more popular option for cryptocurrency staking.

Fixed staking involves staking coins for a fixed period as it generally has higher crypto staking rewards, but it is also riskier and less convenient. Another option is flexible staking, with this option an investor can withdraw their coins at any given point, however, for this convenience there is a notable cut to their interest rates.

Crypto staking rewards and risks

There are many benefits to Crypto staking investor as it offers attractive interest rates to holders - from 5% in well-reputed crypto networks, such as Ethereum (ETH), to 90% in smaller ones, like PancakeSwap (CAKE). 

Remember that any kind of investment comes with it own risks and crypto staking is no exception. Multiple factors affect the security and performance of staked cryptocurrency:

    • Cybersecurity incidents. You could end up outright losing your tokens 

    • Damage to cold storing hardware. To eliminate the threat of cybersecurity incidents, some investors resorted to cold staking, where you store your tokens on a hard drive or another piece of hardware. With this option for your crypto assets will be lost if you damage or lose your cold storing hardware. 

    • Price downturn. With crypto staking, you commit to locking your investments – as we all know crypto prices can be volatile and could result in significant losses if the price of your crypto asset plummets. Which mean that you would not be able to liquidate your holdings to reduce your losses.

    • Validator node uptime. If the validator node is unable to process transactions to the full capacity, this will be penalised by the network, and this alone will in turn diminish your staking income. 

All this makes Staking sound like a bad investment, but it’s not, but its important to understand the risks and potential gains, there are many upsides to where you can earn vast interest on your staked tokens, just do your homework first and weigh up the risks.


Jonathan

Jonathan

An editor at Coincrop
View articles


Our sponsor

CoinLoan combine the best of traditional and novel finance helping you borrow, swap and grow your assets.

Compare over 42,421 CeFi and DeFi products across more than 208 organizations here