What is Crypto Staking?
When it comes to crypto investments, it is crucial to understand that this market is incredibly volatile and risky compared with traditional finances. Crypto assets are not subject to governmental control or emission by central banks. The industry is still very young and unstable, so even a news background shakes the crypto market every time, as you might have noticed. Many people still make a fortune from crypto trading in this fragile environment. How do they do it? How to trade cryptocurrency and make profit? There are several instruments to earn from crypto. Some of them are more dynamic and risky, and require quick decision-making, while others are less stressful.
Let’s see how to trade digital assets:
- You may buy crypto coins and hold them in your wallet for many months, tracking the situation and price charts. When the rate grows, you sell coins and earn. That is called long-term investment.
- You may use the swing method – purchase digital assets and keep them for a couple of weeks.
Or more dynamic types of trading:
- Intraday trading – lasting 24 hours. That is, a trader opens and closes a position within 24 hours.
- Scalping – trades may last from a couple of minutes to 15 min. It allows taking small portions of profit from every little price change. There may be many quick trades during the day.
Most beginner crypto users pick swing and long-term investment methods, for they are less stressful and give enough time to reflect and analyze the market. That’s the right position, and over time, a person learns how the market works and dares to try some more dynamic strategies.
There is an alternative to simply holding crypto coins – you may increase their number by doing nothing, in fact. The process is called “staking crypto”, let’s discuss it.
How Does Staking Work?
If you are engaged in trading, you might notice that different digital assets are developed using different mechanisms. For example, the world’s first crypto, Bitcoin, is developed on the Proof-of-Work consensus protocol, which means, every new block in the Bitcoin blockchain is received through machine calculations of math problems, which is also called mining. People who mine crypto buy expensive equipment for that purpose, for ASICs do not work anymore – the mining difficulty is increasing, requiring more and more advanced and expensive equipment and consuming more energy. In addition, mining harms the environment.
Other types of digital coins (for example, Solana, Polkadot, Cardano, and Ethereum from recently) are those developed on the Proof-of-Stake consensus protocol:
- Staking is proof of ownership, in other words, to receive a new block, you just need to have more coins.
- It does not require any machines and does not consume energy as much as mining does. To be a staker, you only need some crypto coins and a connection to the Internet. So probably anyone can be a crypto staker without enormous investments.
- Crypto projects developed on the Proof-of-Stake protocol perform much higher speed and charge much lower fees.
One of the most popular PoS products is Solana. This network has become the leading platform for developers looking for the most convenient, technological, and cheap solution for building and deploying decentralized applications. Solana became the foundation for hundreds of DeFi, NFT, games, metaverses, and other products built on it. It could even overperform the Ethereum network, but it also switched to the Proof-of-Stake consensus; thus, since recently, the Ethereum network also has high speed, low fees, and high throughput.
Let’s talk about how to stake crypto. Staking is the passive income option on the crypto market. It works similarly to a bank deposit when you leave your funds in a bank and receive interest in return. In crypto, staking works the following way. Suppose you have some SOL coins and would like to get more. So you lock your SOL crypto on the Solana network for some period, and when it expires, take more SOL coins than you put (initial number plus staking rewards).
Not only PoS coins can be staked, but other cryptos are also available for staking through crypto platforms. For example, use the WhiteBIT exchange:
- Register an account
- Find the WhiteBIT Earn section
- Select the crypto lending program that you like
- Pick the amount and the locking duration
- Leave your coins in the crypto staking program and receive rewards when the period expires.
Many other crypto platforms like Bytbit has staking option. It is crucial to keep in mind that taking assets back is impossible without losing rewards. That is, if you withdraw funds before the staking duration expires, you will not receive bonuses. Some exchanges impose penalties for withdrawing coins beforehand. So be attentive and read the rules before locking coins.
Another thing to know is picking an asset. It is advisable to choose crypto coins with high liquidity and low volatility. Tokens with a large market capitalization resistant to market trends. Keep in mind that if the price chart drops while your coins are locked, your rewards will reduce, for it depends on the current assets rate.
What are the Advantages of Staking?
Crypto staking brings the following benefits for crypto holders:
- Staking is the easiest way to generate more crypto assets from passively holding coins. It does not require trading strategies and stressful decisions. Staking is a good alternative to holding.
- To generate coins, there is no need for advanced machines. Anyone with a connection to the Internet and crypto wallet can stake coins.
- Proof-of-Stake blockchains are secure and environmentally friendly. Everyone who uses such networks supports sustainability.
- Stakers may earn 10 – 20% per year, which is a really huge income, given that you do nothing for it.
- By locking your assets, you support the network and its smooth work, increasing asset liquidity.
The most significant disadvantages of staked crypto are:
- High market volatility. If the market collapses, the losses may outweigh your earnings. So you should not be beckoned by high staking interest proposed by some little-known assets. Pick only well-known coins with high capitalization (we have already mentioned them at the beginning of this article).
- It is impossible to withdraw your coins out of staking before the expiration day comes. Otherwise, you lose rewards and, on some platforms, even face penalties.
What is the Best Place to Stake Crypto?
As we said before, crypto staking is supported by many crypto platforms. To pick the best suitable, look at the conditions they propose for staked crypto. Are there penalties for withdrawing coins beforehand? It is important to check the reputation of the platform and reward the reviews on it. Some scam services attract inexperienced traders offering high staking interest and unknown crypto. Be cautious and entrust your funds only to reliable and credible services. An example is WhiteBIT.
WhiteBIT is the largest crypto platform in Europe, focused on a high level of safety for clients. 96% of users’ funds are kept offline – on cold wallets. Every client sets a two-factor authentication and randomly receives codes to one’s phone to enter the account.
WhiteBIT offers a passive income option to earn up to 30% from holding your coins on the platform. That may be:
- Crypto lending (smart staking) – a client gives the platform a loan of coins and receives 0.4% to 30% rewards in return.
- Crypto staking – a client holds his assets blocked on WhiteBIT and receives rewards.
Smart staking involves around 40 programs for you to pick from. They differentiate by the underlying asset and the period of locking. You may pick the amount of assets and locking period and see how many bonuses you receive. Use the staking calculator to see the correlation between the length of the staking period and the bonuses. The longer you keep your tokens locked, the more bonuses you get.
To learn more about crypto lending and staking on WhiteBIT, welcome to its official blog. This educational resource will guide you and help you handle all trading and staking tools to succeed in working with WhiteBIT. There are many interesting quizzes to participate in. The WhiteBIT community is engaged and active, so you will find like-minded people and share experiences and recommendations. WhiteBIT is a big family welcoming new people to expand the crypto industry worldwide.