The term “staking” refers to cryptocurrencies with a Proof of Stake consensus algorithm. PoS allows for the creation of new blocks without relying on specialized, expensive mining equipment, as is the case with Proof of Work blockchains (which include Bitcoin). Users interested in co-creating the blockchain therefore invest only in the cryptocurrency of their choice. They freeze their coins for a predetermined period of time, thus becoming a market validator, and thus fulfilling a specific function in the network. The popularity of this solution is also added by the fact that it significantly reduces electricity consumption. Instead of complex mathematical calculations performed by high-performance hardware, the network is secured by users storing their own coins. In the event of an attempted fraud, the user exposes themselves to the loss of all blocked funds.
To further discourage behavior that is harmful to the network, a minimum balance is usually specified, necessary to become a validator. In the absence of the entire amount, it is possible to join the so-called pools. The principles of operation are appropriate to mining pools, where miners accumulate computing power in order to mine cryptocurrencies more efficiently. In the case of PoS, users combine their capital. In this way, they qualify to be a validator, support a selected validator, or increase the chance of a reward.
Staking rewards
Each PoS network may implement a different method of rewarding its validators. Several factors may be taken into account, including the staking period, the amount of staked coins, and the total amount of staked coins in the network. Another popular solution is to set a fixed percentage of the staking reward. The reward may be the same or a different token, depending on the established system.
Cryptocurrencies to stake for 2022
We present you with a few projects based on Proof of Stake consensus that are worth paying attention to. This is not investment advice – we encourage you to research each project yourself before deciding to buy tokens.
Ethereum (ETH)
Ethereum is still based on PoW, but is in the process of transforming into Ethereum 2.0 with PoS consensus. Since the launch of Beacon Chain, the chain responsible for securing the network, you can participate in the staking process. The APR (Annual Percentage Rate) is currently 5.2%. To become a full network validator, you need to have as much as 32 ETH, which at current market prices is about PLN 500,000. Of course, you can also join existing staking pools. A list of services that offer joining such pools can be found, among others, on the website http://beaconcha.in.
It is important to note that it will not be possible to withdraw from staking until all Ethereum updates and a full transition to Proof of Stake have been implemented. The implementation date of the last stage was recently moved, once again, to 2023. However, if we want to invest funds somewhere for the long term – Ethereum is undoubtedly a project with very solid foundations.
Brine (SOL)
The Solana network has enjoyed great success in the past year. Its enormous scalability while maintaining a low transaction price have made it a strong competitor to Ethereum. With further delays related to Ethereum’s transition to PoS and the conveniences associated with it, one can suspect that the SOL hype will not end anytime soon.
Anyone can become a full Solana validator. However, voting on the inclusion of additional blocks can involve fees of up to 1.1 SOL per day. This also makes users more willing to join pools.
The most convenient way to stake Solana is from SolFlare and Exodus wallets. APY (Annual Percentage Yield) is around 7%.
Terra (LUNA)
The project’s creators’ goal is to revolutionize the stablecoin market. UST operates in symbiosis with LUNA, and both currencies are dependent on each other. The amount of LUNA in circulation affects the stable price of USD.
Terra is an example of Proof of Stake, where there are only 130 validators, which have the most locked LUNA coins. Staking users delegate their tokens to the validator, receiving rewards for doing so. Luna can be staked on Binance or through their Trust Wallet, for example, but the most profitable solution is to install the Terra Station application. For comparison, at the time of writing, APY on Binance is 3.85%, and on Terra Station as much as 9.27%
Polygon (MATIC)
Polygon Network is a platform that is a scaling solution for Ethereum. It uses layer 2 blockchains that run alongside the main Ethereum chain, providing faster and cheaper transactions for network users. Staking involves delegating your MATIC tokens to 100 main validators. The APR is around 11%. Coins can be staked on an exchange, such as Binance, or by syncing your wallet on the Polygon website. It is worth mentioning that when staking on an exchange (any coin), we are not able to choose which validator we want to transfer funds to.
Cosmos (ATOM)
The principles of Cosmos are similar to Polygon, but they are not specific to the Ethereum network. The goal of the creators is to create a fast and convenient “Internet of Blockchains,” networks that can communicate with each other in a decentralized way. Cosmos makes it easier for developers to build blockchains while maintaining sovereignty.
The APY for staking ATOM tokens is around 9.5%. There are as many as 35 wallets that you can use to stake your coins. This is also possible through the Coinbase and Binance exchanges.
Fetch (FET)
Fetch is a decentralized project that combines the advantages of blockchain and artificial intelligence. Its task is to improve and optimize existing systems by introducing so-called programmable agents. These are learning digital entities that intelligently create solutions to current network problems. Fetch has the potential to revolutionize many existing industries, including the medical sector and tourism. FET tokens can also be staked on the Binance exchange or by synchronizing a wallet, such as Metamask, on the Fetch.ai website. The APY is 4.7%.
Summary
Only a few selected cryptocurrencies have been described above. However, there are many other projects that you can support by investing your funds and earn money this way. Staking is a simple way to earn passive income. Assuming that we want to HODL the coins anyway, we can simultaneously increase their amount in a convenient and transparent way.
Every investment should be preceded by research. Some projects offer really high interest for invested capital, but staking is usually a long-term investment. A hasty decision can result in a bag of worthless coins. It is therefore worth staking a project that you understand and believe in its success.
