Are you looking for a means of passive income?
Then, DeFi Staking is your best bet.
The most interesting thing about DeFi staking is that you do not need too much stress to make money.
You only have to choose a platform, select a validator, fund your wallet, and earn passive income.
This article will guide you through DeFi staking by explaining how DeFi staking works, the rewards, the risk involved, and so much more.
Understanding the Basics of Staking
Staking is locking your crypto assets for a particular amount of time. It is done to help support the activities of a blockchain, and what do you get in return?
More crypto.
How does Staking work?
When you lock and participate in the network validation, you’ll receive rewards in the crypto assets you are staking.
If the crypto token you want to stake is in a wallet, you can set up how much of your portfolio you want to put out for Staking.
Furthermore, a Proof-of-Stake and Proof-of-Work make the whole staking process possible.
Proof-of-Stake (PoS) vs Proof-of-Work (PoW) Consensus Mechanism
PoS and PoW initiate the process of data synchronization, validating information and processing transactions in the blockchain. Both Consensus mechanisms have proven to help maintain blockchain transactions.
PoS doesn’t consume much power compared to PoW because of the integration of smart contracts on the blockchain. PoS is arguably better than PoW, but this argument could be more practical, and PoS also has its setbacks.
Proof-of-Stake
For PoS, the term “validator” is used in identifying block creators. A validator verifies everything on the blockchain and also maintains records.
To become a block creator or a validator, you must own many coins or tokens.
Proof-of-Work
For PoW, block creators are called “Miners.”
Miners solve for the hash, carry out the whole cryptographic process and authenticate transactions. When they identify the hash, they get a coin as a reward.
Miners must understand the cryptographic process and be able to invest in equipment that will power the machines to solve the hash. This equipment is expensive and a significant limitation of the blockchain.
The major setbacks of PoW are “Energy consumption”, which led to the creation of PoS and the use of “Physical computers.”
So, how is staking beneficial to DeFi protocols?
The Role of Staking in DeFi Protocols
By staking crypto, you support the blockchain project you like. Staking is like saying, “Hi Buddy, I got you.”
Staking increases a blockchain’s resistance to attacks.
By Staking DeFi tokens, you add to the security of the blockchain and increase the speed of transactions.
Let’s take a look at some popular staking platforms.
Popular DeFi Staking Platforms
We picked five popular DeFi staking platforms for you to get started with DeFi staking.
- Binance
- Cake DeFi
- Defi Swap
- OKX
- Crypto.com
Binance
Binance supports over a hundred cryptocurrencies and provides trading pairs with all the major DeFi coins.
It also provides high transaction and staking speeds, making it a fantastic choice for users looking to stake and earn.
With a trading fee of 0.1%, Binance offers a lot of altcoins to choose from, meaning you are not limited to a particular set of coins.
Interesting right?
The only perks of Binance are its limited fiat currencies and the unavailability of stop-limit orders for some DeFi coins. Aside from that, Binance is a pretty impressive platform.
Cake DeFi
Cake DeFi is one of the best DeFi staking platforms because of its many features.
It allows for staking crypto and earning rewards.
The trading fee ranges from 0.1% – 0.2%, and you can access over 200 tokens and coins.
DeFi Swap
With DeFi Swap, you can trade Ether and ERC-20 tokens. Users can stake Ether or ERC-20 tokens and earn rewards.
If you have Ether or ERC-20 tokens, you can look into this and see how you can learn rewards.
The trading fee is 0.3%, and it has its stablecoin.
OKX
With OKX, you can stake crypto and carry out many other activities because of its versatility.
OKX is also user-friendly compared to other staking platforms.
Crypto.com
With crypto.com, you can stake your coins, select DeFi token pairings and carry out transactions with the speed of light.
How to Stake DeFi
Choose your preferred DeFi protocol
Take your time and pick what’s best suited for you. Some DeFi protocols are better than others.
Also, take your time and study the reward system.
Fund your wallet
Make sure your crypto funds are in the right wallet for Staking.
Choose a Validator node
Set the stake validator node to which you would love to delegate your crypto fund and set the agreement to meet your interest.
Get your rewards
After setting the agreement, you will start receiving rewards equivalent to the fees earned from the transactions carried out in the blockchain network, and you know people carry out transactions daily.
Now, that’s what we call a passive income.
Earning Passive Income through Staking
When you choose a staking platform, it will display what you’ll get in return, and once you’ve staked your crypto asset, you will receive your reward according to the staking schedule displayed on the platform.
You should note that you can earn no stipulated amount for staking crypto.
However, the amount you will make depends on the DeFi staking platform, the crypto asset and the number of people staking that crypto asset.
Platforms have rules, so it’s safe to look through the staking rules before putting your crypto assets in. Some platforms give you your full staking reward, while others will provide you with a certain percentage of your staking tips.
Risks and Considerations for Stakers
Staking feels like extra crypto added to your existing crypto asset. You can also call it free money because you do not have to work much.
However, there are some risks involved with staking crypto.
This article will guide you through the risks so you won’t succumb to unforeseen circumstances.
Price Movement
The risk here is price movement. There can be an increment in market price and a price decrease.
So, if a high yield is a platform’s promise but your crypto price drops by a large percentage, that will be a significant loss.
With this, the risk for Staking is higher than when your crypto assets are in your wallet.
There are other risks as there are benefits too.
Fraudulent Staking platforms
Some platforms may promise heavy returns, persuading people to stake their crypto assets when there is nothing in store for them in real life.
So, ensure you are using the right platform.
You can also glance at the staking platforms on our list.
Note that you are not limited to the ones on the list; you can do your research and find what will work best for you.
With all these risks involved, should you still stake your crypto assets?
It is a personal choice, and it depends on your investment plan.
If you are looking for a quick trade with an immediate profit, Staking is not for you, but if you are in for the long run (holding crypto for an extended period), you can look into staking your crypto.
You can further look into the risks and check with the agreements of the platform before putting your funds in.
Conclusion
Cryptocurrency staking is one way to earn passive income. You do not need to work nonstop to earn rewards. You only have to stake your crypto assets and watch your crypto grow.
Staking has its downsides, and looking into them is essential to determine the best way to carry out your investment plan.
If you have any additions or questions, drop them in the comment section, and we’ll respond in no time.
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