Crypto Staking: Top 10 Coins You Can Stake to Earn Yield on Your Digital Assets
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Crypto staking has become one of the most popular ways to earn yield in the global crypto markets. Read on to discover ten staking coins that allow you to earn passive income paid out in newly minted tokens.
What Is Crypto Staking?
Crypto staking is the process of locking up your digital assets to contribute to the securing of a blockchain network. In return, you get rewards in the blockchain’s native cryptocurrency in proportion to the asset staked. Cryptocurrency staking is possible with blockchains that use the Proof-of-Stake (PoS) consensus mechanism to confirm transactions and maintain security.
Crypto holders that participate in staking are generally known as stakers or validators. Their stake represents their skin in the game, meaning they have to act honestly for the good of the network otherwise they risk losing their funds.
Stakers are randomly selected to confirm transactions, and staking a large amount could increase your chances of getting picked. You can join a staking pool if you don’t have the staking amount a blockchain requires. By joining a staking pool, you and other investors are delegating your coins to the pool operators, who then stake the coins by handling the technical side of setting up a node and maintaining it. Validators share the rewards earned with the pool members (delegators).
Validators still own the cryptocurrencies they stake. However, they cannot access these coins for a certain period as they are locked by the blockchain protocol. Once the staking lock period is over, they can unstake their coins and invest in something else.
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Top 10 Staking Coins
There are many staking coins available in the market for investors to choose from. Here are ten of the most popular.
Polkadot (DOT)
DOT is a staking coin that offers rewards to validators and their nominators. Nominators vote for trusted candidates to take up the role of validators. Staking is available on Polkadot-JS UI, Ledger wallet, and crypto exchanges like Binance and Kraken. Polkadot uses a Nominated Proof of Stake (NPoS) consensus protocol that requires stakers to hold at least 10 DOT to stake on the network as a nominator and 350 DOT for validators.
The lock period is about 28 days, and the inflation rate determines the returns. Nominators should check the validator commission before voting. The annual nominal return is about 20%.
Polygon (MATIC)
MATIC is a staking coin that allows stakers to earn an annual percentage rate (APR) of about 14.3%. Validators need at least 1 MATIC to qualify, while there’s no minimum amount for delegation. However, validators can set a limit for investors that want to delegate with them.
To delegate MATIC, connect the supported wallets via the Polygon website.
Build and Build (BNB)
Build and Build (BNB) token powers the BNB Chain ecosystem, which includes BNB Beacon Chain and BNB Smart Chain. The cryptocurrency was previously called Binance Coin until Binance announced a name change in February 2022.
BNB is a popular crypto asset you can stake on Binance Exchange or Trust Wallet, for example. The lock-up periods for BNB are 30, 60, 90, and 120 days. Additionally, the minimum lock amount is 0.001 BNB, while the estimated annual percentage yield (APY) is 12.99%. Stakers receive interest daily.
Cosmos (ATOM)
Cosmos offers a staking APY of approximately 9.7%. The inflation rate and the commission you pay validators will influence the returns.
You can stake ATOM via a range of supported wallets. After setting up your wallet, choose a validator and start staking. The project recommends selecting multiple validators to minimize validator risk. You can unlock your staked ATOM by clicking “Unstake or Undelegate” on your wallet and waiting 21 days.
Avalanche (AVAX)
Avalanche is another blockchain that allows investors to earn investment income through staking. The average annual staking reward is about 9.23%. Avalanche requires validators to stake a minimum of 2,000 AVAX, while delegators should delegate a minimum of 25 AVAX. The minimum period for delegation is two weeks. Token holders can use Avalanche wallets and Binance to delegate their coins.
ICON (ICX)
ICX is ICON’s native cryptocurrency. The blockchain network allows people to participate in native staking in exchange for rewards. You can delegate your coins via any of the ICON wallets. The annual reward rate is about 6-7%, and the lock period is one week. ICON distributes rewards every 24 hours.
ICON’s staking rewards are coming from inflation as with many other protocols. However, ICON is building out a general cross-chain interoperability solution called BTP that is built around ICX. If this solution gets traction, ICON’s staking rewards would potentially become more sustainable as they come from another demand source.
Tron (TRX)
TRX is the native token of the Tron network. You can stake this digital asset on supported Tron wallets like Ledger and exchanges like Kraken and Binance. According to Ledger, the annual staking reward is about 5%, less the fees paid to the super representatives. The locking period is about 3 days.
Cardano (ADA)
Cardano is another popular PoS-based cryptocurrency you can stake to earn an income. You can stake ADA through pool delegation. All you need is either the Daedalus wallet or Yoroi. Next, choose a pool and start earning. Investors should study the available pools carefully before joining. Cardano has no lock up period.
Solana (SOL)
Solana is another staking coin that can earn you a passive income through delegation and validation. You have to install a Solana wallet like Phantom, Solflare, Sollet, or Solong to get started. Next, deposit SOL in your wallet, pick a validator, and start earning.
The SOL staking rewards depend on numerous factors such as the inflation rate and validator uptime (consensus voting behavior). When a validator votes on a block, they earn a voting credit. Vote credits determine how much SOL validators get.
The estimated annual reward at the time of writing was 4.69%, according to data from Staking Rewards.
Tezos (XTZ)
Tezos uses the PoS model, which means you can stake its native cryptocurrency. Participants that create blocks on Tezos are referred to as bakers. Investors need a minimum of 8,000 coins (1 roll) to bake. If they can’t meet this threshold, they can delegate their coins to bakers. The blockchain network also requires bakers to make a security deposit of 512 Tezos, which remains locked for about 14 days.
You can stake XTZ on supported wallets like Exodus. According to Ledger wallet, XTZ has an APY of about 3%, minus baker fees. It takes about 35 days before you start earning your first interest.
The Risks of Staking
The staking coins mentioned above could provide investment income to investors that want to put their idle digital assets to work. Staking is also an opportunity for blockchain enthusiasts to support projects with impactful visions. On the flip side, investors expose themselves to various risks when staking.
Let’s take a look at the possible dangers of staking.
Coin Lock Up
Most PoS blockchains will lock up staked assets for a certain period, meaning you can’t transfer or trade them. The locking period is there to prevent a scenario where many validators are unstaking their coins simultaneously, thereby compromising network security and operations. While it makes sense, you’ll incur a loss if the crypto asset value drops during lock-up because you can’t sell your coins to avoid the bear market.
Delayed Incentive Period
Blockchain networks like Tezos delay sending the first returns by 35 days, while other platforms don’t send payouts daily. As a result, this will shrink the time you can re-invest your returns to earn more yields.
Validator Risk
Delegating your coins with a reliable and trustworthy validator with an excellent track record is crucial. That’s because you’ll earn less if your validator attracts penalties and gets slashed because of offenses like being offline. If the offense is serious like making dishonest validations, the platform will slash a certain amount of the staked tokens, affecting the delegators’ assets. The complete slashing of the entire stake is also possible, as well as permanent banning.
Asset Liquidity
Staking an asset with low liquidity on exchanges makes it challenging to convert returns to stablecoins or major cryptocurrencies. The last thing you want is to be stuck with a token you can’t sell. Therefore, evaluate the liquidity of an asset before staking.
Validator Costs
Validator fees will always be deducted from delegator rewards. For this reason, ensure that the validator fees you’re paying aren’t consuming a large portion of your reward share. Moreover, the cost of equipment, electricity, and internet connectivity also affect a validator’s ROI. Hence, validators have to keep expenses low and optimize their chances of earning rewards to make a profit.
Price Movements
Finally, staked assets are always at risk of large negative price movements that can’t be offset by returns earned. In other words, an investor might get more tokens through staking but these tokens have dropped in value, which is why he can be worse off. Therefore, investors should not choose staking coins based on APY alone. They should also examine the performance of the coin.
Crypto staking is an interesting way for crypto-savvy investors to add yield to their holdings. However, if the value of the coin you are staking drops more than the staking yield, you won’t end up making a profit. So choose the asset you plan to stake wisely.
FAQs
What is Staking?
Staking in the crypto markets refers to locking up funds in a smart contract to receive rewards (paid in newly minted tokens) in exchange for securing a decentralized protocol.
How Much Money Can You Make Staking?
Staking APYs range from as low as one or two percent all the way up to 30 percent and higher. However, if you are looking at expected staking returns, you also need to consider the market price. If the value of the token you are staking drops by more than the staking returns, you will make a loss on your investment.
Is Crypto Staking Safe?
Staking is a high-risky activity as you lock up already volatile assets and are often not able to access them immediately to unstake them to sell them in the case of a sharp and sudden market correction. Moreover, essentially all stakable crypto assets have experienced substantial drops in token value, eroding staking returns for holders, on at least one occasion.
