Maximising Your Earnings: A Comprehensive Guide to Staking Crypto in 2023

Crypto investors are increasingly turning to stakes to maximise their earnings. In this comprehensive guide, we delve into the intricacies of staking crypto and explore the various opportunities it presents.

Staking is the act of engaging in the verification and safeguarding of blockchain transactions. For example, when you stake Ethereum, you are helping to secure the Ethereum network, and you get rewarded for doing so in the form of Ethereum tokens.

By staking their tokens, an individual essentially locks them up in a wallet for a predetermined period of time. Stakers are rewarded for their participation in the network, which contributes to its security and consensus system. Depending on how many tokens are staked and for what length of time they are held, the rewards will vary.

According to a report by Staked and Kraken, the average annual yield for retail stakers was 14% in 2021, a 9% more that in 2022.

Why Crypto Staking Is Beneficial

Crypto staking offers several advantages for crypto holders. 

• Passive Control

For those lacking time or expertise, staking coins is more convenient as it doesn't require active monitoring. Staking is similar to depositing money in a savings account, where you earn interest on your deposits without having to actively manage it.

• Consistency in Rewards

With staking, investors are rewarded with extra tokens for their contributions, providing a reliable passive income stream. In other words, as long as the investor holds onto their coins, they can expect a continuous flow of rewards payments over the long run.

• No Large Capital Required

In addition, crypto staking requires a much lower capital investment than other forms of cryptocurrency investment, making it an appealing option for users with limited funds.

What to Consider Before Staking

In addition to its numerous benefits, crypto staking entails a number of potential risks. Some of the primary risks related to crypto staking include:

• Lock-up Periods

In some instances, staked assets can't be accessed during lock-up periods. If a price drops considerably during these periods, holders may not be able to unstake their assets and suffer losses. Some exchanges have lock-up periods of up to 180 days.

• Minimum Holdings Requirements

For many projects, staking a minimum amount of assets is necessary in order to qualify for rewards. It is, therefore, crucial to review the terms and conditions of staking projects and determine whether the minimum holding requirements are feasible.

• Price Volatility

There is no doubt that prices in the crypto industry are volatile. Staking for passive income requires choosing the right coins and considering their historical volatility when the value of a staked asset decreases significantly. If the value decreases significantly, staking may not offset the loss.

• Difficulty Selling Staked Assets

The ability to convert staked assets into cash or other crypto is not guaranteed. Liquidity constraints and market demand can influence how quickly staked assets can be sold.

• Delayed Profit Distribution

Staking rewards are not always distributed on a daily basis. Investors may have to wait for certain periods to receive their staking benefits. In addition, return rates are not always consistent.

• Project Failure

If a crypto project fails, investors may lose their staked coins. Rather than focusing entirely on earnings potential, investors should evaluate the project's fundamentals and technology. According to CoinKickoff, from 2013 to 2022, there were 2,383 crypto coin failures.

Popular PoS Tokens

Over 80 different crypto assets have adopted the proof-of-stake model, proving its effectiveness and potential for growth in the industry. One of the notable examples is Ethereum (ETH), which recently made a transition from PoW to PoS. However, concerns have been raised about its vulnerability to security law enforcement. 

Here are some other coins that use proof-of-stake:

• SOL (Solana)
• AVAX (Avalanche)
• Polkadot (DOT)
• Cardano (ADA)
• Tezos (XTZ)

How to Stake Crypto

Passive income from crypto is on the rise among investors. There are multiple methods available, each catering to different levels of involvement and skills.

Staking on an Exchange: A crypto exchange is one of the most common ways to stake crypto. The process is relatively straightforward, as users simply transfer their coins to the exchange's staking wallet and opt-in to receive staking rewards. For example, Binance offers staking rewards for 21 different cryptocurrencies, with staking periods ranging from a few days to a few years.

Participating in a Staking Pool: Staking pools are communities formed by like-minded individuals who pool funds to increase their reward potential. The members of the pool contribute their coins to a common staking pool, which is managed by a pool operator.

You can start staking crypto by following these steps:

• Find out how different crypto perform in terms of Return on Investment (ROI) and fees. Return on Investment (ROI) measures how much profit or loss is made on an investment compared to how much was invested.
• The next step is to find a pool operator that offers staking services for the coin you have selected. Once you've deposited your coins with the pool operator, you'll have the opportunity to stake the coin and earn a share of any rewards the pool generates.
• Make sure you're up-to-date about market changes and staked assets.

Last Thoughts

Staking crypto offers a way to generate passive income and a chance to dive into the exciting world of digital assets at the same time. The steady stream of earnings, minimal initial investment, and hands-off nature of staking make it an appealing alternative to conventional investment.