All you need to know about Crypto Staking
|— Blockchains are decentralized ledgers that rely on rules to approve new transactions. The proof-of-stake rule requires network participants to stake their cryptocurrencies to validate transactions and win rewards.|
— While crypto staking may seem like a complicated process, wallet providers such as Ledger simplify it for everyone and helps them securely win rewards.
— And you can now stake directly from your wallet using Ledger Validator node, to earn rewards through a validator you already know and trust.
Crypto staking is one of the easiest ways to grow your crypto assets, and become an active participant in the network, without doing any extra work, find out how to stake your crypto.
If you own cryptocurrencies, you probably are experiencing the recent bull run. You know that seeing your wealth grow while you carry on with your usuals is a magical feeling.
But did you know there are probably ways for you to further leverage that growth? Not using those innovative methods to grow your assets is leaving profit on the table. Why be so generous?
In this guide, we will get you a step closer to one of the best ways to grow your crypto. It’s called staking. And worry not, we won’t throw you the burden of delving into the technicalities.
What is crypto staking?
One of the factors that differentiate cryptocurrencies from fiats is that the people who use them are the ones operating them. Bitcoin, for example, relies on its thousands of network participants (nodes) to work in unison through a consensus protocol called proof-of-work. It requires the nodes to use computing devices to solve complex puzzles and verify new sets of requested transactions.
However, the PoW protocol is energy-intensive and often debated as non-sustainable. So, not all crypto innovators were ready to have it that way. They wanted to create a greener, more sustainable approach to verifying crypto transactions.
So, they wrote the code for proof-of-stake (PoS) protocol and its new version nominated proof-of-stake (NPoS).
Instead of obligating blockchain nodes to employ high computing devices, the PoS protocol requires them to stake (delegate) their cryptocurrencies. The staked amount acts as proof that the nodes responsible for verifying the transactions will act with integrity because their money is at stake.
Typically, a PoS blockchain randomly chooses validators for verifying new sets of transactions depending on the amount each node has staked. A node that has staked more cryptocurrencies has a better chance of acting legitimately, so the network allows them to approve more valuable transactions than those who have lower stakes. Once a node verifies a set of transactions, the network rewards them in its native cryptocurrency.
That staking reward. That’s exactly where your opportunity to grow your crypto lies. Time to grab it.
Crypto staking made easy
Becoming a validator and running a full blockchain node requires you to stake a high amount of cryptocurrencies and its management can be a challenging task.
For example, the Polkadot (DOT) network only accepts 1,000 validators, based on the number of DOT tokens staked by each validator. Furthermore, you would have to operate a system on a high availability server to ensure that your validator node stays live most of the time to prevent penalties. If that weren’t enough, there are other technicalities such as setting up a cloud server, installing client software, and so on.
You’re surely wondering, “well, that doesn’t sound as easy as you promised in the beginning!”
We know. Not many of us own such huge quantities of cryptocurrencies. Nor can we afford to operate a system 24×7 on high-speed internet or understand the technicalities of the process.
Thankfully, you don’t need to do any of it. We still stick to the claim that growing your assets via crypto staking can be as easy as clicking a few buttons. Hear us out.
Instead of becoming a blockchain validator node, you can delegate your cryptocurrencies to one. This allows you the freedom to delegate any small amount of cryptocurrencies and earn rewards proportional to the number of tokens you stake. Additionally, you won’t have to keep your computer running all day long to ensure the network rewards you for your contribution.
So, it doesn’t matter whether you own 100 or 200 or 500 crypto tokens, you can stake your funds and instantly add a new revenue stream to grow your wealth. At the present rates, staking your cryptocurrencies can bring you an annual return of anywhere between 5% to 14% on the staked tokens.
The best part is that compound interest works in your favor when you stake cryptocurrencies. This means the interests you earn each time is calculated on the total amount of token you hold after the previous reward was credited to your wallet.
So, if you were to stake 100 DOT and receive 1 DOT as your first reward, your next reward will be calculated on 101 DOT. The case with compound interest is that the initial growth may seem slow, but if you stake for the long term, it could make a big difference to your portfolio.
This is a way better return than the 1% or lower interest offered on your savings bank account. Besides, the income you make from staking is on top of the growth in value of the assets you hold.
Ready to start staking? Here’s how you can do it.
Stake crypto directly from your wallet
Staking-as-a-service platforms, cryptocurrency exchanges, staking from non-custodial hardware wallets, and DeFi staking are the most common ways to stake crypto. But the simplest, most flexible, and most secure way to stake is using a hardware wallet.
Because staking-as-a-service platforms often charge high fees that eat out on the total staking reward you eventually receive in your wallet. The case of crypto exchanges can be even worse. Firstly, you don’t truly own and control the crypto you hold in an exchange wallet.
In addition, they too charge a high service fee, thus affecting the total reward you earn from staking. Exchanges also do not offer you the ability to choose the validator who you delegate funds to.
On the other hand, hardware wallets such as Ledger Nano offer you full control over your cryptocurrencies while helping you earn the maximum possible staking rewards. This implies, high security and high profitability. You also get the option to choose from a number of cryptocurrencies to stake and the freedom to delegate your funds to the validator of your preference.
Ledger Nano along with the Ledger Live application allow you to stake eight coins including Algorand (ALGO), Tezos (XTZ), Cosmos (ATOM), Tron (TRX), Ethereum (ETH) and Polkadot (DOT). The biggest benefit of staking from a non-custodial hardware wallet is that you never really part ways with your cryptos.
Once you choose to stake a cryptocurrency, you can install its application on your wallet device, set up an account on Ledger Live, and move your funds to the application. Follow a couple of simple steps depending on the crypto you wish to stake and that’s it. The wallet will take care of the rest and fund your account with the rewards every time you earn it.
…and Stake directly Through Ledger Validator Node
Did you know, you are now able to stake directly from your Ledger hardware wallet, through Ledger’s own validator node? So you can enter the rewarding world of staking securely, via a platform you already know and trust. Find out how to access staking through Ledger validator node for yourself, right here.
Now you understand staking, and how to do it yourself, you can just sit there, sip your cocktail, and watch your crypto goods grow.
Ready to take the leap? Your time is now and you can now use Lido staking service through Ledger Live.
Knowledge is power – so keep on learning! If you’re enjoying getting to grips with crypto and blockchain, check out our School of Block video, What is DeFi?