Did you know that the highest price of crypto was over $65,000 per coin? This was the value of Bitcoin in November 2021. This cryptocurrency's insane prices have encouraged the world to invest. But this isn't the only crypto you should be interested in.
Plus, there's another way to earn money besides trading. Crypto staking is an excellent way to generate passive income.
Do you want to make money with little effort? Then read on to see how to stake crypto wisely.
Understand How Staking Works
How can you maximize an opportunity if you don't understand how it works first? So before you jump in feet first, understand what crypto staking really is.
Basically, this is holding your crypto for a set period of time. This helps a blockchain to create new blocks and upgrade its security.
What do you get for locking your assets? Usually, a percentage of the blocks are unlocked. Some platforms may also reward you with lower fees, or if you're lucky, both things!
Choose Cryptos You Can Actually Stake
Unfortunately, you won't be able to stake Bitcoin. There are many others you can't stake either.
This is because they use proof-of-work (PoW) systems. People earn rewards from PoS systems by validating transactions through mining. And mining's done by solving complicated math equations.
Crypto staking relies on proof-of-stake (PoS) systems instead. Transactions are validated through collateral (your assets).
Pick Cryptos With High Annual Percentage Yields (APYs)
Not all cryptocurrencies are created equal. Like when you shop banks for savings accounts, these institutions will offer different annual percentage rates (APRs). The higher this percentage is, the better.
Be careful though, as some platforms may entice people with introductory APYs. Read the fine print and look into the platform's reputation to ensure you won't be trapped with a low APY after the introductory period is over.
Some good cryptos to start off with include Cosmos (ATOM), Cardano (ADA), and Tezos (XTZ).
Get the Best Rewards Possible
The APY isn't the only thing you should be considering. While a platform may offer a generously high APY, this might be offset by other things, like poor rewards.
Do note that rewards aren't static. Last month's numbers may not match the latest BNB staking rewards, so you'll need to consider the trend on a long-term basis. In general, staking rewards decrease over time since more tokens mean lower values. So don't be alarmed if you see a downward trend.
Don't Forget About the Fees
Sadly, the majority of platforms will charges fees. That way, they can earn a profit themselves. After all, they've got to be in the green still after giving away part of the unlocked blocks.
Types of fees they may charge you include:
- Transaction
- Liquidity
- Network
- Withdrawal
Compare these fees with the rewards to understand what your net gain will be. You might find a platform with fantastic rewards, but their fees are so high that you might as well choose another platform that has decent rewards but lower fees.
It might take a bit of legwork, but you'll come out with more profit if you do the math. If you're lucky, you might even find a crypto-staking platform with zero fees.
Speak With a Financial Advisor
Before you start sinking money into crypto staking, you need to know how much you have to work with. It might seem like you have endless disposable income, but if you stake indiscriminately, you'll run out of money quickly.
A financial advisor can look over your financial situation and determine what's feasible. Generally, you should never invest or bet any money you can't afford to lose. This is applicable to crypto staking too.
Stake More Than One Cryptocurrency
When it comes to investing, the rule of thumb is to never put all your eggs in one basket. If the investment fails, then all of your money is gone.
The best thing to do is to pick a main crypto to stake. Then, choose a few others to put small amounts into. If one or a few do terribly, you can still count on your other stakes to pull through. This will ease your financial risk.
Watch the Market
As we've said before, rewards aren't static. This is because the market's constantly changing.
It's true that crypto staking is a great way to generate passive income. But you can make your assets work even better by being proactive.
If you keep track of the market trends, then you can change your stakes accordingly. It'll minimize your losses.
Don't Stake Solo
Solo staking takes up a lot of resources. Not to mention, you'll also need expensive equipment. Add in the fact that you have a lower chance of earning rewards, and it's just not worth it.
Instead, join a staking pool. You'll combine resources to boost your chances of earning rewards. Even though you'll have to share these rewards, you'll still come out better than going solo.
Look Into Delegated Proof of Stake (DPoS)
Normally, crypto stakers need to perform consensus functions manually. These are the actions that lock up your tokens and begin the staking process.
DPoS makes things easier on you since you delegate your tokens. The validators then perform the consensus functions on your behalf, so you don't have to do anything.
Plus, DPoS has a high transaction capacity. As a result, you'll get more rewards. And if you're worried about the environmental impact staking has, you can rest easy knowing that DPoS minimizes your carbon footprint. It doesn't need state-of-the-art equipment.
Become a Pro at Crypto Staking
It might sound complicated at first, but crypto staking can pay off if you do it right.
One of the best things you can do is to join a staking pool, as it eliminates the need for expensive equipment and high energy bills. Consult with a financial advisor, spread out your investments, and keep your ear to the ground regarding the market. You'll see some outstanding returns in no time!
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