If you’re looking to earn free cryptocurrencies, look no further than picketing. Whether you’re a beginner or an experienced cryptocurrency veteran, betting your crypto assets is a great way to earn passive income over time. You can earn much higher rates of return than traditional options with many different methods of crypto staking.
In this guide we will discuss what staking is, its various forms, and give you the best option for your level of cryptocurrency knowledge.
Let’s get into it.
Table of Contents:
What is Staking Crypto?
Staking is the process of taking your crypto assets and using them to help secure and validate transactions on a blockchain network. This can be done as a validator yourself or by delegating your bet to a bet pool operator or a service provider as a centralized exchange. When you delegate, you are not giving someone your assets, but rather allowing them access to their voting rights.
For example, Cardano (ADA) uses a proof of bet mechanism. Users can choose to be a stake pool operator (SPO), which means they manage a node and can receive Cardano from other users through delegation. They can also be a delegator, meaning they hand over their voting power to someone else but still own their ADA. Cardano is also a liquid staking, meaning you can still trade/sell ADA that is wagered.
Centralized vs. decentralized picketing
When it comes to options for staking, they fall into two general categories: centralized and decentralized.
Centralized staking is staking through a centralized service such as a cryptocurrency exchange such as Binance, Kraken, or Coinbase. Within the centralized staking options there are therefore two main categories, the betting protocol and the earning programs. Note that Binance and Kraken’s staking services are not available in the United States.
Protocol staking
is staking done directly on a blockchain, which means you’re delegating your cryptocurrency to a validator (often the exchange itself). It’s often a stable and decent return, but it could result in additional costs or commissions that you wouldn’t get if you got involved. You also need to keep your assets on the exchange rather than in a wallet to which you hold the keys.
Earning programs are generally a higher return, but they may not protect your capital. You are usually lending your assets to a third party that does not offer the same guarantees as the staking protocol.
Decentralized staking comes in three forms: liquidity pool staking, lending platform staking, and protocol staking.
Protocol staking is the same as centralized services, but rather than centralized exchange is one that puts your resources into play, puts them into play yourself, and keeps them in an external wallet. You can also choose the validator you use.
Staking the lending platform is quite simple and is done on decentralized lending platforms like AAVE. You provide a good (supply) and earn what is generally a modest return (but it is based on how much supply and demand there is). There is no real risk and you can therefore borrow against the goods supplied.
Liquidity pool staking involves providing two assets in dollar equivalent amounts to a decentralized exchange such as Uniswap. You will then receive trading fees in proportion to the liquidity you have provided which depends on the trading volume made using the pool. There is more risk in the form of impermanent loss, but premiums can compensate for it.
The best way to bet for beginners
The best way to start betting for beginners is to use a centralized option like Coinbase Earn, or a similar service where the exchange is simply pointing your assets to the blockchain protocol. There is no risk of losing assets (provided you trust the exchange), the returns are stable, and assuming you used the exchange to make your first cryptocurrency purchase, your assets are already there and ready to be wagered. Depending on the resource, you can earn anywhere from 2 to 15%.
Here’s a look at staking on Coinbase:
As you can
see in the image above, you can do Ethereum staking, without having to learn how to bet Ethereum. Just make a few clicks and confirm on Coinbase. Other centralized options for cryptocurrency staking are Binance, Kraken, KuCoin, and Crypto.com, with the processes just as simple.
The best way to bet for intermediate users
The best way to start staking for intermediate users is to do direct protocol picketing. This simply means that rather than having the cryptocurrency exchange hold and point your assets, you keep them in an external wallet and delegate them yourself. This can be done quite easily through most external browser extension wallets like MetaMask or Coinbase Wallet and through hardware wallet applications like Ledger Live.
Simply choose the asset you want to bet,
which validator you want to bet with, how much you are going to bet, then start earning after confirming. Apps like Ledger Live provide step-by-step guidance when you’re ready to bet, along with an easy-to-find “Stake” button.
The advantage of doing the staking protocol yourself is that you control your assets, you can choose a validator with a fee you like, and you have more freedom to move them.
Keep in mind that some cryptocurrencies, such as Cardano and Cosmos, are much easier to bet at the protocol level with very little investment. Meanwhile Ethereum requires considerably more investment (there is a minimum of 32 ETH and technical requirements) so many people use liquid staking tokens such as Lido (STETH) or Rocket Pool (RETH) to bet small amounts of ETH.
The best way to bet for advanced users
For advanced crypto users, the safest and perhaps best way to bet would still be to stake the protocol. It is a constant return without real risks. However, advanced users are likely motivated to leverage both their knowledge and holdings using things like liquidity pools and lending platforms. Liquidity pools are the best way to bet for advanced users potentially looking to maximize their returns, while lending platforms offer them a way to leverage their holdings through staking.
By staking the liquidity pool, users can often earn a rate of return of more than 30%, but face the risk of impermanent losses. While with the lending platform staking, they earn a much lower rate of return, but can leverage their holdings to take out loans. These are both riskier and more complex ways to target crypto.
Closing thoughts: staking should be for everyone
Although there are many ways to bet on encryption, the best and safest way is just staking the basic protocol.
Whether you do it alone or through an exchange is up to you. If you’re more of a risk-lover, do some due diligence and research liquidity pools and lending platforms to see if they’re something you want to try.
