How to make money with crypto staking

General investment instruments do not always provide the desired result. Due to the unstable geopolitical and macroeconomic situation, the inflation of fiat currencies has become a bigger concern. Meanwhile, residents of Russia and Belarus have completely lost access to numerous investment platforms due to sanctions. Even crypto exchanges are no longer a zone of freedom and security: the world’s largest crypto platform Binance has banned trading operations for Russia-based accounts. 

No wonder the demand for new investment tools has drastically increased recently. After all, it is not preserving your capital but growing it that actually matters. Staking cryptocurrency has become a popular trend over the past few years, allowing people to make a profit on digital assets without possessing technical knowledge and skills. This article provides more information on earning passive income from staking cryptocurrencies.

What is crypto staking

The digital asset industry is actively developing and growing. Five years ago, bitcoin was worth about $1,000. Today its price exceeds $40,000 even during a bearish decline. An increasing number of people understand the prospects of the industry: the number of BTC transactions exceeds 270 thousand, while Ethereum runs over a million transactions daily.

All cryptocurrencies function with a consensus algorithm so that transactions can be processed and the network can function correctly. There are currently two main types of algorithms: Proof-of-Work and Proof-of-Stake. The former is connected to mining: using expensive equipment, transactions can be confirmed, and new blocks can be added and rewards are received. The latter involves staking, which does not require special equipment or skills for earning money.

Answering the question “What is staking in crypto” — the process of holding a cryptocurrency in a wallet to help maintain the project’s blockchain is referred to as staking.

Users are required to hold crypto in a wallet for a defined period to participate in the validation of the transactions and add them to the blockchain. Staking is often referred to as a better alternative to a bank deposit.

How staking works

When users buy cryptocurrency to make money with crypto staking, they automatically participate in the transaction validation process. It ensures the uninterrupted functioning of the blockchain and the security of the system. Since participants use their personal funds, it does not make sense to risk them by undertaking malicious acts. If the blockchain is corrupted in any way, its native token’s price is likely to plummet, leading to money loss.  

Therefore, the “stake” ensures that each user acts honestly and for the network’s good. In exchange, validators receive a reward in native cryptocurrency. The more coins stored in a wallet, the bigger the chances of adding a new block and receiving a reward.

The stake does not always consist of one individual’s coins. More often than not, validators manage a pool and collect funds from a group of holders to lower the entry threshold. Anyone can participate by delegating their coins to pool operators who independently verify transactions and add new blocks to the chain.

There are fine mechanisms employed in each project to keep validators in check. They can receive a penalty for minor infractions or even be removed from the process altogether. Each blockchain has its own set of validation rules. For example, the maximum number of validators in the Terra network is 130.

What are the types of staking

As mentioned above, staking is considered to be a better alternative to a traditional bank deposit since participants also receive interest for “not using” the money in the account. However, there are three main ways you can earn passive income with crypto staking:

Fixed

In this case, the user independently chooses the period for holding coins. It can be either a week or a month, or a year. The main advantage of this method are the pre-known and clear conditions. You know precisely when and how many coins you will receive. However, keep in mind that the funds will not be available for any transactions during the selected period.

Flexible

This type does not involve a predefined holding period. Usually, funds are stored in the wallet, while the holder receives interest on a daily or weekly basis. The main advantage is that you can terminate the contract at any time and withdraw your money. However, there is also a drawback: the annual reward is usually lower compared to fixed staking. Consequently, this type is suitable for those who prefer flexible investment and are unwilling to lock funds for a long time period.

DeFi

DeFi staking involves locking crypto assets in a smart contract to become a validator of a DeFi protocol or a layer-1 blockchain and receive rewards for keeping the network running. In a broader sense, it is a collective term for all DeFi activities that require a temporary freeze of crypto assets.

Yield farming is the process of using decentralised finance to maximise profits. Users lend cryptocurrencies to DeFi platforms and receive crypto coins in exchange. This method is considered more advanced, as participants constantly move their assets between several lending platforms for maximum profitability.

Liquidity mining is another income source in the decentralised finance sector. Users lend their funds to the DeFi platform to provide liquidity and receive a reward in return.

How much money can you make with staking

The popularity of staking for earning passive income in crypto is growing, since this method involves fewer risks than trading, for example. Nevertheless, profitability may vary depending on the chosen platform and cryptocurrency, as well as the number of active participants.

Usually, the annual yield ranges between 5% to 20% for proven and reliable projects such as Ethereum, MetaHash and Polkadot. As for more speculative and risky projects, rewards can reach even 100%. Nevertheless, you should be extra careful choosing such cryptocurrencies since there is always a risk of not only losing potential profits but the initial investment if the project collapses.

As for the types of staking, the most profitable ones are fixed and DeFi, since they involve greater restrictions. Flexible staking allows the participant to withdraw funds at any time, and therefore profitability is lower. You can learn about the annual reward rates for the most popular coins and calculate the potential profit based on your parameters.

How much to invest

The advantage of this investment method is the low entry threshold. You do not need thousands of dollars or expensive equipment to make money by staking crypto. For example, on the Polkadot network, the minimum amount is 10 DOT (~$180); on MetaHash, it is less than $100, while some projects do not have any requirements. Of course, there are projects with a high entry threshold, like Ethereum, where you require at least 32 ETH (more than $90 thousand at the current exchange rate) of investment to make money by staking ETH. However, you should note that independent platforms on the market provide the option of Ethereum and crypto staking as a result of many participants being involved.

When choosing a coin, you should find out the minimum investment requirements, but usually, they are pretty low and affordable for most investors.

How to choose the best coins for staking

An important step is selecting the right cryptocurrency. Experts recommend studying the market in detail and paying attention to several criteria. First and foremost is the reliability of the project. Give preference to those that have a proven track record and possess experience. Newer and riskier projects often have attractive high APRs but carry additional risks.

Also, consider volatility. Since users receive rewards in crypto, the coin’s rate plays a key role. Study annual indicators that provide information on the prospects of the coin’s long-term growth. When choosing more speculative and volatile cryptocurrencies, weigh the risks and refrain from large investments.  As for the list of best coins to choose from, there are dozens, maybe hundreds. The main criterion is that it should be a cryptocurrency that works on the Proof-of-Stake algorithm. That is why you cannot make money by staking Bitcoin. Possible candidates include Ethereum, Polkadot, MetaHash, Solana, Terra, etc.

What are the best crypto staking platforms

A wide range of services available on the market allows even beginners to earn passively on digital assets. A large number of options will help you choose the most favourable conditions, but it also requires some effort when searching and analysing platforms.

Exchanges, specialised pools, and DeFi platforms provide staking services. Moreover, you can set up a server yourself and become a blockchain validator, but this involves certain costs and requires technical skills.The most convenient and simple option for beginners and experienced investors are specialised websites. aStake, for instance, is a platform for automated staking of the MetaHash (MHC) cryptocurrency. The coin has a proven reputation, while the MetaHash blockchain is considered to be the fastest globally: the system can process up to 100 thousand transactions per second. In addition, aStake takes care of the technical side entirely. All a participant needs to do is create a wallet, deposit coins and receive rewards eventually. You can begin with a small investment of less than $100 to ensure the project’s reliability. There is another significant advantage: aStake does not store the private keys of clients, which means that trust management firms are not involved.

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17% per annum estimated reward from MetaHash Network

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Summing up

Staking is a financial instrument of the new generation, which has already proven its effectiveness and earned a place in the market. According to Staking Rewards, the total value of locked-in assets (TVL) is over $245 billion. It proves that the PoS cryptocurrency sector is growing, as well as opportunities for earning passive income.

Staking has already surpassed traditional bank deposits, in terms of both entry threshold and profitability. Even a beginner can earn 5-15% annually by holding and storing cryptocurrencies in a wallet. No hardware costs or extended learning and practice are required. 

In addition, specialised services, such as aStake, are available, allowing novice investors to earn passive crypto income with minimal investment and no special skills.

The unstable macroeconomic situation in 2022 showed that there is a need to look for independent financial instruments for saving and growing capital. Fiat currencies are no longer a safe haven due to record inflation rates. Now is the time to create capital on digital assets since the market is rapidly developing and growing. Become a participant of MHC staking on aStake to earn passive income with crypto.