Crypto Staking: What You Need to Know

Matthew Stokes
Last updated on October 28, 2022

Introduction

Staking crypto is a process by which crypto investors can earn rewards for using their digital assets to secure the blockchain network. There are many ways to stake; you can get technical and run a validator node on the blockchain yourself, or you can trust the exchange to pool it’s users resources and do it on your behalf – which is what most people do.

Staking usually requires users to lock up your coins in a digital wallet for a specific period of time, during which they cannot be spent or traded. Some staking programs are flexible and allow you to unstake at any moment, though the rewards are less attractive.

In return for their participation, stakers earn a portion of the interest generated by the assets they have staked. The concept staking rewards in crypto is similar to dividends in the traditional financial world. Shareholders are rewarded quarterly by the company by distributing a portion of the company’s earnings. In crypto, staking is rewarding holders by distributing a portion of the fees earned for securing the network.

Crypto staking can be a great way to earn passive income and help support the growth and development of the blockchain industry. As opposed to the quarterly model of the traditional financial system, staking rewards are distributed on a daily or weekly basis. Of course, it is important to note that staking your crypto to earn rewards comes with some risks. For example, if you are staking via an exchange, you assume counterparty risk and trust the exchange to pay out. In addition, if you lock your crypto to stake it, and the price of the asset falls sharply, you may be left with losses since you are unable to cash out while your crypto is locked. Nevertheless, crypto staking is widely popular, and not staking is missing out on an opportunity to grow your crypto, especially if you stake with a reputable party. All in all, staking crypto is a profitable endeavour for those willing to take on some risk and patient enough to wait for the rewards.

Top Crypto assets by Staking reward

Asset
Price
Reward Range
Highest Reward Provider
More Staking Providers

Reviews

Bitvavo – European Focused, Small Offering, Minimal Returns.

Are you based in Europe and looking for a way to grow your crypto with a safe and registered exchange? Bitvavo might be your answer. Bitvavo offers flexible staking on 17 coins and is a perfect exchange for beginners looking to venture into crypto staking. The rewards are on the lower end of the spectrum compared to other rivals, but the security that comes with a registered exchange and the ease of staking offered by Bitvavo might make it an excellent choice. 

Staking with Bitvavo is straightforward, and most beginner and intermediate traders not familiar with staking shouldn’t have any issues understanding how staking works. We like that it’s flexible, and there’s no need to lock up your crypto to earn rewards on it. It’s easy to control from one central dashboard and is available from desktop and app, so you’re never caught out. If you’re looking for a staking platform to learn how staking works, you will find value in using Bitvavo. If high rewards are your number one priority, we don’t think you’ll be happy using Bitvavo and would find more value using a staking platform like Binance or Kraken to stake your crypto.

Read our full review of staking on Bitvavo.

Crypto.com – Flexible Staking, But with Low Rewards

Crypto.com is one of the most recognizable names in the crypto space, so, naturally, you’d expect it to have an attractive staking offering if the rest of its exchange is anything to go by. Crypto.com supports staking for 49 coins, including a variety of stablecoins. You can choose to stake flexibly or for 1- and 3-month terms, with higher rewards awarded the longer you stake your coins. You can also earn double rewards by staking its native coin, CRO, with your other staked crypto. Rewards range from 0.2% – to 14.5% APR depending on the coin and staking term, and rewards are paid out weekly. 

We liked that Crypto.com lets you flexibly stake all its coins, but the rewards are not among the highest. The most you can get is 5% on DOT and MATIC; the rest of the coins will only give you a potential 0.5% – 2% return. When you enter your crypto in locked staking for a minimum of 1 month, the rewards start to look a bit better but to gain maximum rewards you need to commit to 3 months. Because Crypto.com does not have a proper desktop interface, staking is only available using the Crypto.com mobile app. The positive is that staking crypto on the app is very straightforward. If you don’t mind locking your crypto up for 1 – 3 months, we think Crypto.com would be a good choice for you.

Read our full review of staking on Crypto.com.

Binance – Multiple Staking Tools, Easy Management, High Rewards

Binance is the world’s largest exchange and really doesn’t need much of an introduction. Its name is synonymous with crypto trading, and its staking services are no different. Binance offers one of the best investment platforms in Binance Earn. Users can use multiple staking tools to help grow their crypto, including Binance locked and flexible staking, DeFi staking, ETH 2.0 Staking, Binance Savings, Binance Launchpool, and Binance Liquid Swap. It supports 182 staking coins with flexible and locked terms ranging from 5 to 120 days. Interest is compounded (APY), and multiple potential APY of more than 100% are on offer on selected coins.

Binance has taken the complexity out of staking and has made it accessible to the masses, with an easy-to-use platform on both the desktop and mobile versions of Binance Earn. With all of the staking options offered, one would be forgiven for thinking it must be a nightmare controlling everything if you use more than one product. However, Binance has made it easy by letting you control everything from one central dashboard.

The only downside is that if you are a novice investor and only use Binance Lite, the less complicated trading app, you’ll need to switch to Binance Pro to access the staking tools. Staking is an excellent way to earn rewards and interest on your idle crypto, and we think you’ll be hard-pressed to find a more attractive staking option than with Binance.

Read our full review of staking on Binance.

Coinbase – Small offering, Unattractive Rewards, High Fees

Coinbase is one of the biggest U.S.-regulated exchanges. U.S. regulation usually limits high-yield interest products depending on how many states the exchange is regulated. Coinbase offers 10 staking coins, and you can only participate in locked staking, with lock-up periods ranging from 3 days to 3 months, depending on the coin, and the highest return is capped at 5.75%. 

We found it hard to find anything we liked about Coinbase staking, with maybe the only positive being that it’s easy to manage from both the desktop and mobile app. To start staking, you need to join a waitlist which could take a few weeks, and Coinbase takes 25% of your rewards made from staking as a fee for providing the staking service some of the highest we’ve come across in the crypto staking world.

The only reason to stake on Coinbase is if you want the absolute easiest way to stake, and don’t mind getting subpar returns. However, even if you would like to use Coinbase to buy and sell crypto, it’s a good idea to look at different offerings to find a better staking platform. In our opinion, Coinbase’s staking offering is what currently keeps it from being THE #1 destination for novice crypto investors. 

Read our full review of staking on Coinbase.

Kraken – Flexible, Attractive Rewards, An Excellent Option for the U.S. Traders

There are some decent regulated exchanges on the market for U.S. traders, but few offer attractive staking rewards. Kraken offers an easy-to-use staking tool supporting 15 coins and 2 fiat currencies. Though the number of coins might sound limiting, the rewards are attractive, ranging from 4% – to 23% RPY, and the rewards get paid out weekly or bi-weekly, depending on the staked coin. We loved that the returns are attractive even though the staking is entirely flexible, giving you the chance to unstake your coins at any point without losing any accumulated rewards. 

For a predominantly beginner-focused exchange, Kraken has done well to bring a feature that is considered ‘advanced’ to the broader market of users. It’s easy to use the staking features, and the fact that it’s all flexible staking takes a bit more of the risk out of it for the beginner trader. Though limited in its offerings, it’s a good place to start staking. For the more advanced and experienced trader, there is value in staking with Kraken with its attractive rewards and flexible terms, but there are better exchanges out there with greater returns and more coins, like Binance. 

Read our full review of staking on Kraken.

Frequently Asked Questions

This all comes down to volatility and market conditions. The value of a staked coin may increase if the network or project associated with it is successful and decrease if it isn’t. 

Suppose your strategy is to buy crypto and hold it hoping that it will gain value over time, despite any fluctuations and volatility. In that case, staking is better than holding, as you will earn more crypto even if your staked crypto depreciates. 

There is no definitive answer to this question as it depends on personal preference, investment strategy and goals, and various other factors. Some popular coins for staking include Ethereum, Tezos, and Cosmos, but there are many others to choose from. We would say that if you had a choice between a high market cap coin with high trading volume with a mediocre return versus a low market cap and low trading volume with a high return, go for the more secure high market cap coin as the stability of the crypto is the most crucial factor. Ultimately, it is up to the individual to decide what the best coin to stake is for them. Stablecoins are also an excellent choice to stake, as they are pegged to a fiat currency, making the crypto less volatile and susceptible to price swings. This could be a perfect way to get long-term reward without the risk. 

There are a few risks, mainly around volatility and price fluctuations in the crypto market. If you are in a locked staking contract, the value of your staked crypto could depreciate during the lock-up period. There is also a possibility of losing your stake, not receiving any rewards or not being able to withdraw your stake if the staking project is unsuccessful. But this is unlikely if you choose a more stable coin with a higher market cap, liquidity and volume. 

The high staking rewards are meant to incentivise users to hold and stake their coins, which helps to secure the network. Generally speaking, if you see a coin with a high potential return that seems too good to be true, it’s probably because that network needs your crypto to help the crypto grow, and the risks associated with growing that unestablished network are more significant than already established networks.

This depends on several factors, including the amount of crypto you have to stake, the length of time you stake, and the rate of return you earn on your investment. Generally speaking, the more crypto you have to stake, the higher the potential return. However, it is also important to remember that the longer you stake for, the greater the risk of losing crypto, as crypto markets are inherently volatile.

The easiest way to start staking would be to stake through an already established crypto exchange. You can do it yourself, but it is incredibly complicated. Exchanges like Kraken, Crypto.com and Coinbase are excellent starting points as they offer very straightforward and user-friendly staking tools. Still, it’s advised you check the T&Cs of each exchange, as an exchange like Coinbase doesn’t explicitly state that it takes 25% (this is rare) of any profits as a fee for providing the staking tools. 

This will largely depend on how much you invest and how long you stake your crypto for. If you are looking to generate a consistent and passive income, then staking your crypto could be a good idea. However, it’s important to remember that crypto prices are highly volatile, so you could lose money if the markets crash.

It is possible to lose cryptocurrency when staking, but it isn’t common. The main risk is if the price of the cryptocurrency falls sharply and crashes or if the staking pool is hacked. 

There are a few key advantages to staking crypto assets: 

  • Staking can provide a passive income stream, as rewards are often paid out daily, weekly, or monthly to those who stake their assets.
  • It can help to secure a blockchain network, as those who stake their assets are typically more invested in the success of the network. 
  • Staking can help increase the value of a crypto asset as the demand for the asset increases as more people stake it. 

There are also a few key disadvantages to staking crypto assets:

  • Staking can tie up assets, as they need to be held in a wallet to stake them.
  • It can be a risky proposition, as the value of a staked asset can go up or down, and there is always the potential of losing your stake if the asset’s price falls.
  • It can be complex, as it often requires understanding how the underlying technology works to set up a staking wallet correctly. But most crypto exchanges will do all of this for you in return for a fee.

Staking your cryptocurrency is mainly considered to be safe. However, you should always do your research before investing any money. Make sure you understand how the staking process works, the coin and blockchain you are staking with, and what risks are involved. You should also only invest money that you can afford to lose.

Staking works in a few different ways, and staking can be flexible or locked depending on the type of staking contract. In its most basic form, crypto staking is the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. Essentially, stakers provide their resources to help maintain the network in exchange for rewards. The specific process and requirements for staking vary depending on the cryptocurrency. For example, Ethereum staking requires users to deposit 32 ETH into a smart contract to become a validator, but any exchange you stake through will do this complex task for you. 

Crypto staking is the process of holding cryptocurrency in a wallet to support the operations of a blockchain network. When you stake crypto, you are essentially locking up your coins to support the network. In return, you receive rewards for your contribution in the form of new coins, transaction fees or more crypto.