If you’ve decided to invest in crypto, staking is a great way to boost your returns. Many cryptocurrencies, especially newer ones, validate transactions using a model called proof of stake. With this model, people who own the cryptocurrency can stake it. That means they let their crypto be used by the blockchain to validate transactions.
In return for staking crypto, participants receive rewards on what they’ve staked. You could look at it like earning interest on what you have in a savings account. The big difference is that while bank account interest rates tend to be very low, you can often make 10% or more with crypto staking.
Like almost everything crypto-related, staking can seem confusing at first. It’s easier to do than you might think, and you’re free to unstake your crypto if you want to trade it later. Once you know how to stake crypto, you can start earning passive income from it.
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1. Learn about cryptos that offer staking
To start staking, you need to own a proof-of-stake cryptocurrency. These are the only cryptocurrencies you can stake. Fortunately, the proof-of-stake model is getting more and more popular because of how efficient it is.
Choosing the right crypto is the most important part of the staking process. A common mistake here is choosing a crypto solely because it offers enormous rewards. It’s always tempting to buy when you see a crypto offering 100% or more in yearly staking rewards, but many of these are poor investments that will plummet in price.
You should only buy a crypto if you feel confident it’s a good long-term investment. Look at staking as the cherry on top and don’t make it the only reason you buy.
There are lots of proof-of-stake cryptocurrencies you can consider. Here are a few of the biggest:
Ethereum (ETH) is also in the process of transitioning to the proof-of-stake model. It’s not 100% there yet, but it can be staked.
2. Buy the cryptocurrency you want
Now that you’ve learned about cryptos you can stake, the next step is to pick one and buy it. This may seem straightforward, but it’s important to consider where you’ll make the purchase. The simplest option is to choose one of the cryptocurrency exchanges with a built-in staking feature.
The reason to take your time here is because not every cryptocurrency platform lets you stake crypto. At the moment, most of the stock brokers and payment apps that sell crypto don’t offer staking. They also won’t let you transfer the crypto you buy off their platforms.
Read more:How to Stake Crypto in 3 Steps