There are plenty of opportunities in the crypto world that provide users with a steady stream of passive income apart from risky trading or complicated investment strategies. Well, staking your coins might be just what you need. Staking is when you lock your crypto assets for a certain period of time to help maintain the operation of a blockchain. In exchange for staking, you'll earn more cryptocurrency.
A lot of blockchains use a Proof-of-Stake (PoS) consensus mechanism. This means that network participants who want to validate new transactions and add new blocks to the blockchain must stake a certain amount of cryptocurrency. By staking, you're helping to ensure that only legitimate data and transactions are added to the blockchain.
If you're thinking of staking, it's important to note that there is a risk involved. If you improperly validate flawed or fraudulent data, you may lose some or all of your stake as a penalty. However, if you validate correct and legitimate transactions and data, you'll earn more crypto as a reward.
So, why not give staking a try?
MinePlex is a blockchain-based ecosystem of decentralized services, such as advanced payment solutions, a marketplace and business-focused crypto payment gateway. MinePlex has been making waves with its blockchain-based ecosystem of decentralized services since its launch in 2020. The project announced a phased transition to the new Tendermint Core architecture and the launch of two new tokens, XMine (MPX) and CrossFi (XFI).
With the MinePlex 2.0 blockchain utilizing the DPoS consensus protocol, MPX holders can stake their tokens and by choosing a validator and delegating their tokens. MPX is a non-volatile token that represents MinePlex's blockchain computing power and is needed to generate new XFI tokens, while XFI is a volatile utility token that provides access to MinePlex's ecosystem services and products. Since XFI will be traded on crypto exchanges with its price depending on the market situation, the return on staking may fluctuate. The project team set the target level at 7% per month, which in annual terms gives approximately 100% APY based on the economy and development strategy of the new MinePlex 2.0.
Those MPX sent to staking are immediately put into operation, and staker starts receiving rewards nominated in XFI. The coins obtained via staking can be withdrawn at any time. But it will take 15 days to withdraw MPX from staking in order not to disrupt the stable operation of the network.
MinePlex's dual token business model has already been successful on the previous version of the blockchain with its MINE and PLEX tokens, making it an exciting option for staking in 2023.
Optimal strategy: long-term investments
Staking rate: < 100% per annum
Risks: common risks associated with the cryptocurrency market, such as volatility and security
Ethereum is the largest blockchain in terms of capitalization, operating on the PoS consensus mechanism. A couple of years ago, new ETH were mined in the Ethereum network as a result of the operation of computing equipment, similar to how bitcoin still works. But to increase the speed and scale of the network, ETH core developers decided to upgrade and gradually transferred the blockchain to PoS. That’s where the EThereum history of staking started.
But here's the catch: to begin the Ethereum staking process, a validator must deposit at least 32 ETH into the official deposit contract address. Currently, staking on Ethereum 2.0 has a 4% annual percentage rate (APR), or 1.28 ETH if you staked 32 ETH. However, not everyone can stake 32 ETH. That's where liquid staking services like Lido Finance come in. Thanks to them, you can start staking even without owning 32 ETH. The service pools ETH with other users' funds until the pool reaches 32 ETH. It then creates a validator node by depositing ETH into an Ethereum smart contract and shares the staking reward proportionally among pool members.
But wait, there's more. Those who have staked 32 ETH in the Ethereum smart contract will not be able to withdraw their coins until the activation of the Shanghai update, expected in 2023. Since the smart contract for staking was launched in December 2020, investors fear a massive sell-off of coins that have been frozen for the past two and a half years. In this case, volatility and a drop in the ETH rate can balance the income received.
Optimal strategy: long-term investments
Staking rate: <4% per annum
Risks: high volatility in the near term
Polkadot (DOT) is a blockchain platform that paves the way for inter-chain communication and immense scalability. Its innovative heterogeneous sharding technique sets the foundation for the first-ever "internet of blockchains." By participating in Polkadot's nominated proof-of-stake (NPoS) consensus method as either a validator or a nominator, users can earn staking rewards. Validators are responsible for verifying transaction accuracy, while nominators keep an eye on the validators' behavior.
Nominators do not require a specific hardware or node to run. Validators must also operate a node and launch a cloud server. There is an implied minimum of approximately 120 DOT to nominate, as the network is limited to a maximum of 22,500 nominators. For validators, approximately 350 DOT is required to start, although the total amount needed varies.
Similar to Ethereum, DOT staking pools are available for those who lack sufficient DOT to start staking directly with Polkadot or prefer a "not your keys, not your crypto" approach. To cover staking fees, it is recommended to leave at least 1 DOT unstaked (do not stake 100% of your DOT). Furthermore, when selecting validators (10-16 is recommended), only use ones with verified identities and do not charge a 100% commission.
Optimal strategy: middle-term investments
Staking rate: <12% per annum
Risks: risk of being penalized if the validator you choose behaves badly
Algorand boasts lightning-fast and inexpensive transactions powered by its own proprietary Pure Proof-of-Stake (PPoS) consensus algorithm, making it a top contender in the blockchain space. Not only does Algorand support smart contracts, decentralized applications, and the issuance of digital assets, but it also fosters an ever-growing ecosystem of DeFi, NFT, and Web3 services, alongside a plethora of traditional economy solutions. Validators are chosen based on the amount of coins staked, giving higher staking accounts a greater chance to participate in the block creation process.
ALGO serves as the native currency of Algorand and is used for staking, paying transaction fees, running relay nodes, and as a governance token. Staking rewards are automatically sent to ALGO holders' wallets after each new block is created, and offer a return of approximately 6% per annum, subject to various factors.
Algorand employs a unique staking model, with node holders earning participation rewards by simply keeping a balance of at least one ALGO token in an on-chain wallet address. While these rewards may be small, the platform also offers governance rewards which can provide a higher yield of up to 10% APY, with a 3-month lockup period for governance rewards.
Optimal strategy: short and middle-term investments
Staking rate: <10% per annum
Risks: common to the entire cryptocurrency market, i.e. high price volatility and the security issues related to the network as a whole and its assets
BNB Chain is a decentralized blockchain network that seeks to enable developers to create decentralized applications (DApps) as part of the transition to Web3. Its ultimate goal is to create a unified platform for various projects such as the Metaverse, DeFi, GameFi, SocialFi, Web3, and NFTs. By staking your BNB, you are allowing the exchange to temporarily use your tokens to support the operations of the Binance blockchain network. Staking BNB helps to secure the asset’s Proof-of-Stake (PoS) network, facilitate decentralized governance, and improve the network’s resilience. You can stake BNB on various exchanges, including Binance, Coinbase, and Kraken, or choose to stake BNB using a hardware or software wallet. However, the rate of return on the tokens you stake is dependent on many factors, including the time frame in which you stake the tokens, the platform you choose, and other variables. The 30-day staking period, for example, will provide less than 3% per annum. Essentially, the less lock period you choose, the lower your staking APY will be.
Optimal strategy: long-term investments
Staking rate: 2,7%-9% per annum depending on lock period
Risks: regulatory framework and ties to Binance exchange
In summary, the cryptocurrencies listed above are some of the best options for staking in 2023. Keep in mind that staking rewards and rates of return can vary depending on the network, staking platform, and other factors. Staking can be a great way to earn passive income and support the growth of decentralized networks, but it's important to approach it with caution and diligence.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.