Staking is a great way to earn crypto rewards and diversify your portfolio. Depending on whether you feel the need to dive into the technical details or just want to get a feel for how the process works, Staking can be either simple or complicated.
For most investors and traders, the main takeaway is knowing that staking is a way to earn rewards for holding certain crypto tokens. Even if you’re only looking to earn a bit of staking rewards, it’s still helpful to understand what staking is and how it works.
Read our simple guide to learn more about the basics of staking your crypto.
What is crypto staking?
Staking offers a way for crypto holders to put their digital assets to work and earn passive income without selling them.
You can think of staking as a way to put your coins to work earning yield. When you stake your crypto, you lock up your coins to help participate in running the blockchain and maintain its security. In exchange for staking, you earn rewards, which are calculated in percentage yield. The returns earned are typically much higher than any interest rate offered by banks.
How do you stake cryptocurrencies with SMART VALOR?
It’s easy to make your money work for you:
- Log in to your account
- Purchase crypto
- Go to the ‘staking option in the dashboard
- Choose the crypto you’d like to stake
- Enter the desired amount
- Select lockup period and confirm & you’re done
How does staking work?
The purpose of staking is to provide security to a blockchain. Staking ensures that all the transactions made on the blockchain are verified and secured. Individuals can be a part of this process when they choose to stake the coins they own. The reason certain cryptocurrencies can be staked is that they use a “consensus mechanism” called Proof of Stake.
The network participants, also known as validators or "stakers," need to purchase and lock away a certain amount of crypto tokens to participate in staking. Involving network participants makes it unattractive to act dishonestly in the network. If the blockchain were to become corrupted through malicious activity, the native token associated with it would likely plummet in price, and the perpetrator would stand to lose money.
To keep validators in check, the blockchain network can penalize them if they commit minor infractions, such as going offline for extended periods of time. They can also be suspended from the consensus process and have their funds removed (a process known as slashing). While this is rare, it has happened previously across some popular blockchains, including Ethereum and Polkadot.
Essentially, the stake serves as the validator's "skin in the game," as it ensures participants act honestly and for the network's good. In exchange for their commitment to the network, validators receive rewards in the form of the platform's native cryptocurrency. The bigger the participant's stake, the higher probability they have of proposing a new block and collecting rewards.
However, the stake doesn't need to consist of one person's tokens exclusively. Most of the time, networks run a staking pool and raise funds from a group of token holders through delegation.
This also lowers the barrier to entry for more users to participate in staking. Any token holder can join in the staking process by delegating their tokens to stake pool operators who take care of all the heavy labor involved with blockchain transaction validation.
Every blockchain has its own set of rules for validators. For example, Ethereum's blockchain requires each validator to stake at least 32 ETH.
Crypto Staking Pros and Cons
| Pros | Cons |
|---|---|
| More energy efficient than mining. | Value of staked crypto isn’t constant |
| Less risky than traditional trading. | Some platforms have lockup periods, meaning you won’t have access to your crypto for a certain period of time. |
| Potential for high returns while earning passive income. | The need to split your returns and pay fees if you join a staking pool. |
| No need for any specialized equipment. | Comes with a learning curve. |
| Satisfaction of playing a key role in a crypto project you believe in. |
Which cryptocurrencies can you stake with SMART VALOR?
Here are some of the cryptocurrencies that you can stake with SMART VALOR:
- Ethereum: Ethereum was the first cryptocurrency with a programmable blockchain that developers could use to create apps. While Ethereum started out using a proof-of-work mechanism, it’s now transitioning to a proof-of-stake model.
- Dash: Dash is an open-source blockchain and cryptocurrency focused on offering a fast, cheap global payments network that is decentralized in nature. According to the project's white paper, Dash seeks to improve upon Bitcoin (BTC) by providing stronger privacy and faster transactions.
- Kyber Network: Kyber Network is a hub of liquidity protocols that aggregates liquidity from various sources to provide secure and instant transactions on any decentralized application (DApp). The main goal of Kyber Network is to enable DeFi DApps, decentralized exchanges (DEXs) and other users easy access to liquidity pools that provide the best rates.
- Valor: VALOR is the exchange’s native cryptocurrency issued by the Switzerland-based company SMART VALOR AG. VALOR is used on the SMART VALOR platform primarily as a means of payment and for staking. Using VALOR for payment has the advantage of reducing transaction fees.
Is staking profitable?
Staking can potentially be a profitable way to invest your money. It allows you to earn passive income, and it’s often viewed as the crypto world’s equivalent of earning dividends or interest while still holding onto your underlying assets.
Generally speaking, crypto staking offers investors solid annual returns - returns that can exceed those earned through a traditional savings account. However, staking does not come without risk. Keep in mind that you’ll be earning rewards in crypto, which is a volatile asset. In some cases, you also need to lock up your crypto for a set period.
There’s also the chance that you could lose some of the crypto you’ve staked as a penalty if the system doesn’t work as intended, though this is quite rare. That said, staking crypto can be a great way to grow your portfolio using the assets you plan to hold for a while.
Staking also offers a more energy-efficient way of running a network than mining, as it uses far less computational power. This is not only good for the planet, it is also more profitable for those securing the network when compared with other methods of securing blockchain networks.
Stakers at SMART VALOR can also earn extra on top of their normal staking rewards. When you stake with us, you can redeem an extra 20% when you choose to get paid in VALOR
Advantages summary
- No need to acquire hardware and run software protocol yourself
- No need to arrange a complex security process to secure your private keys yourself
- Benefit from custody security of a regulated crypto exchange, which is registered in one of the most prestigious jurisdictions with an advanced regulatory framework for cryptocurrencies.
- Take advantage of one of the most competitive rates in staking available today
Passive income for long-term believers of crypto
Anyone that stakes their crypto is taking an active role in securing the network and receives tokens in return. These rewards depend on network activity, stake size and how much is currently staked on the blockchain in general. Staking is an easy and transparent way to both support the Ethereum blockchain and earn up to 4% in Ether passively p.a.
The event everyone is anticipating
Staking is the word on everyone’s lips at the moment. That’s because, after years of anticipation, the Ethereum merge is finally here. This means big changes for cryptocurrency and investors alike.
The Merge is an event in which the Ethereum blockchain switches to Proof-of-Stake (PoS). This is exciting because it’s a first for the industry and it means that many more investors will have the opportunity to get involved with the network and earn passive income from their digital assets.
🌱 A greener choice
The upcoming Merge means that staking will both play an important role in the industry, as well as give investors a new benchmark for earning responsibly.
Proof-of-Work required expensive computers that used lots of energy, meaning very few people could really afford to take part. Now, staking gives ordinary cryptocurrency enthusiasts the opportunity to contribute to the industry without any special equipment whatsoever and no significant increase in energy costs.
In fact, Staking will reduce Ethereum’s energy consumption by an enormous 99.95%, meaning it becomes an even more attractive investment to eco-conscious investors.
To celebrate the launch of our new feature, we’re offering you the chance to double your staking rewards in VALOR when you stake your first ETH with us. Find out more here.
Now, it’s time to do deeper research into the tokens available for staking. Then, you can choose a staking method so you can begin earning rewards! To begin staking your crypto portfolio, sign up for SMART VALOR today.