In the world of crypto, staking represents a fairly low-risk way of generating passive income on your assets. Best rewards for staking your crypto can be obtained either by holding that asset into a wallet, by locking it in a decentralized staking pool, or by using a third-party staking service. By staking a specific cryptocurrency asset, you are helping in securing that network and making it more sustainable in the long term.
I will not go into the technical details on how staking works at this time, it will be a topic for a future article.
There are two types of crypto staking: decentralized and custodial.
With decentralized staking, you have control of your crypto at all times by holding and staking them in your wallet. You are the only one who has access to the private keys.
Decentralized staking can be done using several devices and software. These can include:
- Hardware wallets (Ledger Nano S)
- Laptop / PC (Atomic Wallet, Exodus, Metamask, Guarda, Math Wallet)
- Server or even a Raspberry Pi (by installing and running your own node for a specific cryptocurrency)
- Android/iOS phones (Maiar, Trust Wallet, Coinomi, Abra, ZenGo, Edge)
Pros and cons of decentralized staking
- you are in control of your private keys
- you are in control of your crypto assets
- you don’t depend on a third party
- for certain assets, you can earn even better returns by running your own node
- you are the only one responsible for securing your keys and updating your wallets
- no insurance for losing your assets
I put together a list of cryptocurrencies that I consider to be the best rewards for staking. The filtering criteria I used for this list were the following:
– coin must be in the top 200 on Coinmarketcap
– must have a usable, live product
– launched for at least one year
– security audit passed
– good reputation
– min. 4.5% per year return rate from staking
Please note that the listed return rates are not fixed, and may suffer future changes, depending on each protocol. This list contains the estimated return rates calculated based on a past 30-day average. More details can are available here.
Best rewards for staking your crypto using using decentralized methods:
Custodial staking implies holding your cryptocurrency assets on a third-party platform. It is somewhat easier to start with than decentralized staking, as you don’t have to install and update the wallet(s). It only requires one device, such as a phone or laptop. This method of staking does require a high level of trust in the respective third party.
Pros and cons of custodial staking
- to certain limits, your assets will be covered by an insurance policy (different for each platform)
- it saves the hassle of not dealing with wallet installations and upgrades, as well as with safeguarding private keys and backups
- better return rates for stablecoins compared to decentralized staking
- you don’t technically own your crypto assets (“not your keys, not your coins!”)
- limited selection of cryptocurrencies available for staking
- based on feedback from other customers, withdrawing crypto assets can be problematic in some cases
Custodial crypto staking services include exchanges like Binance, Kraken, Kucoin, Bittrex. These offer staking for a wide range of cryptocurrencies and stablecoins. One advantage of using a crypto exchange is that some of them (Binance, Kucoin) also offer the option of staking your coins for a limited time (15/30/90 days).
Besides exchanges, there are also some specialized platforms that offer crypto staking. The most popular such platforms are Celsius, Nexo, SwissBorg, BlockFi and Crypto.com. The difference between these platforms and traditional crypto exchanges is their business model. For example, an exchange like Binance makes most of its profit from trading fees. A custodial platform like Celsius makes their profit from lending assets for higher interest rates compared to the staking rates they pay.
Best rewards for staking your crypto using using custodial platforms:
As mentioned, these staking rewards are not fixed. Because of this, it is difficult to calculate exactly how much you will earn in a year/month/week based on your crypto. The returns are, however, much better than the ones offered on savings accounts by banks. For that reason alone one should consider adding crypto staking to his/her investing portfolio.
If you want to read more on how I choose to build my crypto portfolio as well as which are my best performing cryptocurrencies for this year, check out my previous post here.
My personal approach for staking crypto is the following: to take advantage of the best yearly rewards, I use both decentralized and custodial staking providers. I use a Ledger wallet to stake long-term cryptocurrency holdings such as BTC and ETH. I use Celsius for staking stablecoins (USDC). For shorter-term cryptocurrencies with higher, more volatile return rates, I use Binance.
In my opinion, cryptocurrency staking potential is huge at the moment. Compared to traditional financial services, it has an edge that will most likely attract more and more people. It is one of the best use cases for blockchain technology, and it is something that I don’t want to miss out on.