Staking Crypto — Let your money make money for you.
I’d be lying if my browser search history wasn’t full of “passive income” queries in the last few years. I’m always looking for ways to make money with my money. None of us want to work forever and while I’m privileged and fortunate to have an income that sustains me, I’m always asking, how can I turn this into more.
So let’s dig into how you can make money off your crypto using Staking.
Before I begin, let me state that I am in no way a financial expert or consultant. I’m simply a software developer who likes to blog. Investing comes with risk so invest with lots of research of your own. This is just my experience.
What is staking?
Crypto Staking is a way to earn interest in the cryptocurrency you hold in a wallet. This usually happens via a “staking pool” which you can think of as being similar to an interest-bearing savings account. The nice thing about crypto staking is that it usually has a better APR than your bank(s) are willing to offer!
How does Staking make interest?
Basically, the crypto blockchain utilizes your staked crypto to help ensure that its transactions are verified and secured. This is called Proof of Stake (POS). An alternative to Proof of Work (POW), the POS can mine or validate block transactions based on the amount of coins a miner holds. POW requires huge amounts of energy, while POS gives mining power based on the percentage of coins held by a miner. POS is also seen as less risky for the potential of miners to attack the network.
With each transaction that your wallet is a part of to validate and secure, you are rewarded with a portion of the fees.
What are the benefits of Staking?
- Easy to get started! You don’t need expensive hardware as you do with mining crypto. All you need is a software or online wallet that supports staking! In my case, I use both Coinbase.com and the Exodus Desktop wallet to stake multiple coins.
- Earn passive income. Once you’ve staked your crypto, you can set it and forget it. Check back in a few weeks or months and collect your gains.
- Low Energy Consumption. Unlike mining, you don’t need to use any energy at all on your end. No increased electricity bill.
- Minimal startup costs. All you need is a few coins that support staking to get started. If you don’t have extra money to throw into buying these coins, there are lots of ways to earn crypto! See my previous articles on how to earn coins with coin drops and mining.
What are the downsides of Staking?
- Coin market fluctuation. You are investing in coins that can fluctuate in value over time depending on the market, so be prepared to see your profits go up and down. In my experience, I’ve always come up with a positive ROI from staking my coins compared to investing in the stock market.
- Your coins are locked while staked. Depending on the coin, you may or may not be able to perform transactions while your coin is staked. Some coins can be quickly unstaked and available in your wallet while others can take days/weeks to become available again when you decide to unstake them. Before staking, you should do your own research on the coins to determine which ones you are comfortable with not having immediate access to.
How to maximize your earnings.
- Avoid withdrawing your rewards too often. You will most likely have to pay a transaction fee to get your rewards into your wallet. Some coins will automatically deposit, others will stockpile until you are ready to request a withdrawal of your earnings. I’d recommend if you will incur a fee, to only collect your rewards once or twice a month.
- Re-invest your earned rewards into the stake pool. As soon as I collect my rewards, I put them right back into the staking pool to earn more interest. The goal behind this is to make compound gains. The more coin you hold for staking, the more likely you will be used to validate transactions and receive fees.
- Diversify your staking portfolio! Like stocks, coin values fluctuate. You should have a diverse portfolio of different coins that are being staked to reduce your chance of loss due to a coin losing its value. It's safer to hold many coins.
- If you can, invest your spare money in more coin staking. If you have extra cash at the end of the month, put it in another coin or get some more coins that you are currently staking. I try to put a couple hundred each month into my portfolio to maximize my interest over time.
Where can I start Staking?
- Download the Exodus Wallet to get started with a software-based wallet.
- Create an account with Coinbase to stake online.
So far on the $2,000 I’ve invested through Exodus, I’ve earned about $20 in rewards over the past 2 months, an 8.16% average APY on my holdings.
I try and put $200–500 additional USD worth of coins into my wallet each month and have begun to diversify into new coins as they become available to stake.
If you would like to get updates on my progress in a few months, feel free to subscribe to my Medium page. Thank you.