There are a lot of crypto staking misconceptions that you and I have been believing all along.
Either as a result of being misled by other traders or just painting a picture in our mind of what we expect.
But let’s not be led by assumptions since that could cost time and money.
That is, the time you would’ve invested in other potentially profitable schemes. And the money you would’ve saved up for other things.
While learning about these misconceptions, you’ll also get to know what staking cryptocurrency is.
There’s also an outline of the best platforms and wallets for staking crypto in case you’re all about investing in this niche.
Keep in mind that you can choose to be a day trader, swing trader, an investor, or even all three.
Staking caters to the need of the last group of traders who’ll rather hold their beloved asset for months and even years while earning on the side.
Let’s take a closer look at what all of this entail and the top staking misconceptions in the crypto market.
What is Staking Cryptocurrency?
When you lock up your crypto asset on a blockchain, you are staking it.
You earn a reward for staking because you’re promoting the security of that blockchain network you staked on.
You could stake on Ethereum, Cardano, Terra, Solana, Avalanche, Binance, and several other blockchain networks.
But let’s get a bit technical.
You’ve probably heard of proof of work (PoW) and proof of stake (PoS) consensus mechanism.
The first means you’ll be using your computer resources (hardware and electrical power) to compete with other miners to earn crypto.
The second means you’ll need to stake your crypto as collateral to earn more crypto.
Why do any of these?
You’re working to verify transactions that are to be added to the blockchain.
And this is what crypto mining is all about.
What does mining have anything to with staking? A lot!
That’s because the setbacks of PoW led to the launch of PoS.
A major setback is the high energy consumption of the mining process.
A miner needs high-end devices and a good power supply to verify these transactions.
The difficulty in mining and high energy use required that less memory and energy-consuming mining process is launched.
And that led to crypto staking.
Here, you stake what you have for a chance to become a validator on that particular blockchain network.
But then you use less energy to do the same work (record transactions) as a miner on the PoW network.
Sounds cool right?
I bet it is!
Top Crypto Staking Misconceptions
The top crypto staking misconceptions are:
- Staking rewards are certain.
- More funds is needed to stake.
- Staking is not environmentally friendly.
1. Staking Rewards are Certain:
It’s true you get a reward when you are a validator.
However, the reward could change every now and then due to certain reasons.
The first reason is if your reward or stake is slashed as a result of punishment.
The punishment could be a result of verifying the same transaction twice.
It could also be due to your inconsistent online presence.
Networks such as Solana and Polkadot use these measures to ensure validators pay close attention and do their due diligence while working.
They go as far as creating a jail period that slows down when you get your reward.
Another reason why your reward might not be what you expect is the commission the network charges on your earnings.
As a validator, you’re allowed to state how much you charge but that can be changed due to the commission levied on your rewards.
So you see, it isn’t crafted on stone that you’ll get what you expect every single time.
2. More Funds are Needed to Stake:
Staking sounds technical and it is for the rich crypto investor.
But really it isn’t.
You can join staking pools and contribute your crypto with other members of the pool.
What does this mean?
If 32 ETH is the minimum stake required to be a validator, you can contribute or stake even less.
And that’s with the help of the staking pool.
You’d, however, have to keep in mind that your returns are the same as what you could potentially get in the long run.
This means the amount you’d staked determines your return.
3. Staking is Not Environmentally Friendly:
Staking combats one of the major challenges posed by crypto mining.
And that is the high energy use and pollution emission into the environment.
China, for instance, has time and again categorized crypto mining among the list of sectors that are wasteful.
Reportedly, Bitcoin mining consumes 0.55% of the world’s electricity.
One can expect that verifying transactions with PoS consumes way less.
That’s because complex mathematical problems are not required to be solved just to maintain the blockchain’s integrity.
Large mining fields that release whose power plants release toxic materials into the space are significantly eliminated.
And as such, the emission into the environment is comparably less.
Best Platforms for Staking Crypto
The best platforms for staking crypto are:
- Binance
- Coinbase
- Gemini
1. Binance:
Binance is the world’s top crypto exchange.
Hence, it doesn’t come as a surprise that its staking platform is among the best.
Binance has been in operation since 2017 and within that time it has shown to be reliable.
And when it comes to staking, the exchange offers a wide range of projects to stake and earn money from.
They’re at least 100 of such projects, as such, you can research which is most suited for your needs.
This staking comes without a fee.
That leaves more of your capital to yourself than having it slashed in fees.
Binance supports payment methods like Bank transfers, credit cards, cryptocurrencies, etc.
This provides several convenient channels to fund your trading wallet and then purchase crypto of your choice to be staked.
The supported staking type on Binance is flexible, locked, and Defi.
2. Coinbase:
Coinbase also ranks top on the list of the world’s crypto exchanges thanks to its high trading volume and user base.
The American company was launched in 2012 and has been around long before Binance.
That’s important if you’re all about trusting an older exchange to a new one.
What’s more, FCA and FinCEN regulate this exchange which gives it one more layer of security.
You can stake six crypto assets on this Bitcoin exchange.
Some of these tokens include Ethereum (ETH), Algorand (ALGO), Cosmos (ATOM), USDC, and Dai (DAI).
Unlike Binance, staking is not free on Coinbase. There’s a 25% fee levied on your rewards.
You’d agree Coinbase staking service doesn’t come cheap.
On the other hand, the exchange’s supported staking type is locked.
3. Gemini:
Gemini is a US-based crypto exchange that was launched by the Winklevoss twins in 2014.
The New York State Department of Financial Services (NYSDFS) regulates this exchange.
Its fees range from 0.5% to 3.99% which depends on the deposit method used.
This fee is considerably lesser than what Coinbase charges even though it is higher than what Binance offers.
It is still one of the best sites to stake crypto.
Best Staking Wallets
Some of the best staking wallets are:
1. Atomic Wallet:
Atomic wallet is a decentralized wallet app that was launched in 2020.
And today, a good number of tokens can be staked right from the wallet.
These tokens include:
- Tron (TRX)
- Icon (ICX)
- Tezos (XTZ)
- Neo (NEO)
- Zilliqa (ZIL)
- Solana (SOL)
- VeChain (VET)
- Komodo (KMD)
- Algorand (ALGO)
- Atomic Wallet (AWC)
- Band Protocol (BAND)
You’re free to choose a validator of your choice to stake.
You can also unstake whenever you want while using the Atomic wallet.
Your staked rewards are automatically transferred to your wallet.
However, there are certain coins that require manual claiming.
2. Exodus Wallet:
Exodus wallet was launched in 2015.
The wallet can also be used to stake some of the best proof of stake cryptos.
These assets include:
- Tezos (XTZ)
- Solana (SOL)
- VeChain (VET)
- Cardano (ADA)
- VeThor (VTHO)
- Cosmos (ATOM)
- Ontology (ONT)
- Algorand (ALGO)
It’s worth noting that you can download the Exodus wallet on Android and iOs devices.
The platform also has a dedicated app for tracking rewards.
3. Ledger Live Wallet:
Staking can also be carried out using the Ledger Live wallet from Ledger
This wallet supports over 100 cryptocurrencies.
And out of these numbers, at least 10 can be staked.
The supported assets to be staked on Ledger wallet include:
- Tron (TRX)
- Neo (NEO)
- Nem (XEM)
- Terra (LUNA)
- Cronos (CRO)
- Elrond (EGLD)
- Cardano (ADA)
- Cosmos (ATOM)
- Ethereum (ETH)
- Internet Computer (ICP)
Frequently Asked Questions
Here are answers to some frequently asked questions.
1. Can You Stake Bitcoin?
Bitcoin uses a proof-of-work consensus mechanism.
As such, Bitcoin cannot be staked like other cryptocurrencies that use the PoS model.
2. Is Crypto Staking a Good idea?
Crypto staking may be a good idea if you’re a long-term investor.
Let’s say you want to force yourself to hold on to that BNB, Sol, Algo, etc., and not be tempted to cash in every time there’s a significant rally.
On the other hand, it might not be a good idea if you rely solely on trading as a source of income.
That means you’ll be on your toes to see how the price of the asset pans out even if it’s in 30 days’ time.
Therefore, decide if you want to hold long-term for major profits or if you’ll rather day or swing trade the same asset.
3. Are There Any Cons to Staking Crypto?
Yes, there are several cons to staking crypto.
The first is when the asset you’ve staked devalues during the lock-up period.
Let’s take Pancakeswap Token for instance.
During the 2021 bull run the asset was priced at around $25 per token.
And a lot of people staked CAKE in hopes of a massive return in the long run.
But at the time of writing, CAKE is now priced around $3.
While that may not really be a cause for concern especially if you have long term staking goals, you’re banking on the hope that CAKE could revisit its previous highs.
What if it doesn’t?
The same goes for other digital assets that can be staked.
Who says the project will still rally or be around after the bear market?
But let’s hope you did your research well before staking any asset.
It would’ve been nice if the dollar value at the time you staked is used as the staking amount and not the coins in question.
So what can go wrong with staking?
Alot!
- The staked asset might not revisit its previous highs.
- The project backing the project might disappear into thin air.
- Your staking reward might be reduced.
At the end of the day, it’s often advised that you do not invest more than you can afford to lose.
Final Words
These crypto staking misconceptions are believed till date until maybe the investor discovers it themselves.
Therefore, if you’re looking to stake for profit, it’s important to be aware even before you proceed.
You stand to benefit more from this process knowing fully well that your earnings depend on the staked amount.
And if you’re peculiar about saving the environment, you can stake conveniently without guilt that your actions could be impacting the environment negatively.
Now go ahead and choose the right project to stake in.
