To answer what is the cryptocurrency staking you will need to know more about this topic. It could be a little bit confusing at first, but after reading this article you will understand what it means. After smart contracts, decentralized finance can be considered one of the busiest innovations the crypto-industry has seen so far. It is no surprise that they are pushing Ethereum to new historical highs. DeFi has thus opened up an ocean of opportunities for its users to build passive income.
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What is DeFi?
As the name suggests, DeFi or decentralized finance refers to financial services and a lack of central authority. They exclude brokerage firms, stock exchanges, or banks from offering traditional financial instruments. DeFi could be defined as a combination of conventional banking services and blockchain technology. Their features include cryptocurrency trading, loans, interest accounts, and staking. In other words, there are many opportunities for retail investors in the DeFi area, especially if the goal is to earn a passive income.
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Institutional players are also entering the DeFi sector
Humbuk has reached a point where even traditional banks have begun to study decentralized finance. According to Ruangroj Poonpola, chairman of Kasikorn Business Technology Group (KBTG), a KBank technology subsidiary, KBTG recently established a subsidiary called Kubix, which will work with the Thai Stock Exchange to act as the initial digital token coin portal. What else is needed to demonstrate the viability of this idea when even regulated institutions are considering integrating DeFi technology? No matter how it sounds, DeFi is on its way to a revolution in the financial industry, just like the blockchain used to be.
Staking DeFi is the best alternative for gaining passive income
We all know the phrase that money should work for us, not the other way around. For this reason, our parents would put their money in a savings account to get a higher interest rate without taking too many risks. Unfortunately, those great days are long gone, so we should start looking for something new. DeFi staking, for example, allows people to earn interest simply by holding cryptocurrencies without any transaction or trade.
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What is cryptocurrency staking?
This is an activity in which the user locks or holds his means, i.e., cryptocurrencies, in his wallet to participate in the operation of the blockchain system based on proof-of-stake (PoS). It’s similar to cryptocurrency mining in that you help the network reach consensus and reward the participating users. Holding cryptocurrencies is a similar activity to depositing money into a savings account. You lock up cryptocurrencies for a certain period in return to receive rewards in the form of additional cryptocurrencies. The process is straightforward:
- Buy assets
- Select the asset you want to stack
- Get rewards
How to choose a cryptocurrency for staking?
It should be borne in mind that not every cryptocurrency operating on the PoS consensus offers similar rewards and conditions. For example, to download ETH 2.0, you must have at least 32 ETH and an be an ETH1 network client. To become a staker on Tezos, you must have 8,000 XTZ coins and run the whole knot. It is also essential to remember that the more coins are held, the greater the rewards.
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The three best cryptocurrencies for staking
You have to consider the rewards and the overall staking conditions, such as the minimum deposit, lockout time, withdrawal rules, etc. From this point of view, three projects stand out: ICON, Stake DAO, and NBU.
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In the case of ICON, we are talking about a Korean blockchain designed based on a consensus delegated proof of equity (DPoS) algorithm. It allows block manufacturers to verify transactions in seconds, providing faster transactions than PoS and PoW. But the best part is that the remuneration payments at ICON reach up to 36% per year. Also, keep in mind that running an I-Rep node requires a professional hardware setup, and you must have enough funds or votes to get into the Top 100.
On the other hand, Stake Dao eliminates the need to stack assets on multiple platforms. This feature is important because it brings simplicity to the process. From Stake DAO, users can find the best of Defi and choose from the best products to help them beat the market. The Stake DAO platform receives performance and withdrawal fees for the strategies offered. These fees are then redistributed to the holders of the stacked SDTs. Currently, the level of remuneration is over 50% per year.
Nimbus, behind the NBU, worked hard on the tokenization and reward system. Let’s start by mentioning that there are two types of staking: soft and hard. They differ mainly in choice, deposit, and percentage of rewards, so you can choose what suits you best. As common sense suggests, hard staking will involve withholding funds for a while in exchange for a higher reward percentage (up to 40% per year). It’s worth noting that you’ll be able to receive rewards every second without a claim so that you can pick them up at any time.
Another great thing is that the NBU is still gaining strength and attracting new users every day. And the reason is quite apparent – perfect conditions for staking. In addition, the Nimbus team cut NBU supplies for faster token valuation.
Staking is an exciting way to make money. You can also do so through stock exchanges. For example, Binance offers a convenient and easy way to stack several coins, but this may not be the most ideal for long-term holding. Stock exchanges are a frequent target of hackers, and resources are more endangered here. Crypto wallets such as Ledger, Exodus, Atomic Wallet, Trust Wallet, and many others are much more suitable.