In this post, I explained the two Cryptocurrency Staking types – Staking on PoS blockchains and Staking on Decentralized and Centralized platforms.
Both staking types have their pros and cons.
To decide which option is best for you, read this post to the end to know how each of them works.
Let’s get to it!
Cryptocurrency Staking Types
As mentioned, the two types of Cryptocurrency staking are:
Let’s take them one after the other…
1. Cryptocurrency Staking On PoS Blockchains
In Proof of Stake blockchains, validators stake or lock up their assets to qualify them to confirm transactions and add new blocks.
This earns them block rewards and transaction fees as incentives.
You need to hold a substantial amount of the blockchain’s native asset to be a validator.
Otherwise, you can delegate your assets to an existing validator and share in his rewards.
(Learn more about PoS blockchains here)
Pros Of Cryptocurrency Staking On PoS Blockchains
- PoS blockchains are secure and stable.
- Transactions are processed fast and so are your rewards.
- You can contribute to the governance of the chain.
- Well, you can only stake and earn rewards from the network’s native asset.
- Sadly, the value of the asset fluctuates in response to the health of the crypto market.
- Also, you have to lock up your funds for a long time.
- Again, you may not meet the minimum staking requirement to be a validator as it is usually high.
- So, you’re left with the option of delegating, which leaves your reward at the mercy of the validator.
- And you can only have what he is willing to give you.
- Then, if he misbehaves and his staking is slashed, you may not get anything at all. Oops!
PoS blockchains with great potentials that you can stake their tokens include Cardano, Polkadot, Cosmos, Binance Smart Chain, Algorand, Tezos, etc.
Now, let’s talk about the second type of staking.
2. Cryptocurrency Staking on Decentralized and Centralized Platforms
This type of staking involves locking up your funds in decentralized or centralized platforms.
Rewards for this staking type stem from 3 major areas namely:
- Lending – here, you are rewarded from the interests borrowers pay. Both DeFi apps and some Centralized Exchanges offer lending services.
- Liquidity mining – rewards come from the trading fees on the trading pair that you are providing liquidity to. Liquity mining is very common in DEXs.
- Yield farming – you earn from both liquidity mining and distribution of new coins.
(Read this post to learn more about the reward models mentioned above)
Let’s see the pros and cons of cryptocurrency staking on decentralized and centralized exchanges.
- First of all, you can stake as many coins as you are bullish about and earn from all of them.
- Plus, some of these coins are stablecoins which do not fluctuate in price.
- Again, it is flexible. You don’t need to lock up your funds forever.
- Most platforms have various investment plans that you can opt for.
- So, you can lock up your funds for less than a month and withdraw your earnings.
- Later, you can choose to stake them for a longer period and earn more.
- Lastly, these platforms boast of high liquidity and rewards are usually very lucrative.
- Talk about up to 18% APY for hodling your crypto in a wallet.
Ain’t that great?
- There’s a smart contract risk especially in yield farming
- For the centralized platforms, you will need to complete KYC.
- And of course, there’s that reality of you not having absolute control of your funds.
So, in which platforms can you stake your assets and earn big?
- Lending – Crypto.com, Binance, OKEx, Compound, AAVE, MAKER, etc.
- Liquidity mining – Uniswap, Balancer, SushiSwap, 1inch, PancakeSwap, etc.
- Yield farming – Yearn.Finance and Nominex
Fun fact: by staking the native assets of PoS blockchains on Decentralized and Centralized exchanges, you’re indirectly contributing to their governance because you’ll be increasing the staking power of those exchanges, which are supernodes or validators for some of the PoS blockchains.😏
It’s time to decide 👇
Which Cryptocurrency Staking Type Is Best For You?
Weighing their pros and cons, I prefer to stake my assets on Decentralized or Centralized platforms.
That way, I can earn from each of them and withdraw my earnings conveniently.
Being able to stake PoS tokens on these platforms is also an advantage.
Again, there are 3 reward models obtainable in this cryptocurrency staking type unlike staking on PoS blockchain staking where you earn via one channel alone.
Nevertheless, these are just my thoughts. You are free to opt for your preferred cryptocurrency staking type.
This is where I’ll draw the drapes in this post. I hope you enjoyed reading it.
Also, I’d love to know which of the cryptocurrency staking types you feel is more convenient and profitable.
Tell me in the comments section right now. Feel free to ask any questions you may have as well.
Before you go, please share this post with your friends, thank you!