money·3 min read

Looking for a Passive Way to Earn Crypto? Meet Staking

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Design: theSkimm | Photo: iStock
Jul 18, 2022

If you’re ready to start earning income from your digital assets without getting into trading or selling them, it might be time to start staking your crypto

What is staking crypto?

It’s when you lock your digital coins to earn interest (instead of spending them). Hi, passive income

Here’s how it works: Timeframes vary for how long you need to lock your coins in order to earn interest before you can use or trade your cryptocurrency. But the idea is that, while they sit, you can earn more crypto at a certain percent-rate, depending on the coin. Kinda like putting your cash in a high-yield savings account. Except with potentially higher returns.

Why is this a thing?

Because it’s a way for the blockchain to put your cryptocurrency to work.It all happens with “proof-of-stake'', which is a process used to verify and secure transactions even without a middle man.Aka a traditional bank or payment processor.When you stake, your crypto becomes a part of that process, which is why you get rewarded with returns. Buh-bye, trading.

How do I start staking?

First, you need to own the right kind of crypto. At the moment, your options are Cardano, Solana, and Ethereum, among a few others. Once you have your coins, here are three ways to start staking your crypto:

Make the minimum investment. 

Spoiler: It usually requires a substantial amount. Example: For ETH2, the minimum investment is 32ETH. Or over $50,000 as of the end of July. Read: This isn’t the move for most of us.

Join an exchange. 

Like Coinbase or Binance. Those aren’t the only options, but they are the most popular. Hint: Binance has over 60 coins that can be used for staking.And Coinbase doesn’t require coins to be bought on its exchange to be used for staking.

Join a staking pool.

If you don’t have thousands to spend on crypto, you can consider contributing to a pool on a platform like P2P or Stakin. Think: Like a virtual mutual fund for crypto. 

What are the advantages of staking crypto?

The main benefit of staking crypto is the high rewards you earn. Payouts can be disbursed daily or quarterly. Like digital dividends. And the more you stake, the higher your rewards.

Are there risks associated with staking?

Crypto values change. ICYMI, the market's been struggling lately. And price swings have always been wild.That means you could potentially end up taking a loss. Remember: Crypto staking requires you to keep assets locked, even if prices plunge. And when values drop, so do the payouts. There’s also a risk of pools getting hacked, resulting in major losses for multiple investors. Consider your options carefully before deciding whether or not staking is the right move for you. 

theSkimm

Staking crypto comes with tempting benefits. And who doesn’t want big returns? But it’s also risky, so it’s important to weigh your options before you lock in.

Updated July 29 to refresh the price of Ethereum.

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