Evidently, crypto is going through bear market conditions, with 2021 being a bleeding year for DeFi space. Even so, the total value locked in Defi is still going through an upward slope, citing an increasing number of stakers.

But, what is staking crypto? And why is there a hype around crypto staking.

Let’s find out!

This blog will talk in detail about crypto staking,  its benefits, working mechanisms, and best crypto staking platforms of 2022.

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What does Crypto staking mean?

Crypto staking is all about turning your passive cryptocurrencies into profit making entities. Staking is achieved by locking cryptocurrencies into smart contracts powering decentralized finance protocols.

The Defi protocols offer interest on investments and governance tokens to incentivize users to lock their digital assets and stake them through risky smart contracts.

In 2020, staking in Defi skyrocketed in value, exploding the size of its market cap. But then in 2021 the picture took a downturn shifting the focus of staking from Defi to NFT.

Let us now understand how staking crypto works.

How does crypto staking work?

For earning staking rewards, you have to look for crypto-staking platforms. It involves locking up your digital assets in staking pools of Proof-of-Stake network.

In a PoS platform, staked assets are used for validating transactions, to earn passive staking profits, which is the essence of the PoS consensus mechanism.

Every staking platform has diverse requirements such as minimum number of coins that can be staked, staking period, and others.

Simply, you have to attach your crypto-wallet directly to the staking platform. The rewards are mainly based on the number of validated transactions for each node. However, the quantity of staked coins determines the amount of transactions assigned to each node for validation.

Staking assists a network in reaching consensus while compensating members that participate.

Let us have a look at staking on an Exchange platform, taking Binance as an example.

Note: For staking coins on Binance you need to have a Binance account and coins for a specified platform you choose for staking.

Step 1: Open Binance.com and go to Earn as shown below.

Step 2:  Go to Binance Earn and choose Staking

Choose the staking option you are looking for.

Step 3: Let’s choose ETH 2.0 staking

Step 4: Login in to your Binance account and lock your Ethers.

Note: Here you need to lock your Ether for a minimum period of 2 years. Binance tokenizes BETH as the only proof of your staked ETH in a 1:1 ratio and distribute rewards in BETH.

Step 5: Your staking reward balance can be checked post logging in to Binance account and transiting to the Spot wallet.

Now that we know how the crypto staking works, let us look at the different staking options available.

What are the different staking options?

There are a number of ways of earning cryptos by locking cryptos at various staking platforms. Let us look at different ways of doing so.

• Decentralized Finance

Defi staking refers to holding crypto assets in order to join a layer-1 blockchain or a DeFi protocol as a validator. Locking fungible or non-fungible tokens inside smart contracts is referred to as “staking crypto assets.” Additionally, users receive compensation for the tasks their stake carries out in exchange for staking crypto assets.

Example of Defi staking platforms: Maker, Synthetix, compound, and Yearn finance

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• Decentralized Exchanges

With an enlarged user base for crypto-exchanges, staking offers a diversified source of income for traders, helps in monetizing their idle

funds on exchange.

Some of the leading cryptocurrencies exchange trading platforms are: Binance, Coinbase, Celsius, BlockFi, Gemini, and others.

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• NFT Staking

It alludes to locking up your digital assets on a Defi platform. In practice, it pays NFT holders depending on three main factors: the annual percentage yield, the staking time, and the quantity of NFTs maintained at stake. You can obtain this while still being the holder of your digital assets, earning cryptocurrency by staking NFTs.

• Stablecoin Staking

In the present low interest rate climate, staking stablecoins is a fantastic method to keep your money invested and generate dividends while minimizing market volatility.

• Cold Wallets

Staking at private wallets or Cold Staking does not require stakers to confirm transactions or become validators.

The cold staking collects 40% of overall mining award and distributes it among the cold stakers in proportion to their crypto assets, it implies, stakers earn a passive rewards by locking their crypto assets, hence, it’s a much secure and energy efficient way of earning passive income with crypto.

• Staking-as-a-Service (SaaS) Platforms

Allowing Proof of Stake cryptocurrency owners to participate in consensus through a reputable staking provider, like as an exchange or financial institution, is known as staking as a service. These platforms charge a fee for this service, which they offer to optimize returns for their clients.

SaaS are dedicated platforms to staking also called Soft Staking.

What are the pros and cons of Staking Crypto?

With the incoming Proof-of-stake mechanism, staking presents an enticing investment opportunity for crypto-users.

Here are some of the benefits of crypto staking.

• Staking a simple approach to earn passive money.
• Stakers typically pay small entry fees.
• Getting started is normally quite easy.
• Rewards are usually greater than anticipated when the interest rate is taken into account.

Staking is straightforward and may be completed in a few clicks, especially with the addition of staking services by well-known exchanges. Users don’t need a lot to get started, and staking utilizes little energy in comparison to the Proof-of-work consensus mechanism.

However, as with every investment option, Staking crypto strategies have their own drawbacks.

Following are some of the risks involved with passive income crypto staking:

• Hacking or cyber threat possibility with the smart contracts
• possibility of a decrease in currency value, particularly in erratic market circumstances.
• Staking frequently necessitates a locking period during which your cryptocurrency cannot be transferred. Even if prices change, you won’t be able to swap staked tokens during this time.
• Some platforms require minimum substantial investment for one to become a staker, debarring a number of users from staking.

Now that we have a fair idea about crypto staking. Let us look at the attractive crypto-staking platforms in 2022.

Best Crypto Staking Platforms of 2022

Here are a few of the top exchanges where you may receive the highest staking incentives:

1. Binance

Rewards earned by stakers at Binance:

8.19% for BTC, 25.12%% for dYdX, 6.49% for AAVE, and 5.23% for BNB

2. Coinbase

Rewards earned by stakers at Coinbase:

ATOM= 5%, XTZ= 4.63 percent, and XTZ= 0.45 percent.

3. Kraken

Rewards earned by stakers at Kraken:

(4-6)% for ADA, 12% for DOT, (4-7)% for ETH

4. ByBit

Rewards earned by stakers at Bybit:

20%: UST, 5%: LUNA, 5%: SHIB, 3%: MATIC, 2%: SOL, AVAX, and FTM

Mapping Up

Undoubtedly, proof-of-stake that initiated staking as an investment is an energy efficient mechanism in comparison to the older proof-of-work mechanism.

And while DeFi staking thrives in 2022, the popularity of both centralized and decentralized exchange staking appears to be at an all-time high.