The Complete Guide to Staking cryptocurrencies
Have you heard about staking cryptocurrencies, and you wonder what it means? And how much money can you earn from it? Here we are publishing our best tips and the complete guide to staking cryptocurrencies.
In this guide to staking cryptocurrencies you will learn:
- What is Proof of Stake?
- How Proof of Stake rewards work
- Benefits of PoS and staking
- This is how you can get started with Proof of Stake
- Look into some of the most popular Proof of Stake coins
Proof of Stake or PoS, is method used to secure a blockchain network and validate the transactions on it. Without it the blockchain wouldn’t be able to function. With PoS the owners of the cryptocurrencies running on that blockchain stakes their coins and those coins are used to validate transactions and create new blocks. Users that stake their coins put them into a wallet that is connected to the blockchain. This wallet needs to be connected to the blockchain all times (traditionally, there are exceptions with cold staking now).
In the Proof of Stake systems creators of new blocks are created in a “pseudo-random way, depending on the user’s wealth, also defined as ‘stake’” (Hackernoon guide on Proof of Stake blockchains).
The users who stakes their coins in a Proof of Stake blockchain are known as forgers. You might have heard of miners, which refers to the users securing the blockchain that operates on a Proof of Work type of blockchain. Bitcoin famously runs on PoW. On a Proof of Work blockchain miners solves complex mathematical puzzles to validate new transactions and create new blocks. And as a reward for staking their coins users gets rewarded new ones from transactions fees.
Is Proof of stake more secure than Proof of Work?
One of the most common risks with blockchain is the 51% attack. Which refers to an event where miners with more than 50% of the computational power of a Proof of Work blockchain would essentially control the blockchain. And be able to prevent new transactions from happening, and able to reverse transactions. And they would be able to double-spend coins. Which fundamentally destroys the concept of an immutable blockchain record. So that’s obviously something that every keen blockchain promoter doesn’t want to see happen.
With the 51% attack on a Proof of Work system the miners needs to have more than 50% of the computational power. I.e. the hardware, which for Bitcoin is near impossible. And on a Proof of Stake system you need to control more than 50% of all the coins available. Which for Ethereum or other bigger blockchains are near impossible. The risks around both are more probable for smaller cryptocurrencies. But any attack of smaller cryptocurrencies would essentially destroy the value of that coin and ultimately act as an deterrent. null
There are some clear advantages to PoS cryptocurrencies and the methods used to keep the blockchain operating compared to traditional PoW. Here below we have listed some of the benefits and advantages.
- Less energy consumption: The big issue when it comes to mining Bitcoin and other cryptocurrencies is the amount of energy used to keep the hardware mining machines operating. When Bitcoin started out the amount of computational power and hardware needed was what many families had at home. Now there are specialised mining rigs that drain huge amounts of energy in order to make more than they spend. PoS cryptocurrencies are far more energy efficient in comparison to Proof of Work and much better for the environment as they need less energy to function.
- Cheaper equipment: No need to invest in expensive mining rigs as most of the staking can be done via a cheap Raspberry Pi, your own personal computer or via a hardware wallet like a Ledger Nano S for cold staking.
- Decreased risk of 51% attack: Potentially this factor comes to life for cryptocurrencies like Bitcoin, Ethereum and other major coins. As the concept of someone getting hold of more than 50% of all of Ethereum’s cryptocurrencies seems near impossible.
- First you need to decide on which coin you want to stake. We have compiled a list below in our eyes the best coins to stake in 2019. There are more PoS cryptocurrencies, but these have been and approved by Go Cryptowise researched by us. Find more cryptocurrencies with staking option here.
- When you have decided on the best coins to stake, then you need to find out what the requirements are to get started? Usually there’s a minimum requirement of how much you need to have in order to be able to stake.
- If using a computer: Traditionally for most PoS coins you need a computer with a wallet connected to the blockchain all at times. So if you have a spare computer laying around this could work perfectly for that. Another option is to buy a Raspberry Pi or similar which costs about $50-70 and use that for staking. There are several guides on how to get started on the internet for that (guide here).
- If using a Virtual Private Server or VPS: If you don’t have a spare computer lying around, or concerned about the electricity costs then running a virtual server is another option. There many services where you can run a private server on the cloud. Allowing you to setup a wallet on that private server and have it running 24/7 without a computer needed for you at home. This might be a bit tricker to get started but there are guides on the internet available.
- (Only for some coins) Using a simple designated wallet. Some PoS or PoA (Proof of Authority) coins let you stake by holding the cryptocurrencies in a simple dedicated wallet and that’s it (maybe you need to click yes to staking or similar). Both Neo and VeChain allows you to do this for example.
- (Only for some coins) Cold staking. Another new and interesting feature is cold staking. Which is basically staking from a wallet that is offline.
Of course we need to include a list of good coins in our complete guide to staking cryptocurrencies. Here below we have listed some of the most popular coins which you can use for staking with. Do your research into each coin and select the one you like the most. Ask yourself again why this is a good coin to invest in. You can find out where you can get hold of these coins in using Coinmarketcap and find a suitable exchange where to buy them here.
- NAV (NavCoin) 5% annual ROI. Useful links – Medium article to get started, Nav Reddit – Buy at NAV at Binance
- NEO – 5% annual ROI Similarly like VeChain by staking NEO you in return receive GAS another coin used on the NEO blockchain. Useful links – NEO to GAS profit – Buy NEO at Binance, OKEx, eToro, Kucoin, Bit-Z
- ICX (ICON) up to 12% annual ROI. Useful links – ICON toolbox with several guides – Buy ICX at Binance, OKEx,
- VET (VeChain) and VTHO. It’s actually a PoA (Proof of Authority) but it works similarly like other PoS coins. By staking your VET you receive in return VTHO which works like gas. VTHO is required to pay for transactions on the VeChain blockchain. Useful links – VeChain website, VeChain subreddit (lots of tips) VeChain block explorer, VeChain staking calculator – Buy VET at Binance, Kucoin
- PIVX 5-8% annual ROI. PIVX website, PIVX staking calculator – Buy PIVX at Binance
- ARK 10% annual ROI. Useful links – ARK staking calculator, ARK Reddit – Buy ARK at Binance, Bit-Z, OKEx
- LSK (Lisk) 4% annual ROI. Useful links – Lisk website, Lisk Reddit – Buy LSK at Binance, Bit-Z, OKEx, Kucoin
- NEBL (Neblio) 11% annual ROI. Useful links – Neblio website, staking explained – Buy NBL at Binance, Kucoin
- ONT (Ontology) 3.79% annual ROI. Useful links – ROI rewards, How to guide for staking – Buy ONT at Binance, Kucoin, OKEx, Bit-Z
- KMD (Komodo) 5% annual ROI. Useful links – ROI rewards, stats, guide – – Buy KMD at Binance
- STRAT (Stratis) 1.46 annual ROI. Useful links – Stratis website with guides, Statis cold staking – Buy STRAT at Binance
- And in the future Ethereum will move from Proof of Work to Proof of Stake. Useful links – Ethereum article on Constantinople (the major change to the Ethereum blockchain) – Buy ETH at Binance, OKEx, eToro, Kucoin, Bit-Z
Complete guide to staking cryptocurrencies – the exchanges
When you have decided which cryptocurrency you want to stake it’s time to find out where you can buy it. In order to buy some of that cryptocurrency you decided to use for staking then you need to find out which exchange it is available from. You can use Coinmarketcap to find out this information. And you can use our exchange comparison tool and reviews to find the best exchange that fits your needs. The exchanges we have reviewed have been vetted by us.
Our favourite exchanges to buy the Best Proof of Stake coins of 2019:
- OKEx – OKEx is the second biggest exchange for cryptocurrencies when comparing trade volume (24h). OKEx offers fiat-to-crypto and crypto-to-crypto trading on more than 100 digital currencies.
- Binance – Binance is right now the leading exchange if calculated by volume (via Coinmarketcap). Binance offers perhaps the biggest selection of coins and one of our favourite exchanges
- Bit-Z – Bit-Z is one of the worlds biggest exchanges when it comes to trading volume and amount of supported coins, after Binance. Bit-Z founded in 2016 in Hong Kong. Bit-Z has established branches in 10 countries and regions including Singapore, Japan and South Korea.
- Kucoin – Kucoin launched in 2017 and fairly quickly made a name for itself in the crypto world due to its early adoption of certain altcoins and their own coin called Kucoin Shares (KCS) which is a passive income coin, where you as a hodler of KCS gets a percentage of the trading fees from the Kucoin exchange.
- eToro – eToro is very much part of the new wave of global Fintech companies that has helped to change the scene of finance, banking and much more. It is the world’s leading social trading network, with millions of registered users and an array of innovative trading and investment tools. And they have taken the tools, the users and methods to crypto as well.
Find more exchanges where you can buy Best Proof of Stake coins of 2019 at out Exchange Comparison tool.
What is cold staking?
There’s a new method that was released not too long ago, and that’s called cold staking. Which means that you no longer need to stake your cryptocurrencies via a hot wallet (a wallet that is constantly connected to the internet). This has been one of the common hurdles keeping people away from staking their coins. It’s difficult for most people to find another computer. Have it run at all time, and it’s not as secure as with cold staking. Cold staking means that you can stake your coins but hold them on a secure wallet. Which is much easier and more secure. Which means that we will see many more cold staking options in the future for more cryptocurrencies.
Cryptocurrencies with cold staking option
- Stratis – guide on how
- NAVCOIN – guide on how
- Bonus cryptocurrencies:
- DIVI (guide on one click staking – the super easy way)
Benefits of cold staking
- Keep your cryptocurrencies on a secure hardware wallets and avoid hacks, scams and other risks
- One of the easiest ways of getting started with staking cryptocurrencies
- No need to have computers or other devices running at all times, less costs spent on energy, devices and better for the environment
What is Proof of Authority – PoA?
Proof of Authority is a type of Proof of Stake blockchain method but with a different consensus model. In PoA you stake your cryptocurrencies as with PoS. But with PoA only certain nodes are allowed to validate new blocks. So instead of the focus and priority given to nodes and holders with more cryptocurrency staked (PoS). They give priority to pre-selected validators. VeChain is an example of a cryptocurrency that runs their blockchain on a PoA model.
With PoA everyone can still stake their coins and get the rewards, but not everyone can validate transactions and create new blocks. How exactly the validators are selected and their identity given public or not is up to each community and blockchain to further discuss on.
Important tips to remember before staking
- You need to lock up all your coins when staking. That means you can’t use or spend them without disrupting the staking.
- Only invest your staking efforts into a cryptocurrency that you believe in. No point have lots of coins that in a few years time will be worthless?
- Check out cold staking options which is starting to appear more often. Sometimes this is timed with cryptocurrency projects that has really good apps with nice UX/UI that makes staking more secure and easier than ever.
- The value of your cryptocurrency can both appreciate and depreciate in value during the time of staking. This can have its benefits as you’d get more coins for your effort when it’s worth less. But you need to always re-evaluate the future value of your cryptocurrencies.
We hope you liked this article on the complete guide to staking cryptocurrencies. Did you like our list of best proof of stake coins 2019? If you have any questions or suggestions please leave a comment below. Otherwise get started staking and let us know how it goes. Also please share the article if you enjoyed it.
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Per Englund – Founder of Go CryptoWise a cryptocurrency and tech fan that wants to see better and smarter products and services that makes our lives better and easier