The Buy and hold rule is the most profitable and safest rule for investors of all levels. Even the famous W. Buffett always adhered to this rule. And here we want to point out that with cryptocurrency, this strategy can help increase income. And staking will wonderfully cope with this task.
Beginners are interested in the pressing issue of security. Here there are no guarantees one hundred percent. For example, in 2021, there were several major hacks: Poly Network, Cream Finance, Pancake Bunny, and smaller exchanges were hacked. But that doesn’t mean that staking is a high-risk activity.
Hacked exchanges are more the exception to the rule. And over time, there are fewer and fewer such cases. In any case, be sure to study the question thoroughly and draw your own conclusions.
The information in this article is for informational purposes only and is NOT a financial recommendation.
Let’s break it down further: What is staking?
What is staking?
staking (from “part”, “allotment”) is a type of passive income in the crypto market or an earning strategy for lazy cryptans.
Historically, staking is a kind of “mining” in PoS and DPoS consensus networks (and other modifications of “share proof”), only the counterpart of computing power here is a coin deposited (blocked) in the steak.
For those who like to get to the bottom of this, our article will help familiarize you with the concept.
In brief, it turns out the following:
1. The user’s funds are blocked ⇒ 2. Thanks to which the correct operation of the blockchain is maintained ⇒ 3. The user gets a reward for his blocked funds.
Coins can be blocked for a fixed time, or without limit – depending on the conditions of the project.
With the advent of DeFi (decentralized finance), to the delight of fans of passive income appeared a separate type of staking – DeFi-staking, which has recently become increasingly popular.
User funds are deposited into pools for the purpose of generating income, rather than supporting the proper operation of any blockchain. This mechanism can be compared to an interest-bearing deposit in a bank.
So, DeFi-staking in order
DeFi-staking compared to the historical, let’s call it that, version often has a higher yield (sometimes more than 100%) and a lower entry threshold.
Staking is possible both on special platforms (links to staking platforms – below) or directly in your wallet, and on centralized exchanges in the appropriate section (staking section on Binance).
It’s important to remember: if you steak on a centralized exchange, you can consider yourself protected from fraudsters, but there are always other pitfalls, because it is a centralized exchange.
Staking in a mobile cryptocurrency wallet is convenient because almost everyone’s smartphone is always at hand.
Special platforms provide quite a wide range of pools for staking, here the main thing is to remember about security. When choosing the right interest rate, keep in mind that, as a rule:
High interest rate = High risk.
To start staking, you need to:
- Decide on an exchange and coin for staking.
- Create a wallet for the cryptocurrency. Wallets like MetaMask, Binance Chain or TrustWallet are suitable for this.
- Next, you need to fund your wallet with the cryptocurrency of your choice.
- The next step: put the coin into the selected pool.
Attention! You will have to pay a small fee for each transaction. That’s why your wallet must have a small amount in the cryptocurrency with which you pay “gas” (most often it’s BNB or ETH).
You can choose one of the staking platforms:
Swap Mars to MarsDao – https://app.daomars.com/.
PancakeSwap – https://pancakeswap.finance/.
Beefy Finanse – https://app.beefy.finance/.
staking and autostaking
Anyone who has steaked on their own or studied the subject has come across the concepts of APR and APY.
Many people confuse these concepts, let’s get this straight:
- APR (annual percentage rate) is a way of accruing annual profits without compound interest.
- APY (annual percentage yield) is a way to calculate profit taking into account reinvestment, i.e. taking into account compound interest.
There is a variant when the staking is in manual control and requires human intervention. After the user receives the profit, he must credit the accrued amount, i.e. add it to the body of the “deposit”. Often in this case it is marked “manual” and marked with an APR-rate.
Dealing with APY is called “auto-staking” because reinvestments are made automatically without any human involvement.
Autostaking usually has a higher return and is more convenient because it requires less attention from the user.