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What is Crypto Staking and what is the connection to passive income?
A cryptocurrency is a decentralised open ledger (set of accounts). Decentralised means distributed where everyone can have a copy and update it! The challenge is to make sure that all the accounts on all computers tally.
That is if A has 1 and B has 2, and B gives 1 to A then the new balance should be A has 2 and B has 1 on all copies of the ledger. The tallying or consensus is done by the generation of blocks. These are groups of transactions which are final and can update all copies of the ledger.
This is essential to the system and people are rewarded when they participate in this mechanism. This reward is where you earn a passive income. You help the network agree on the consensus.
The higher your stake the more you can earn. The more importance you have in the network the higher your returns will be. Stake refers to the amount of coins; “Hence proof-of-stake”
Staking is energy efficient, low tech and easy to implement.
What are the different types of staking?
There are three types of staking;
- Simple Proof of stake: Your wallet (and computer) need to be online,
- Delegated Proof of Stake: Your wallet does not need to be online because you delegate your stake to a delegate node.
- Masternodes. In this article, we will cover the first two. Read more: Masternodes
You could do PoS without keeping your computer on through your online platforms. I could not find any reliable platforms. StakeUnited seems to be one such platform, but, When I tried it, it did not work as expected – multiple bugs. Platforms which hold money should not have multiple errors when you log in. Stay safe!
What are the risks to PoS passive income?
- Wallets with viruses and Trojans
- Project Failing on it’s objectives
- Development team quitting the project
- Competition overtaking the project
- Price Fluctuations of the coin
- The bear market of the crypto space.
- Investing more than you can afford to lose
- Getting FOMOed (fear of missing out)
To protect yourself from these risks, you need to do things slowly. With many hours or research. (Did I just lose you?) The more you do this the easier it gets. Then stake on a separate computer, use Sandboxie, VirusTotal and a computer virus scanner. Remember when something is too good to be true it is. High staking returns do not come for free.
How does staking work in practice?
In general, it works like this.
- Find the wallet, make sure it is the wallet and it is virus free. Confirm the link from multiple sources. Contact the dev team and double check with them.
- Install the wallet. Encrypt it then back it up.
- Transfer coins to the wallet.
- Unlock Wallet.
- Leave the computer on,
- Follow the project for any updates.
Which coins can be staked and how much passive income can be made?
Here are some examples of PoS coins
|Coin Name||Description||Passive Income Calculator|
|Reddcoin||A social currency, with free transfers.||https://jsfiddle.net/yE6Vp/8/|
|NavCoin||An easy to use cryptocurrency|
|Neo||NEO is similar to Ethereum, it is a smart contract development platform (think programmable money)
|Usability focused smart contracts platform. They announce new exciting partnerships weekly!
|PIVX||A cryptocurrency focused on privacy.
|A platform which allows staking even when your wallet is offline.
|Neblio||Similar to Ethereum, Neo and Lisk. Focused on enterprise-level clients.
|A decentralised crypto exchange
|Ontology||Distributed trust collaboration platform.||https://ontcalc.com/|
|Cardano, OMG, Ethereum||Will all join the staking club soon!|
Other Resources: PoS List
What are some strategies when investing in staking for passive income?
Choosing a passive income crypto staking investment is a personal choice. It really depends on your particular situation.
- If you do not have a lot of time to research and follow up: Choose a well-established project
- If you do have the time: Research and find a low cap Staking coin, with the promise of future moon landings.
- Can you keep your computer all day? If No then you need to choose a delegated proof of stake coin or buy a Rasberry Pi and set that up.
- Diversifying into multiple coins increases your workload but reduces the risk.
It is possible to make a passive income from crypto staking. The returns vary from 1% to 100s%. Do not assume this is a free lunch. If you can avoid the scams, the risks and the project does well, there is a chance that when you cash out you will keep the value of your original investment and then some.