Staking Craze: Here are the 5 Best Altcoins for Staking!

 

Staking Craze: Here are the 5 Best Altcoins for Staking!

If you, as an investor, hold cryptocurrencies in your portfolio, making passive income with your cryptocurrency is a great idea. One of the best ways to do this is to stake your coins in altcoin projects that allow you to earn anywhere between 5% and 20% annually. However, it is very important to do research before choosing the right pool. In the continuation of the article, we examine what “staking” is and how you can generate income…

What is “staking” in altcoin projects?

To understand staking, it is important to understand Blockchain consensus models. Because blockchains are decentralized, nodes securing the network must reach a 51% consensus to confirm that transactions are correct. Bitcoin, one of the first examples of these, uses Proof of Work. PoW needs computer hardware to solve complex problems. Therefore, it requires expensive mining equipment and enormous amounts of electricity. In addition, PoW is very limited in processing capacity and highly restricts scaling.

On the other hand, PoS uses a financial stake to secure the Blockchain. By staking cryptocurrencies on a PoS, you can earn transaction fees on the network, similar to crypto mining. If a node tries to engage in fraudulent transactions, the staked cryptocurrency can be confiscated as a penalty. Thus, while many functions of PoW are provided, the potentials are opened at the same time.

Most profitable altcoin projects for stake

First, Ethereum has the most nodes on the testnet of any blockchain, although it has yet to transition to PoS. Nodes earn around 7% annual interest, but this rate varies depending on the number of nodes in the network. You need 32 ETH (about $64,000) to run a node independently. However, Coinbase (NASDAQ: COIN) and Gemini allow you to stake Ether with no minimum amount required.

The second cryptocurrency that investors can choose is DAI. DAI is a stablecoin pegged to the US dollar, so you can profit from exposure to waves of cryptocurrencies. To stake DAI, you need to use a platform like Gemini or BlockFi.

Cardano (ADA) offers an annual rate of return of 4.6%

The “Ethereum killer” in Cardano is an example of a leading PoS blockchain. It was founded by Charles Hoskinson, one of the founders of ETH. You can stake ADA on Cardano to get an annual interest rate of 4.6% paid with Cardano tokens.

While Cosmos Blockchain has higher interest rates for staking, it has a harsher climate than more established cryptocurrencies like Ethereum and Cardano. While these fluctuations bring more risk, cryptocurrencies with smaller market caps such as ATOM may have higher upside potential.

ALGO's Blockchain aims to solve the problem of the triad, which encompasses improving scalability, decentralization or security without sacrificing one of the other factors. If you believe in the long-term success of ALGO, you can opt for staking.

What was not considered while staking?

Before you start earning passive income with your cryptocurrencies, some risk factors should be considered. The main risk factor for staking is the fluctuation of the price of your preferred altcoin project. Even if you earn 10% interest per year, you can get out of the water if the value of the cryptocurrency you deposit drops.

Therefore, it is important to only stake the cryptocurrency you would otherwise invest in. It is not unusual for a coin to offer over 50% interest to entice investors to buy the cryptocurrency. However, these cryptocurrencies are typically short-term and may not be viable investments to hold for the long-term.

Finally, another factor to consider when choosing an altcoin project for staking is lock times. Some cryptos will allow you to withdraw your investment at any time, while others will have minimum lock-in times for staking. For example, investors who stake Ether on ETH2 will likely not be able to withdraw their investments until the ETH2 upgrade goes live in 2022.

Comparison of PoS and PoW

Staking cryptocurrencies is much more efficient and environmentally friendly than mining. Some crypto experts even claim that crypto mining on PoW of blockchains is an outdated technology. Its claims seem to resonate with users, as most new altcoin projects are created with PoS. However, PoWs meet needs that PoS cannot reach. First, it is difficult to have a limited supply in a PoS network because nodes that stake their crypto earn interest in proportion to the amount of crypto staked. In the long run, the nodes with the most coins continue to accumulate more than anyone else, resulting in the centralization of wealth.