In the crypto space, there are multiple ways to make money. One way is to obtain tokens at a low price — either through buying them off an exchange, mining coins, joining a new protocol as an angel investor, or even starting your own currency — and selling them for a higher price.
But there’s another interesting way to make money in crypto, and it has nothing to do with selling tokens. In fact, with this method, the more tokens you own, the more money you stand to make.
It’s called staking, and it’s important that new crypto investors understand what it is and how it works. Let’s dive in.
What is staking? What are staking rewards?
Staking in crypto is the act of locking up digital tokens for a specific period of time in order to earn yield on those tokens. Staking your tokens brings more security to the blockchain you stake them to, helping to validate transactions and create new blocks.
For blockchains to function properly, they must have a cryptographic mechanism to validate and authenticate the transactions being requested. One such mechanism is called Proof of Stake, and blockchains with this functionality are the ones that allow for staking.
From a rewards perspective, you can think of crypto staking like depositing money into your bank. As a depositor, you earn interest on the money in your account while the bank uses the money for other purposes to help build and support their product.
How does staking work?
Every blockchain functions a bit differently, but generally speaking, the more tokens you stake to a network, the more chances you have to earn rewards. All new transaction information in a Proof of Stake network gets validated using the staked tokens, so the higher percentage of the staking pool you own, the higher chance your tokens will be selected to validate transactions and earn rewards.
Different networks offer varying APYs (Annual Percentage Yield — another way to say yearly compounding interest) based on how they’ve designed their protocol. The tokens awarded to stakers are part of an inflation schedule built into the protocol and are distributed to stakers for every new block of transactions that gets validated.
Some technical know-how may be required to stake, depending on which network you choose and the method you decide to use. For example, one way to stake is to run your own node on the blockchain and communicate directly with the network to earn your rewards. If you’re savvy enough, you can even set up groups where other people will send their tokens to you to stake on their behalf.
Most users, however, use 3rd parties to stake their tokens, such as the Uphold wallet. In order to stake with Uphold, simply set up a free account, then buy or deposit the token you’d like to stake. With just a few taps you could be earning up to 25% APY on your crypto!
What cryptocurrencies allow staking?
All Proof of Stake networks allow for staking, but as mentioned before, many require technical skills in order to interact with the network. Uphold offers the largest selection of stakable assets in the cryptocurrency industry, with 23 Proof of Stake cryptocurrencies, delivering some of the highest APYs on the market.
Uphold only offers network function staking and never lends out assets to third parties in order to generate a yield. This keeps customer assets on the platform and does not expose them to unknown lending risks.
For the full list of supported cryptocurrencies available to stake for free on Uphold, tap here.
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