How to Stake Crypto - Comparewise
How To Stake Crypto

How to Stake Crypto

Crypto investing just got a lot more flexible. Cryptocurrency is about to stake its claim to high-yield interest rates and the rewards are potentially endless. While Bitcoin and Ethereum 1.0 rely on the pros and cons of crypto mining, decentralized finance is making crypto safer and more profitable through staking. Check out how to stake crypto.

The NDAX cryptocurrency trading platform is the first in Canada to offer Proof of Stake (PoS) wealth building opportunities. What is staking, you ask?  It’s a passive way to earn money by lending out your coins to power the blockchain. The cryptocurrency you stake earns interest, usually at very high rates not possible through a traditional bank.  

Staking is a great way to earn crypto rewards by depositing and holding your existing crypto assets with a crypto exchange or an external blockchain wallet.

It works pretty much like a savings bank account where you lock up your savings to earn interest. The difference is, you can earn many times more on your crypto holdings than you can get with a traditional bank account.

In this article, I dive into what staking is, how it works, how to stake your crypto in Canada, the best crypto staking platform in Canada, staking vs mining, and more.

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How Does Staking Work?

Staking powers the functions of blockchain networks that use a proof-of-stake (PoS) mechanism.

The network consists of many validator nodes that work to validate and approve transactions before they are permanently recorded to the official blockchain. 

Anyone wishing to participate as a validator node must deposit the network’s native coin with the cryptocurrency protocol.

The more coins you stake and the length of time you hold them, the more your chances of being chosen as a validator.

Validator nodes then collaborate and cross-reference with each other to verify transaction information, which is then grouped into a block and added to the network.

When new blocks are accurately added to the blockchain, the network mints new crypto coins that are distributed as staking rewards to the validators.

Your crypto coins remain under your possession, and you can unstake them anytime you want to trade them, or after the lockup period elapses. Mostly, staking rewards are paid out in the network’s native coin.

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The blockchain needs crypto staking

Staking is a great way to grow your wealth without buying more crypto. But did you know it’s critical for the blockchain, too? By staking your cryptocurrency, you get to participate more fully in the financial revolution. 

The purpose of blockchain technology is to cut out the middleman, like a traditional bank. But in order to do that, it requires help from all of us. That’s where crypto staking comes in. 

In order to truly decentralize finance, transactions need to be recorded and stored on a public ledger spread across countless computers, or machines called nodes. Recent transactions are grouped together and stored in blocks that hold a specific amount of data, like pouring water into a bucket. When the bucket is full, you get a new one. 

When a block is filled to capacity with transaction data, a new block must be created to store new transactions. Blocks of transactions need to be confirmed before they’re added to the blockchain. By staking your cryptocurrency, you become one of a group of people who help confirm blocks of transactions so they can be added to the blockchain. 

But you don’t help confirm every block, every time. Rather, you are in a pool of validators, or miners, for the network to choose from. Validators are chosen based on how much cryptocurrency they have staked. The more you stake, the more likely you are to be chosen to validate blocks of transactions.

You only make money on your staked cryptocurrency when you validate a block. In doing so, more crypto coins are created then paid out to you as a staking reward. The more crypto you stake, the more frequently you will be chosen to validate, and the more rewards you earn. 

Ok, put your calculator away, the process is entirely automated. All you have to do is stake your coins. But you can’t stake with just any cryptocurrency. 

You need cryptocurrencies, like those traded on NDAX, that use the Proof of Stake (PoS) model to power their network. Other cryptos use a Proof of Work (PoW) method to power their network. So what’s the difference? 

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What is Staking?

Staking is the process of depositing and committing your crypto tokens to support the functions of a blockchain network and earn staking rewards.

It’s available with any of the cryptocurrency networks that use the proof of stake (PoS) mechanism to process transactions.

Staking was introduced in 2012 to replace mining, an energy-intensive proof of work (PoW) mechanism that requires enormous computing power to validate transactions by solving complex mathematical puzzles.

With staking, you lock your tokens for a certain period, from days to months, to help secure the network, whereby your staked crypto tokens are used to verify transactions so that new blocks can be securely added to the blockchain.

You then receive staking rewards in the form of Annual Percentage Yield (APY).

The more coins you stake, the more rewards you earn. Some cryptocurrencies impose a lockup period during which you can’t access your staked assets.

Staking vs Mining

Staking and mining differ in the following ways:

Their blockchain networks: Stakings is the consensus mechanism used to validate transactions on blockchain networks that use the proof of stake mechanism (PoS). 

Mining is the process of validating and adding new blocks on blockchains that use proof of work (PoW) mechanisms by solving complex mathematical puzzles. 

Computational power required: Mining requires greater computational power. Staking doesn’t use much computer power.

Qualification criteria: Miners with advanced computer hardware stand a greater chance to add new blocks to the blockchain. Staking can be done by anyone by joining a staking pool.

Energy usage:  Mining consumes a lot of electric power. Staking uses less energy, hence more environmentally sustainable.

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Proof of Stake vs Proof of Work 

When you stake your crypto coins, you are locking up your crypto on the network, which means you cannot use them during the time they are staked. It is your opportunity cost. In doing so, you help create new blocks of transactions and get rewarded with more cryptocurrency. 

Many coins use a PoW model to power their network. PoW is the original way to confirm that transactions on the blockchain are authentic and accurate, and not bad actors doing shady things. It’s how the big daddy coins like Bitcoin and Ethereum 1.0 validate transactions on their networks. But it takes a ton of computing power. 

PoW depends on cryptography, which uses math problems so complicated they cannot be solved by the human brain. These math problems can only be solved by very powerful computers. Each math equation is unique, there are no two alike. That’s how the network ensures the transactions are authentic. 

As you can imagine, that kind of computing power uses a ton of energy. It’s also kind of slow relative to other crypto networks that can validate transactions much faster. Because PoW requires so much computational power, it is limited in how many blocks of transactions it can confirm at a time. It is not the most efficient way to process blockchain transactions, nor is it environmentally friendly. 

PoS solves the problem of time and energy.  It’s better than traditional blockchain verification because it doesn’t depend solely on energy intensive data mining, expensive computing equipment, or genius-level mathematics. All you need is to hold PoS coins and to trust NDAX to generate income for you. Yup, that’s it.

Benefits of Crypto Staking

  • Earn high rewards on your crypto holdings: Staking is a great way to earn passive income at an APY rate of 5% to over 20%, which is far more than what bank savings offer.
  • Low barrier to entry: You can get started skating even with fractional crypto coins, as low as 0.1 coins.
  • No special equipment or expertise is required: Unless you want to run a validator node, you don’t need any special skills or equipment to join a staking pool. All you need is a cryptocurrency that uses the PoS mechanism.
  • Help secure a blockchain network: Staking helps secure a blockchain network and keep it running efficiently. That’s why it’s advisable to stake cryptocurrencies you believe in.
  • Eco-friendly: PoS networks use less energy than proof of work (PoW) blockchains. Thus, crypto staking is more eco-friendly than crypto mining.

Downsides of Crypto Staking

  • Lock-up periods: Some PoS networks, such as Tron and Cosmos impose lock-up periods during which you can’t access your staked coins. That means you won’t be able to unstake or trade your coins until the period elapses.
  • Price volatility: Crypto prices are volatile, and if there’s a significant price drop during the lockup period, the potential loss may outweigh any rewards you earn.
  • Cyber attacks: Hackers may attack the crypto wallet or the liquidity pool you are using to stake your assets, resulting in huge losses.
  • Liquidity issues: Smaller altcoins tend to offer high staking rewards, but you may experience liquidity challenges if you later try to sell your assets.
  • Validator risks: Staking may get challenging if you want to run your own validator node. Apart from the technical expertise and expensive hardware, you could also lose all or part of your stake if your node goes offline or validates incorrectly.
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How can I stake my coins? 

It works like this: NDAX adds your coins to its trading pool. You are loaning your coin’s ability to verify blockchain transactions. You don’t sell your coins, you rent out their potential to the blockchain. 

It is just like when you loan your money to a bank when you make deposits to your bank account and earn interest, minimal as it sometimes is. When you do that, you earn interest from your coins’ hard work. With NDAX, some coins, such as Polkdot (DOT), can make you as much as 12% in annual percentage yield (APY). Let’s take a look at the Proof of Stake coins available on the NDAX trading platform, and how much you can earn: 

  • Ethereum (ETH) up to 5% annual yield 
  • Cardano (ADA) up to 4.8% annual yield
  • Polkadot (DOT) up to 12% annual yield 

Ok. Those are some impressive numbers. When’s the last time your bank paid you more than 0.5% annual interest on your savings account? I’ll wait. Are you ready to start earning passive income right now? Here’s how to get started: 

First, sign up for an NDAX account. It’s super easy and only takes a few minutes. Then hop on over to the Staking section of your NDAX dashboard. You’ll need to sign up for a staking subscription. Once that’s done, simply select a coin available for staking. If you don’t already hold that coin, you’ll need to buy some. 

The lock up period and Annual Percentage Yield (APY) vary by coin. Through NDAX, most of them don’t have a lock up period at all! With Cardano (ADA) and Polkadot (DOT), you can instantly unstake your coins anytime. Choose the one that fits your goals. 

Some coins have a bonding period, which is the amount of time it takes to start earning rewards after you stake them. Depending on the coin, the bonding period ranges from 1 to 3 days. With Cardano (ADA) you start earning rewards in as little as one day. 

Most coins pay rewards daily or weekly. It’s time you got paid to power the blockchain. Are you ready? 

It’s not a lie and it’s not a scam. It comes with risk, every financial decision does. But the rewards are worth it. You get to choose the amount of APY interest you want, because not all coins carry the same weight.

So what are you waiting for? A bank account to give you 12% interest or your coin to reach a new all time high? Open an NDAX account today and start staking your crypto to earn better money.

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How To Stake Crypto Coins in Canada

Anyone can stake crypto coins in Canada in two ways, namely:

Run your own validator node

This option is more expensive and requires you to have the technical expertise, experience, and the requisite computer hardware to validate transactions. 

Unless you want to be involved in the technicalities of running a blockchain network, you are better off leaving it to the experts.

Join a staking pool

The easiest way of staking bitcoin in Canada is to join a staking pool and delegate the technical operations to a third-party validator node. 

Different crypto investors pool their crypto coins together to increase their chances of being chosen as a validator node and earn higher staking rewards.

Rewards are then distributed to the pool members based on each member’s stake in the pool. All you need is a cryptocurrency that uses PoS to participate.

Here’s how to stake crypto in Canada through a staking pool:

  • Buy a cryptocurrency that uses the PoS mechanism. Top ones include Ethereum, Cardano, Solana, Polkadot, Tron, VeChain, Polygon, Agorand, Cosmos, and Terra.
  • Join a staking pool by directly staking crypto through the exchange’s staking program
  • Alternatively, transfer your crypto assets to an external blockchain wallet and choose a staking pool of choice to stake directly from your wallet.
  • Then just relax and wait for the lockup period to elapse and earn your rewards.

Where To Stake Crypto in Canada

The National Digital Asset Exchange (NDAX) is one of the best apps to stake crypto in Canada.

It is a top cryptocurrency exchange in Canada founded in 2018 that allows Canadian residents to trade about 30 cryptocurrencies at a flat fee of 0.20% on trades.

Recently, NDAX launched its own staking program to allow verified NDAX users to stake supported cryptocurrency to earn rewards.

So, what crypto can you stake on NDAX?

Currently, NDAX allows users to stake 3 cryptocurrencies and automatically receive crypto rewards up to 12% APY. 

They include:

  • Ethereum (ETH): 5% APY
  • Cardano( ADA): 4.8% APY
  • Polkadot (DOT): 12% with a 28-day unstaking period; 4% APY with instant unstaking

The NDAX staking model works through flexible subscription plans, and participants are at liberty to unstake their assets at any time. 

You can view all coins available for staking and manage your subscriptions by going to the staking section of your NDAX dashboard.

The table below shows NDAX staking plans for ETH, ADA, and DOT.

Digital AssetAverage APY%Reward Payout FrequencyBonding PeriodMin. Staking Amount Min. Lock-up PeriodUnstaking Period
Polkadot (DOT)12.0%Daily2 Days0.1 DOTN/A28 Days
Polkadot (DOT)4.0% Daily2 Days0.1 DOTN/AInstant
Ethereum (ETH)5.0%Weekly3 Days0.001 ETH ~ 1 YearN/A
Cardano (ADA)4.8%Daily1 Day1 ADA N/AInstant

Is Staking Worth It?

Yes, staking is worth it as it allows you to earn high-interest yields on your crypto holdings. Apart from buying and committing your tokens into a staking pool, there’s really no work required from your side.

So if you have coins that you aren’t actively trading, there is no reason why you shouldn’t stake them to earn passive income. It’s a less risky way to earn more crypto while sleeping. 

Just make sure you do your research and buy crypto for staking if you consider it a good investment and believe in its long-term prospects. Thanks for checking out how to stake crypto!

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May 6, 2022
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