Is Staking Crypto Profitable?

Staking is the act of locking some amount of a cryptocurrency on a staking platform and earning interest from it at the end of the lock-up period. This form of investment quickly rose to popularity as an alternative to mining and trading shortly after its release. Are you wondering how to make profit from staking? Read on to find out.

Key Takeaways

• Staking refers to the process of holding a particular number of crypto tokens for a certain period of time and receiving rewards for participating in a consensus.
• It is similar to a traditional savings account, except that staking is often considered more profitable and helps both the blockchain and the staker.
• Staking on EGG provides you with the highest interest for the lowest fees. And two crypto at the price of one.

But First, What is Staking Crypto?

To put it simply, cryptocurrency staking is the process of holding a certain number of tokens in a crypto wallet, supporting the blockchain network’s security and operations. It is used by blockchains that utilize Proof of Stake (PoS) as their consensus mechanism. PoS is used for reaching an agreement among stakers about a block’s validity and the blockchain’s future path. Compared to Proof of Work (PoW) that is used by blockchains such as Bitcoin, it is more energy-efficient since it eliminates, or at least minimizes, the need to use a lot of mining equipment and electricity for creating blocks.

How Does Staking Work?

After buying some crypto tokens, you can choose which blockchain you want to support and stake your tokens on them. In most blockchains that use the PoS mechanism, the system randomly chooses participants that will be validating the next block at select intervals. Usually, the possibility of being chosen is connected to the amount of crypto coins a participant possesses – higher stake, higher chances. 

The minimum staking amount differs from blockchain to blockchain. For example, to operate a full node in the Ethereum blockchain, you would need to stake at least 32 ETH (but on EGG, minimum Ethereum staking is 0.05 ETH). However, you can also use staking pools to participate as a group. Some blockchains also allow participants to delegate their stake to validators who will be responsible for securing the network in their stead. 

Flexible vs Fixed Staking

There are generally two types of staking plans: fixed and flexible. Staking tokens for a specific length of time is known as fixed staking. On the other hand, some platforms also offer users the option to withdraw their coins at any time – known as flexible staking. Thanks to the rigidity of fixed staking, it has higher interest rates for the holder, while flexible staking generally offers less attractive terms.

Pros of Flexible Staking: Unstake your tokens whenever you want and avoid losses if the token starts to drop in value

Cons of Flexible Staking: Significant lower staking rates (APY)

Pros of Fixed Staking: Extremely high staking rates (APY)

Cons of Fixed Staking: Unable to withdraw your tokens when the token you stake starts to drop in value.

Is Staking Crypto Worth It?

Yes, if done correctly, it is profitable to make money with cryptocurrency through staking. Staking profits are all about how many coins you have in your possession. Since the Annual Percentage Yield (APY) is only a percentage, the actual amount you receive will be based on the amount you stake. Also, different blockchains have somewhat different rules and roles for their participants. You can read about some of them in our Crypto Academy Blog. 

The appeal of staking is that it allows crypto investors to earn far higher APYs than traditional savings accounts or money market funds. This method benefits both consumers and the network since all parties may obtain a piece of the staked coins at any time. Aside from a minimum staking requirement, the majority of staking initiatives also require a continual connection to a wallet in order to maintain a positive return on investment.

How much and how long you invest will decide the real revenue you may generate from staking. As for if it is profitable to stake coins, that depends on the chosen currency and platform. When staking a coin, you must keep a keen eye on its value or price. It’s useless to bet on a coin with a high inflation rate (volatility). Even though you can make a lot of money by staking these currencies, their value will drop fast, leaving you with little to no money. That is why it is suggested to invest in a cryptocurrency with minimal volatility, knowing all your possible options, and diversifying your investment. 

Staking on EGG.FI

Staking on EGG has many benefits. We have the highest returns for the lowest transaction fees. Plus, you receive two cryptocurrencies (EGG and the crypto of your choice) at the price of one! Also, our secure, non-custodial staking helps users compound cryptocurrency investments through secure staking. We connect you to the best-in-class validators that offer high-uptime, secure staking with advanced monitoring and support. To get a more in-depth understanding of how staking works on EGG, you can read any of our Staking guidelines. Also, in the future, you will be able to use the EGG token.

What Should You Consider Before Staking?

Aside from some of the risks you can learn in one of our blogs, here is what you should take into account when choosing a token.

Maximum Coin or Token Supply

The coin/token must have a certain amount in circulation. This will guarantee that the currency’s circulation is limited, which will keep the demand for it high and help to boost the price. Setting a consistent supply of new coins and a specified maximum amount can help to control inflation in a cryptocurrency, which may help the asset appreciate over time. When the maximum amount is reached, there will be less money available on the market in general.

The Demand for Cryptocurrency

When investing in any cryptocurrency, a strong use case should be the primary consideration. When the inevitable comes and the wheat is sorted from the chaff, the cryptos with the greatest use cases are also the ones most likely to rise to the top. When cryptocurrencies are being utilized, demand for them is usually higher. If a cryptocurrency has authentic uses, it will be in high demand and, as a result, have a high price.

Final Thoughts

To summarize, it is profitable to stake crypto, but how much you make will depend on how effectively and intelligently you stake. There are several PoS coins that you can stake, including ETH, DOT, ATOM, etc.

Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of EGG Finance. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.