What does it mean to stake your crypto?
Staking cryptocurrencies is becoming increasingly more popular as people are noticing the benefits it can provide to longer term investors. It allows you to dedicate a percentage of your portfolio to a network and earn passive income – how?
– Helping secure a network through proof of stake / Leased Proof of Stake; to keep it short your funds are ‘mining’ and earning a reward upon every confirmed block.
– Decentralised finance ( DeFi ) allows you to earn on interest; to keep it short people are borrowing money from you and they are paying it back to you with an additional ‘borrowing fee’ which is called interest.
The beauty of this is that unlike traditional banking institutions the returns today are very interesting, as they can often be higher than 5-10% per year; 500-1000% higher than what banks will give you by depositing your funds there.
As a cryptocurrency enthusiasts this allows you to dedicate a percentage of your funds to a network and/or DeFi solution that you trust and earn money without the stress of the volatile nature of this market, as you can stake stable cryptocurrencies like USDN.
As mentioned above it is vital that you pick a network and/or DeFi solution that you can trust to stake your cryptocurrencies, as you might occur into services that are not as honest as they appear.
A solutions that we use to stake a percentage of our portfolio is USDN and the reasons to it are:
- Very competitive interest
- You are staking a cryptocurrency that is stable, as opposed to earning more tokens of a cryptocurrency that can be worth 5-20% less overnight – defies the purpose of having a ‘safe passive income’
- It is decentralised, meaning that there is no central authority that can exit scam with your funds as the whole operation is governed by a smart contract
- Unlike many solutions it is tamper-proof; essentially confirmed by third party companies that is it safe for users to use
Ok but what is USDN?
USDN is the first alghorithmic stablecoin in the market. The protocol enables the value of each token to be 1 to 1 with the US dollar ( 1 USDN : 1 USD ) allowing the token to not be subject to the market’s volatility and thus always maintain its stable valuation due to its collaterarisation with WAVES.
As we speak it has a market cap of around 20 million US dollars and can be bought and sold on Kucoin, Waves Exchange, MCX, Biki, Tidex and Coinsbit
How does Staking work?
Generally speaking staking cryptocurrencies means that you are locking up your tokens for a set amount of time to the network and in return you are getting rewarded for it.
When you are staking USDN on the network you are leveraging the reward system of the Waves monetary policy and LPoS conseus algorithm; you are distributed tokens based on the amount of your contributions with additional USDN – an enourmeous difference to other DeFi products as they generate rewards through borrowing, which puts your assests as risk of liquidation.
On average staking rewards range between 8-15% reward per year. You can calculate here your expected earning here
Sounds cool but what is LPoS consensus algorithm?
LPoS stands for Leased Proof of Stake and its an enhanced proof of stake consensus algorithm
As mentioned above LPoS allows token holders to lease some of their tokens to the network and to earn a percentage as a reward by participating in the prcess of generating new blocks – the higher the amount leased to a node, the higher the chances of that node to be selected to generate the next block – if selected you will receive a reward.
..Ok but how do you actually stake it?
To stake today it is really simple, you don’t need to be a computer scientist nor do you need to know how to code – you have exchanges facilitating the entire process for you.
As we speak these are the exchanges that allow you to easily stake $USDN
How it works on Waves Exchange
The main benefit of staking your funds on Waves Exchange is that the process is entirely decentralised and incredibly easy to use.
To stake you simply have to:
1) Create and account or import an existing one ( ex: hardware wallet )
2) Deposit USDN to the designated address or purchase some directly from there with your credit card
3) Stake your USDN with a click and monitor your earnings from the dashboard
How it works on Kucoin
The main advantage of staking your USDN on Kucoin is that you are trusting one of the leading centralised cryptocurrency exchange; meaning that it has a strong degree of ‘trust’ among the community.
To stake you simply have to:
1) Go to pool-x.io which is Kucoin’s staking service
2) Select USDN
3) Deposit USDN from an external wallet or transfer if it is stored elsewhere to the designated address
4) Simply stake it with the click of a button and monitor your earning through your staking dashboard
If you are not a developer the process of staking cryptocurrencies can be overwhelming, it is natural to assume that it is complicated to safely execute. However today there are tools that are automating the entire process, making it incredibly easy for you to generate passive income over the course of days/weeks/years.
There are of course 100s of different cryptocurrencies that you can stake, USDN is simply the one that we like the most given the benefits that we listed above; the process will be relatively similar regardless of what you decide to stake.
We hope that you enjoyed this little guide and hopefully you will be able to generate some passive income without the stressful and/or time consuming nature of trading cryptocurrencies.
It goes without saying that everything written above is not financial advice, it is vital that you do your own research and due diligence before locking up any of your funds anywhere.
If you have any question, please don’t hesitate to get in touch!