Staking on centralized platforms
What is Staking
Staking can refer to 2 methods of earning passive income. One of them is related to the Proof-of-Stake (PoS) validation mechanism of securing and decentralizing a chain and the other one is staking and locking your currency in centralized or decentralized protocols. Both of those options can generate profit.
Why Stake?
Staking is a way to earn passive income on your crypto assets. If you are holding a coin long-term like BTC and you don’t want to sell it, you can generate more profit by staking it by means of lending. If you hold a cryptocurrency that is being minted on a PoS blockchain like ETH you can earn money by letting them operate your funds and become node validators. This third party takes a small percentage from your earnings for operating a node and then gives the rest of the validator rewards to you.
You can earn even by staking your stable coins such as USDC, BUSD, USDT.
All of this illustrates why staking is lucrative. Now, let’s move onward to places where you can stake your cryptocurrency.
Where to stake?
Depending on the type of cryptocurrency you own, your risk tolerance, and the desired Annual Percentage Yield (APY) there are different places where you can stake your crypto.
POS Staking
If the cryptocurrency you own is one that is minted through a PoS mechanism such as ETH, BNB, ADA, or others and you don’t meet the minimum requirements of staking by yourself, such as having a minimum of 32 ETH to run a validator node, you can stake through third-party platforms. One of the most widely used and trusted platforms are Binance and Coinbase.
Binance Locked Staking
On Binance you can lock your PoS cryptocurrency under Binance Locked Staking. Here you are delegating your crypto to Binance and you get interest from the fees that the Binance pool gets from the nodes they are operating. The APYs here range from 10 to 25 percent. The longer you choose to lock your stakes, the higher the APY. Here you can stake your ETH, BNB, ADA, ATOM, and many others. Keep in mind that the staking opportunities expire and are renewed occasionally, so for some particular cryptocurrencies staking will not be possible for the time being.
Coinbase Staking
What holds for true Binance holds for Coinbase staking. Here again, you are delegating your crypto funds to Coinbase. They run a node where your funds are added and that gives you some APY. The rates are similar to Binance, and choosing where to stake is a matter of trust and habit depending on which platform you are already using.
Staking Pools
You could also search in Google for Staking pools for your coin if staking for those coins do not appear on reputable platforms such as Binance and Coinbase. Keep in mind that choosing a staking pool comes with more risk. If you were searching for a staking pool I recommend checking Reddit to see determine their reputation. Also, you would have to consider the APY and compare it to other staking pools such as Binance’s, Coinbase’s, or others.
Lending
If the cryptocurrency you want to earn passive income is not a PoS cryptocurrency such is the case with BTC (which is proof of work) or it is a stable coin as USDT, BUSD, USDC, you can stake your cryptocurrency to platforms like Blockfi, Celsius, Binance. Here you are lending your crypto to the platform and the platform uses it in various ways and gives you an interest rate.
Binance Earn
Again, Binance can be used to generate passive income. By staking your non-POS crypto on Binance you can earn interest rates. The way those interest rates are generated is by Binance lending your assets to margin traders who then pay you interest rates. This can be done with BTC, stable coins, and with many other coins. Virtually Binance enables margin trading for all of the major coins so you can earn interest on a lot of different options. Here the APYs range from 0.67% to 7% again depending on the duration you have your funds locked in.
Blockfi
Another way to stake your non-POS crypto to earn interest is using Blockfi. The way Blockfi is generating their interest rate is by lending your funds to borrowers who pay interest fees on your assets (rehypothecation). Those borrowers are crypto businesses that need those crypto funds to operate. The APY on Blockfi goes up to 9% percent. For some crypto such as BTC and ETH the more you stake the less return you will get as shown below so keep that in mind
Celsius
Celsius is another reputable platform for staking your crypto to get passive interest. Celsius is an app that makes staking way easier. The interest on Celsius is higher compared to other platforms but these interest rates can be achieved only if the rewards are being paid out in their CEL token. Choosing whether to be paid in CEL is up to the user to decide and essentially would be motivated if one is bullish on the CEL token. The interest rates on Celsius are generated the same way as in Blockfi, by means of rehypothecation.
Closing Remarks
Staking your cryptocurrency is a valuable way to earn passive income. Whether the cryptocurrency you own is POS or not does not matter as there are ways to stake both of those. Originally the term staking was used only in proof-of-staking blockchain but now it is used interchangeably for locking your fund and earning passive income. The staking in this article is only staking on centralized platforms. This comes with risks. Those risks are that you are not having direct access to your crypto as you do not have access to your private keys. This, in the crypto space, is considered bad practice. Your fund are as secure as the platform they are locked on. The platform can be a subject of a hack or even worse can be malicious, so have that in mind. With that being said, the platforms above are some of the most reputable platforms in the crypto space. Happy staking!
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