Staking Digital Assets first and foremost is about creating incentives to decentralize and secure a networks blockchain. Also a way to generate fixed income “rewards” paid in kind, while holding Digital Assets, staking can provide compounding interest opportunities rarely seen in the world of investing.
A brief history:
With the advent of Bitcoin Satoshi came up with a “Consensus Mechanism” known as Proof of Work (POW) which is also know as mining. This is a competition amongst computers to complete a cryptographic puzzle in exchange for Bitcoin payouts known as “Block Rewards”. The point I want to make here is that Digital Asset mining is a competition amongst computers. Because the Bitcoin network and other POW networks economically incentivize competition, what we have here is an ever increasing amount of processing power and electricity needed to maintain the network.
Enter Proof of Stake (POS)
Partly due to the aforementioned issue of never ending increasing consumption, and other reasons we don’t need to get into here, Proof of Stake has become an accepted and increasingly adopted method of achieving consensus in distributed ledger systems.
There are a bunch of interesting POS tokens and ways to stake digital assets to earn rewards for holding them in your wallet. The basic concepts of staking as an investor in Digital Assets are: Purchasing, Delegating, Validators.
To stake and earn rewards in Digital Assets you must first own them. So thats step one.
1) Purchase Digital Assets that are stake-able.
The fastest and easiest way to purchase digital assets is through a centralized exchanged such as Coinbase. You can also use many other systems, and I’m sure they might pay me a higher referral fee to send you their way, but I honestly just think Coinbase works best for getting money into the digital asset market place.
NOT ALL TOKENS ARE ABLE TO BE STAKED. On Coinbase, only select tokens “TEZOS” (XTZ) , “Cosmos” (ATOM) and “Algorand” (ALGO) can be “staked” via the Coinbase app, and to call it staking isn’t quite true. By holding these assets on Coinbase you earn in-kind rewards but you are not really helping out the project by holding the tokens on Coinbase, nor are you receiving the yield you could be. In fact, you are receiving less than half. However, there are multiple tokens available to be purchased through Coinbase that can be staked on other exchanges, or in through your own wallet (recommended) such as Trust Wallet and Atomic Wallet.
The list of stake-able coins is long and getting longer, so do some research to find the ones you feel called to, and learn about their rewards rate, their inflation rate (the rate at which new coins are introduced into the network/market) and how their staking programs work. Not all blockchains stake the same! (For an example check out Synthetix and Mintr. Good luck.)
Here’s a list of stakeable coins.
Back to Coinbase. The other tokens available at Coinbase that can be staked are Cosmos (ATOM), Algorand (ALGO), Band Protocol (BAND) - Currently only available on Coinbase Pro, and soon you will be able to stake ETH. Get your 32 ready.
Staking XTZ, ATOM, ALGO
The easiest way to get started is to buy these tokens on Coinbase and start earning rewards at 4% Per Anum immediately. The first rewards will show up in about 30 days, and then every few days after until you no longer own it in your Coinbase wallet. If you want to earn an extra 4-8 % you’ll need to find a validator and delegate your stake to them.
Delegation & Validation
Each computer on a blockchain network, that is running a copy of the blockchain and processing transactions is known as a Node. Node’s “validate” the transactions on the blockchain. If you want to get the most out of staking, learn how and become a node validator. You’ll need spare computers, lots of processing power, love for the command line and have ninja like security skills. So, for most of us, we get to “Delegate” our stake to one of these node validators, and they will share most of the rewards with us for doing so. Most validators take between 1 and 10% of the reward.
Delegation
As an investor wanting to earn staking rewards, you will need to choose a validator and stake with them. Wallets such as Trust Wallet and Atomic Wallet make it easy to do so, and show you the percentages you can earn from each one.
Back to Coinbase. If you purchase Cosmos, XTZ, ALGO from Coinbase you can send them to your Trust Wallet and stake them, in minutes. To do so.
1) Download the Trust Wallet if you haven’t yet.
2) Open your trust wallet and enable Cosmos. (click the little thing in the upper right, type in Cosmos and click the toggle)
3) Click into the Cosmos account and click “copy” to copy your address.
4) Open your Coinbase App
5) Navigate to your portfolio and select Cosmos.
6) Select ATOM Wallet
7) Click the arrow in the upper right corner (or send in a browser).
6) Enter the amount you want to send to your rust wallet.
8) Paste the address you copied, into the “To” field.
9) Preview and complete the transaction.
10) Once your tokens arrive in your trust wallet, click the “more” button and choose “stake”.
11) Enter the amount you want to stake. IMPORTANT: Leave a bit in your wallet for the (tiny) transaction fee of .001 ATOM to stake and claim rewards. I’d suggest .5 Atom (around $2).
12) Choose a validator. I personally use Staked. I like their reporting. But I notice Binance is now listed in there and offers a slightly better reward percentage. Might have to make the switch…
13) Click Next and complete the process.
14) With Cosmos ATOM, you’ll immediately start receiving rewards, and you can claim them when ever you want. I usually wait a few days to let them accrue and then claim them.
15) * If you have ATOM staked and you buy more ATOM to stake, make sure you claim your rewards before you stake more. If you don’t, you’ll lose the unclaimed rewards.
BAND Protocol (BAND)
To stake Band, you can use Atomic Wallet and follow a similar process. and guess what. BAND pays 17% rewards!
Kusama
Click here to read our Kusama Staking Guide.
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