Staking piggybank

What is staking?

Staking is a way to earn interest on crypto coins and tokens you hold in your wallet. However there is more to it than that. In this article you will learn all you need to know about staking. You will find a guide on where to stake your coins.

How to stake crypto

If you want to start staking crypto coins and tokens, you have to find a crypto exchange that supports staking. Not all do. Furthermore you need to find a crypto exchange that supports staking of the coin that you want to get staking rewards for.

Usually exchanges look at the amount of coins held over a given period of time and payout the staking rewards at the end of the month. Some exchanges require a specific amount before applying staking rewards.

Below you find a list of recommended exchanges that support staking.

  • Algorand (ALGO)
  • Cosmos (ATOM)
  • Komodo (KMD)
  • MetaHash (MHC)
  • Neo (NEO)
  • Ontology (ONT)
  • Qtum (QTUM)
  • Stratis (STRAT)
  • Stellar (XLM)
  • Tezos (XTZ)
  • Tron (TRX)

When staking coins you usually get rewards in the same coin or token that you are staking. But some coins provide the staking rewards in a different coin.

Below you can see some of these coins that are distributing the rewards in different coins.

Staking coin Rewards coin
Neo (NEO) Gas (GAS)
Ontology (ONT) Ontology Gas (ONG)
Tron (TRX) BitTorrent (BTT)

How does staking work?

Staking is the process of actively participating in transaction validation on a Proof of Stake (PoS) blockchain network. On PoS blockchains validators stake coins and tokens on exchanges for the right to validate blocks on a network. Everytime a new block is produced the validators get rewarded. PoS and Proof of Work (PoW) blockchains conceptually share rewarding users that contribute to the blockchain network but they are technically very different.

PoS blockchains validate new blocks through staking. Placing your coins on a wallet will passively be contributing to validating the new blocks and getting rewarded. Users with large wallets have a higher chance of getting selected to validate the next block. This is why exchanges are offering staking, because they use all the funds from users to hold large amounts and thereby increase the odds of being selected. This is what is referred to as Delegated Proof of Stake. PoS validators are selected based on how many coins or tokens that are allocated for staking.

PoW blockchains like Bitcoin require a lot of computing power in order to operate. The big amount of computing power is used for mining, which in short is described as solving complex equations when validating new blocks on the chain. The high usage of energy is often referred to as one of the major downsides of digital currencies.

Energy consumption is one of the reasons why Ethereum has planned to migrate from being a PoW chain to PoS with the Ethereum Casper upgrade.

The downside of using the PoS is that the network will be controlled by large holders of the respective coin or token, which is not supporting the original idea behind Bitcoin to be decentralised currency.