In traditional PoW algorithms (proof of work), miners provide the hash power of their machines to protect and support blockchain networks. Work of miners is rewarded with coins for finding new blocks. However, such a process is not always profitable, especially considering the low price of some cryptocurrencies and the high cost of electricity and truly efficient mining equipment.
This is why staking is becoming an affordable type of mining. It is used for cryptocurrencies that function on a PoS consensus algorithm (rate confirmation). Staking assumes that users store their tokens in a wallet, which is used to protect the network, verify transactions and create new blocks. Just like in PoW, when new blocks are found, stakers receive a reward for participating in this process.
Over the past few months, the popularity of staking has been increasing since it takes a little effort to set up, and makes it easy to receive passive income.
An alternative consensus mechanism, Proof of Stake was first implemented in 2012 in PPCoin cryptocurrency (now known as PeerCoin). The main idea behind it is to use a “stake” as a resource that determines which particular node gets the right to mine the next block.
In the Proof-of-Stake approach, the nodes also try to hash data in search of a result less than a certain value. But in hits case, the complexity is distributed proportionally in accordance with the balance of this node. In other words, in accordance with the number of coins (tokens) stored on the user’s account.
Thus, a node with a greater balance is more likely to generate the next block. Such an approach looks quite attractive primarily because of minimal requirements to computing resources, and also because no capacities are wasted.
Benefits of Staking
PoS algorithm has the following advantages:
- Staking is a more convenient and less expensive way to make money on cryptocurrency than mining through PoW. No expensive mining equipment is required.
- Staking protects holders against inflation. It helps to cover the loss fully or partially if a cryptocurrency falls in price.
- Staking is a secure algorithm. Significant funds are required to carry out an attack, which makes it financially impractical. At the same time, if an attacker has a large number of tokens at his disposal, he will also suffer from the attack, as this will violate the stability of the cryptocurrency.
Best Cryptocurrency for Staking
Launched in September 2018, Tezos uses the Liquid Proof of Stake algorithm and is positioned as the network protocol for safe and tested smart contract systems. In order to become a Tezos validator, you need to “freeze” the amount of at least 10,000 XTZ in your wallet. However, the ecosystem also provides for the possibility of delegation – any number of your own coins can be entrusted to a miner. The current annual revenue is about 7%.
The cryptocurrency uses a hybrid of PoW and PoS mechanisms, which reduces centralization. Miners receive a portion of a 30% block reward. You need to have at least 5 DCR coins in your wallet. The annual profit of DCR holders reaches 10%.
NEO project is often called the Chinese Ethereum. The algorithm behind it is called Delegated Byzantine Fault Tolerance.
NEO differs from other cryptocurrencies by its indivisibility – it cannot be divided into parts less than 1 NEO. The “fuel” model is also used in the form of GAS tokens – when the next block is found, 7 GAS are automatically distributed among NEO holders.
The current passive revenue from NEO is about 2.3% per annum. At the end of April 2019, the project announced the transition to NEO 3.0, which is expected to improve network performance and scalability.
Tron uses Delegated Proof of Stake algorithm. Investors have the right to participate in voting. The annual reward is about 4.4% but may be higher. Recently, TRON increased the staking reward by x10, which motivated new users to join the project.
The launch of the Cosmos Hub took place in March 2019 after three years of hard work. The project is designed to ensure the compatibility of different blockchains (primarily Ethereum and Bitcoin). Cosmos network validators receive additional ATOM tokens for securing the blockchain by staking their tokens. The current annual revenue is estimated at more than 12%.
In October 2019, Gate.io exchange implemented Ontology cryptocurrency staking (ONT) in its new program called “HODL & Earn”. Gate.io users can make deposits in ONT to receive from 12% to 25% of profit per year. The rate of return depends on the number of ONTs stored during the past 14 days. Dividends are accrued every two weeks.
According to Coinmarketcap, the average daily trading volume at Gate.io is $ 40.1 million, and ONT cryptocurrency accounts for $400,000.
Komodo blockchain uses Adaptive Proof of Work, and holders can participate in the staking program via Automatic Reward Distribution. According to StakingRewards website, holding Komodo can bring you about 5.1% of annual profit. For instance, if you hold 1,000 KMD, your yearly earning will be 51% (~$26 at the time of writing this article). On July 24, 2019, Binance introduced Komodo staking with a multiplying co-efficient.
Neblio is an open-source blockchain platform for business, and it has one of the highest ROI rates: holders can enjoy a 33.23% yearly profit! The blockchain uses the classic Proof of Stake algorithm.
#9. Pundi X
Like most others, Pundi X has lost a significant portion of its value, as its market capitalization has dropped to $ 221 million. Yet, staking users are expected to earn about 19.4% per year, which can bring substantial revenue in the long term.
With the total issue of 266.962 bln NPXS, about 212.624 bln NPXS are in circulation The residual emission is unlikely to affect the cost of NPXS.
Qtum is a hybrid blockchain platform used for smart contracts and mobile apps. It leverages Proof of Stake 3.0, and investors can participate only by staking. Qtum staking has a 4.66% annual reward, which means 1,000 QTUM will bring you 46 coins, or $73.19.
If you are not one of the active traders, staking coins will be a great option for you. The reward might range from 3% to 30%, but the best thing about it is that you don’t have to do anything. This is a 100% passive income. Our list of staking crypto coins shows that there are many options to choose from. If you doubt whether a coin is worth consideration, use an online staking calculator.