Is Staking Profitable in 2022? What are The Risks and Rewards?
As we know, investing in crypto comes with its own level of risk and reward. The high volatility of the market allows for significant returns. However, there are also many blockchain projects which may look promising but are doomed to failure.
In the following article, we will talk about staking your cryptocurrency. We will focus on the risks and rewards that come with staking. We will look at some coins that you might want to consider in 2022 if you are looking to stake.
What is Staking?
Staking cryptocurrencies effectively means that you are committing some, or all, of your coin holdings, for supporting a blockchain network and the transactions carried out on this network. In many cases, you can stake coins directly from your wallet. At other times you may have to use a platform specifically designed for staking.
Proof of Stake (PoS) is a consensus mechanism. The main idea behind this is that you “lock” some of your coins into the mechanism. Some of these holdings will be randomly assigned to validate the next block at intervals. The more coins you have staked or locked up, the higher the chances of them being used.
Staking for the production of blocks allows for a high degree of scalability for blockchains. This can be considered a primary reason for the Ethereum network upgrading to using Proof of Stake as part of a series of technical upgrades.
The most accessible way to stake some coins can be to enter a staking pool. This means you don’t need to own any validator hardware and also allows you to invest smaller amounts.
What are the Rewards?
As the coins that you have staked are used to support the blockchain network, you will earn passive rewards on your asset holdings. The rates of interest on this can be very high. If you stake a coin that is going up rapidly in value while also earning more of those coins through staking, you will maximize and accelerate your returns.
Algorand, Tezos, Tron, Cosmos, and Kava offer 6 to 12% APY directly to your wallet app. This kind of earning potential is pretty formidable, making staking one of your best potential income assets. These kinds of returns can overshadow any potential risks.
The Proof of Stake model is more energy efficient than the Proof of Work model. In the Proof of Work model, blockchain transactions involve mining, which uses a lot of computer resources for addressing mathematical equations. This means that you can stake your coins and not feel guilty about impacting the environment.
Crypto staking does not require any advanced equipment or costly computing resources. This makes it much more accessible to the general public than crypto mining. When you stake coins, you are also directly participating in enhancing the security and the performance of the blockchain.
What are the Risks?
One risk that comes with staking is that you will find with all investments. If the value of the coin you are staking starts to drop, you will be losing money on your asset. The volatility of the cryptocurrency market must be taken into account. Blockchain projects can fail for a number of reasons, including a lack of development, no real-world adoption, and token value deterioration.
One of the things to consider when staking is the potential “lockup” period”. Many coins have to be staked for a minimum duration. This means that if they start to drop in value radically and you wish to sell them, you will have to wait until the lockup period is over. This could potentially lead to considerable losses. You can get around this by only staking coins or using staking platforms that don’t require this lockup period.
Some platforms that offer staking will give you daily rewards. However, some platforms may only offer more long-term rewards. This means you cannot re-invest your staking rewards as quickly in order to produce a higher yield. Staking rewards can also rely on the number of participants in the pool and the total amount of tokens staked. This means your rewards can fluctuate.
There is always the chance that your coins will be hacked, lost, frozen, or stolen. According to this article, more than $200 million worth of cryptocurrencies were lost due to fraud in 2021. You may consider using a hardware wallet for staking rather than third-party staking platforms.
Some of the Best Staking Coins for 2022
Please remember that investments are never guaranteed and always come with an element of risk. Always do your own research before buying a cryptocurrency or choosing to stake.
Terra’s native coin, LUNA, is constantly rising in value. It is trading above $90, a 12,000% rise from 7 cents in January 2021. It is currently among the top ten cryptocurrency ventures and offers a staking payout of around 12%.
JEDSTAR has a creative approach to some of the blockchain industry’s most pressing demands. They have introduced concepts such as NFT author royalties, mobile mining, and measures to prevent “pump and dump” tactics. The JEDSTAR STARSTAKING platform allows you to stake $JED for $KRED rewards. The reward levels range from x5 for 30 days to x120 for a year.
Shiba Inu’s SHIB coin was created to outperform Dogecoin. With the launch of the ShibaSwap exchange, you may now stake and farm your SHIB tokens. You will receive BONE tokens as your reward.
Solana is a highly scalable blockchain that was built for efficiency. Their minimal costs and speedy transactions mean that they have scaled very quickly. The SOL token may be an excellent choice for staking as most transactions take seconds. Staking your SOL tokens could lead to a 7-11% yearly profit.
As with any investment, staking comes with its own risks and rewards. You must make sure you invest in solid blockchain projects with a good projection over the next 3 to 5 years. There are certainly prospects for making handsome profits, with very little effort involved on your part. However, if the cryptocurrency you invested in fails, then all of your rewards will likely mean nothing.