What is Crypto Staking?

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Summary: Crypto staking means locking up some of your cryptocurrency to contribute to a blockchain network for a particular duration. It can help you earn rewards. You can start Crypto staking in Australia through the swyftx exchange platform.

What is Staking in Crypto?

Investing in cryptocurrencies is a popular activity in Australia. If you engage in this, you have probably heard about Crypto staking. This is locking crypto holdings in an attempt to earn interest. It works just like depositing some funds in a bank and gaining interest after some time.

If you engage in Crypto staking, you may earn passive income on your holdings. The process is often used to verify crypto transactions. You can earn between 5-20% per annum based on the cryptos you choose to stake.

If you have been mining Crypto and are looking for another way to get assets in your crypto wallet, you can consider crypto staking.

For you to engage in this, you have to commit coins to support a blockchain network and then confirm transactions.

Blockchain technology is used to build cryptocurrencies. When crypto transactions are confirmed, the data is then stored on a blockchain. Crypto staking benefits the network in that it raises the value of the token.

When you commit your crypto assets to the cryptocurrency protocol, the protocol then picks validators to verify blocks of transactions. If you commit lots of crypto assets, you increase your chances of being selected as a validator. It happens through a staking pool.

New crypto-coins get minted every time a block gets added to the blockchain and then distributed to the block’s validator as staking rewards.

The validation processes are referred to as proof of work and proof of stake. Note that crypto staking is only available with cryptocurrencies that utilize the proof of stake model. Proof of work needs mining devices that utilize lots of computing power to solve equations.

Proof of work diagram

Cryptocurrencies that utilize the proof of work model use lots of energy. On the other hand, proof of stake is more energy-efficient. It can also handle a higher number of transactions.

Since some of the cryptocurrencies are not based on the proof of stake model, crypto staking is not viable will all cryptocurrencies. You can earn rewards from crypto staking since the blockchain utilizes your holding.

If you want to start crypto-staking, you should consider signing up with a good cryptocurrency exchange like Swyftx. This exchange has been making it easy for many investors in Australia to earn Crypto from staking their coins.

How Do I Stake Crypto in Australia?

The process of staking Crypto is not that complicated. Pay attention to the following…

Purchase Cryptocurrency that utilizes the proof of stake model…

The following are some of the cryptos that validate transactions with the proof of stake model.

  • Ethereum -This is a popular crypto coin that you can purchase. Though Ethereum initially used proof of work, it now utilizes the proof of stake model. You need 2 ETH to stake Ethereum. You can gain a return of between 5-17% per year from staking this crypto coin.
  • Cardano – Besides Ethereum, you can also start crypto staking by purchasing this coin. This is an eco-friendly cryptocurrency that is multi-layered. It is a smart contract platform with one layer for dApps and another layer for the ADA coin transaction. This crypto coin uses scientifically tested theories, and it is developed via evidence-based techniques. It can help one gain returns of up to 24%.
  • Polkadot -This cryptocurrency is not very different from Cosmos. It was developed to support various blockchains and help them work together. Polkadot can help one gain yields of up to 12% per year.
  • Solana – Some Australians also choose to stake Crypto by buying Solana. This is appealing since it offers low fees and promotes fast transactions.

Note that each cryptocurrency has certain minimum staking requirements. You should take some time to assess them before you choose Crypto to stake.

Stake Crypto in Swyftx

Swyftx Homepage screenshot

Swyftx is the main crypto exchange platform in Australia that many investors use. It is a user-friendly platform that gives you the chance to stake coins and earn a passive income. It works by staking your tokens on your behalf.

One of the reasons you should choose swyftx is that it is well regulated and fully licensed. This abides by the tax laws. Most Australians that use this platform have peace of mind since it guarantees safety. This exchange can protect your assets since it takes security seriously by implementing techniques such as 2FA authentication.

Swyftx should be your go-to cryptocurrency exchange since it supports numerous cryptocurrencies, including those that use the proof of stake model. Swyftx also offers numerous tools that can benefit cryptocurrency investors. Besides that, you can enjoy good customer service by choosing to work with swyftx.

Once you sign up with swyftx, you can get rewards on the Crypto you hold in your wallet. This platform does not subject you to any fees for staking Crypto. It also adds rewards automatically to your balance of the Crypto you hold.

To start, you only need to create an account with Swyftx. You have to provide basic information to create the account, including your ID, phone number, and email.

For full details you can read our Swyftx review.

Choose the right hardware

Apart from picking the right cryptocurrency exchange, you should also find out the right hardware to use. For you to engage in crypto staking, you should have a reliable internet connection.

You can use a regular desktop computer or a single board computer to stake Crypto. Many Australians choose the second option due to electricity costs.

Consider joining a staking pool

Most investors prefer using staking pools since it increases the chances of earning rewards. This involves combining your funds with that of other Crypto traders.

Before choosing this option, you should do some research to learn more about the available staking pools. Ensure that you choose an established pool.

Choose one whose servers have the highest uptime and one with reasonable fees. Staking pools take a certain percentage of the staking rewards as fees.

You should also settle for a mid-sized pool instead of choosing a small or very large one.

Benefits of Staking

Mining crypto is not the only way to invest in cryptocurrencies. You can also benefit from crypto staking. Some of the benefits of crypto staking include the following.

The potential to earn more tokens.

Though this is not assured, it is possible to earn extra tokens on your holdings. The interest rates are often quite generous since you can earn between 10-20% per year.

All you need to begin earning is a crypto that utilizes proof of stake and a good exchange platform like swyftx. The longer you choose to stake coins, the greater the potential rewards due to compound interest.

You support the blockchain.

Staking crypto also enables you to support the blockchain you invest in. Since cryptocurrencies depend on investors to verify transactions, engaging in this ensures that things run efficiently.

It consumes fewer resources.

Unlike crypto mining, crypto staking is environmentally friendly since it consumes fewer resources. Crypto staking limits the supply of tokens and services to the ecosystem. You also don’t require any equipment for you to engage in crypto staking.

Risks of Staking

Though crypto staking can help you earn some passive income, it is not risk-free. The following are some of the risks you should beware of before engaging in crypto staking.

Volatility

Crypto staking is volatile due to price swings that are quite common. Sometimes, the coin you stake may fall. If the assets that you stake experience a significant price drop, you may not earn any interest in return.

Before you start crypto staking, you should therefore assess whether you are ready for such risks. Due to the volatile nature of crypto staking, it is not always the best option for everyone.

Lock-up periods

We mentioned crypto staking involves locking up some funds for a certain duration. It could be months or years. During this duration, you may not be able to access your holdings to trade them. If you don’t have plans to trade soon, you can stake Crypto.

Possible fees

Not every exchange that allows crypto staking is free. Some of them charge certain fees, which are often a percentage of your rewards. If you want to avoid such, consider signing up with swyftx since it does not charge crypto traders fees for staking.

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FAQs About Crypto Staking

Can I become a validator?

Yes. Though this is possible, setting up a staking infrastructure on your own is not easy. This also needs the right computing equipment.

Is Crypto staking right for me?

Though anyone can engage in this, it is not always the best option for every. If you are an experienced investor used to volatility, it might be the right option for you.

Why don’t all cryptos have staking?

This is because some of the cryptocurrencies make use of the proof of work model and staking utilizes the proof of stake mechanism.

Disclaimer: This article is intended to be used and must be used for informational purposes only. It's important to understand that digital assets are risky, you should always do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice.