How do you start coin staking in 2021?

A beginner's guide to staking. What is staking and Proof of Stake? Learn about the benefits of staking, how you can stake crypto, and where to start!

Kyle Turnbull

January 20, 2021 · 4 min read

How do you start Coin Staking?

The rise in popularity of staking coins over the past few years shows that there is a growing interest in ways to earn income with cryptocurrency. With an overwhelming amount of information out there, it can be difficult to know where to start. Look no further, this blog summarises exactly what staking is, and how you can start earning staking rewards.

Staking is how some cryptocurrencies keep their network secure. If you think of the blockchain as one big spreadsheet containing all transactions, stakers are the bookkeepers.

When your wallet is staking, it is checking transactions to make sure everyone who sends coins has the right to transfer them. Stakers are paid staking rewards which are small amounts of the cryptocurrency they work to secure.

What is Proof of Stake (POS)

Proof of stake coins uses stakers as the validators of the network, helping the ecosystem to reach consensus. Stakers are required to ‘stake’ their funds, as they are used to help validate payments. Bitcoin, for example, uses proof of work, which requires powerful computers to solve complex mathematical equations.

There are two main benefits to staking:

  1. Staking (POS) requires less power consumption than mining (POW), making it a more sustainable consensus mechanism. There has been plenty of debate around the energy consumption of Bitcoin, and POS obviates this.
  2. Staking has a lower technological barrier to entry than mining. Proof of Work mining requires expensive hardware, and solid technological knowledge, which means the average person is unlikely to start mining. Proof of stake reduces these barriers, making it a more user-friendly option.

So now you know what staking is. However, the question remains. How can you participate, and earn a passive income while doing so?

How to stake crypto:

Every coin is different. However, there are some steps every investor should take when beginning on their staking journey:

1. Pick a coin!

This seems obvious, but is very important! We strongly encourage users to fully understand the risks associated with their investment. Researching the project, their value proposition, and their record of delivering are all important. In terms of your investment, understand the coin's liquidity (this will make it easy to buy and or sell, and it’s yearly returns. To stake, you will be required to hold onto the coin you’re staking, so it’s long term viability is critical!

2. Decide on your wallet.

Most staking coins will have a dedicated wallet you must use to stake. We suggest you make sure your computer can run the required applications before you invest! Some coins can be staked on hardware wallets, which offer another layer of security.

Additionally, some exchanges offer staking services such as coinbase staking, but there are tradeoffs. This requires you to keep the coins on the exchange, which does pose risks, and quite often, your reward rate will be lower for using such services. We would always champion users taking control of their own funds. However, if you want the easiest option, exchange staking could work for you.

3. Purchase your coins

This can often be the scariest part of the process. Cryptocurrency exchanges can be cumbersome to work with and turn off many would-be investors. You will need to find a way of using your fiat currency (USD, EUR) to buy cryptocurrency.

It is likely that you will have to buy Bitcoin with a credit card or bank transfer, and then send this to an exchange to purchase your staking coin. We’ve included a list of the best staking coins below.

4. Understand your hardware and software

Staking requires a consistent internet connection, and your computer running 24/7, to maximize efficiency. Even WiFi connections are often not stable enough for staking machines. Some people have dedicated laptops to stake on that remain plugged into their modem, and others stake from a Virtual Private Server.

The Divi Project will have staking vaults upon the release of the much anticipated mobile wallet. This will mean users are able to stake without internet, whilst remaining in control of their coins. Decide what makes the most sense to you, and understand the pros and cons of your options.

5. Send your coins to the wallet, and start staking!

You did it! Send those coins from the exchange to your wallet, and start to secure the network! It’s a good idea to check in with your staking wallet frequently, as issues can arise if power is lost, or your network drops out.

This is not a set-and-forget investment! Staking requires the user to stay on top of their wallet, and ensure it’s always connected and working!

Staking coins list:

We’ve collected a list of the best crypto staking coins of 2020 to set you on your way. Please note, this is not financial advice, and we encourage everyone to do their due diligence before investing in any project. The list below also includes the rewards expected for each coin.

  • Divi (DIVI) ~27%
  • Cardano (ADA) ~5%
  • Cosmos (ATOM) ~9%
  • Tezos (XTZ) ~5%
  • VeChain (VET) ~1%
  • TomoChain (TOMO) ~7%
  • Algorand (ALGO) ~7.5%

All of the above coins offer users the ability to earn rewards for helping secure the network. This list is not an attempt to endorse these coins, but provide you a starting point on oyour journey!

This was a quick guide on how to get started staking. If you’re interested in learning more about blockchain, including proof-of-stake, or consensus mechanisms, then check out our informative blogs on the subject.

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  • Staking

Kyle Turnbull

January 20, 2021 · 4 min read

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