Is cryptocurrency staking profitable in 2021?

Defining Profitability

Anyone can create a new staking coin and set an insanely high inflation rate, and promise you the world. Just because a coin has a high inflation rate, it does not mean you will realize any profits. This is because, to see any profits, you would need to sell that coin.

If you’re selling it for less than you bought it then you’re in trouble. This is why it’s important to understand that for staking to be profitable, the coin itself must have value. This is because staking rewards are paid out in the currency you’re staking. So when discussing profitability, we have to be aware that it’s not as easy as choosing the highest returning coin. We must balance returns, with utility and value.

For example, the crypto investor who is in it for the long haul may choose a higher returning coin, because they are confident it will grow in price in the future and are happy to just accumulate that coin for now, even if it’s not worth a lot. However, an institutional investor who wants to supplement their conventional stocks may choose a more stable coin, with lower rates of inflation, as it’s a safer bet.

Summary: to assess profitability, we need to assess our own tolerance and goals.

Staking vs Mining profitability

Due to the popularity of mining over the last few years, it is very difficult for smaller operations to maintain profitability.

With high electricity usage and expensive hardware, the upfront costs of mining can be large. Staking is competitive in returns, without the technological hassle, or needing to replace expensive equipment.

Now that it’s clear that staking is just as profitable, but much more user friendly than mining, what are the best staking coins, and what should you look out for?

Top 5 staking coins

If you’re looking for a few options to get started, here’s a small list of the diversity you can expect with staking coins. This should not be taken as financial advice, and we strongly suggest you do your own thorough research before making any investment decision.

1) Divi (DIVI)

The Divi Project has had a simple goal from day one. To make crypto easy. Their revolutionary wallet is poised to push cryptocurrencies to the masses, using brilliant UX/UI, and human-centric blockchain design. No more scary addresses. No more exchanges.

Just Divi. Staking rewards here range from 22%-24% per year. Users will be able to use Divi’s decentralized staking vaults, making staking accessible for everyone. Divi began 2020 at $0.012, with prices currently at $0.064, representing a nearly six-fold increase in just over a year!

2) Cardano (ADA)

Cardano has been in the cryptocurrency space for years and just recently upgraded its blockchain, facilitating staking. Their goal is to facilitate decentralized communities through peer-reviewed blockchain research and development.

There are two options for people to stake here, either by running their own staking pool or utilizing someone else’s. Cardano started 2020 at a meager 0.033USD, and at the time of writing, is worth 0.34, representing a 1000% increase in just over a year.

3) Cosmos (ATOM)

Cosmos can be thought of as the ‘internet’ of blockchains, allowing different projects to more effectively communicate with each other. Cosmos shows returns of 9%- 10% per year. Price has risen from $4.21 in January 2020 to $6.93 in February 2021.

4) Algorand (ALGO)

A decentralized blockchain focused on facilitating the new borderless economy. Their goal is to solve blockchain scalability, without sacrificing security. Yearly returns range from 8% - 10%. Algorand started 2020 at $0.22 and is currently trading at $0.55.

5) Tezos (XTZ)

Tezos is a relatively new blockchain, released in 2018. An open-source platform for applications and assets, Tezos also uses on-chain governance of holders and simple staking (called baking) for all holders. Yearly returns for Tezos sit around 6%.

How can you start?

1. Pick a few coins, to begin with, this list can be flexible, but you have to start somewhere!
2. Look at their rate of return (ROR), their value proposition (what they are proposing they will do?), and the team’s record of delivering. If you’re excited about what they’re doing, it makes investing easier!
3. Investigate how easy or difficult it is to stake that coin. For example, Divi Projects staking vaults are an example of incredibly easy staking! One-click, and you’re away! Other options include custodial staking on exchanges (such as coinbase staking), but you must be aware of the risks associated with custodial solutions!
4. Install the wallet, buy the coins, get staking!

So, should you stake?

It’s abundantly clear that staking offers a great investment opportunity for cryptocurrency investors who are comfortable with holding onto that crypto-asset.

If you’re in it for the longer-term or believe in the success of the project, staking presents a fantastic opportunity to both support the security of a network whilst receiving rewards.

If you're interested, check out our ultimate guide to proof of stake!