Crypto staking is the process of locking up crypto assets to earn rewards. You can think of it as similar to depositing cash in your savings account for interest rewards in a traditional bank. However, cryptocurrency generally offer much higher interest rates. Therefore, it is a popular method of earning passive income among users in the crypto space.
Through staking, you can also support your favorite blockchains by helping them maintain chain security. The more tokens staked, the more secure the blockchain is perceived to be – and therefore, more valuable. In order to do this, you can participate in two forms of staking:
PoS, or Proof of Stake, staking consists of validators setting up, running, and maintaining their own nodes, as well as validating transactions. In turn, the validators earn transaction fees as rewards. While it is attractive, PoS also requires technical expertise and higher risk tolerance, as running a node incorrectly can result in loss of staked tokens.
Delegating is when users delegate their PoS tokens to an existing validator. The validator can then use them to run their own node and verify transactions. The delegator then enjoys a portion of the rewards earned by the validator without having to perform any of the operational aspects themselves. Delegating offers lower yields than staking, but it doesn’t demand much effort and is more of a passive investment.
Staking calculators access mathematical formulas to estimate the earning potential of staking to different PoS chains, based on both set and variable values. There is an abundance of cryptocurrencies for users to stake and earn yield – all with different interest rates, protocol requirements, and blockchain features.
Hence, staking calculators are an excellent tool to receive an initial estimation of how much profit you can make. This can then help inform your decision on which project to choose before delegating to a trusted validator node, or setting up a validator node yourself. You could also use a staking calculator to explore several PoS chains to discover cryptocurrencies that could potentially earn you a notable amount of returns.
APY, or Annual Percentage Yield, is a common term in cryptocurrency – and finance in general – used to estimate how much returns you will gain for staking or delegating your crypto assets over a specific period of time.
APR, or Annual Percentage Rate, is similar to APY too, but with a stark difference: APY is interest that is compounded over a specific period of time, while APR is interest that is not compounded.
Compounding is the process in which the amount you have earned from an asset is reinvested to generate additional revenue over time. In other words, the interest you earn on interest.
To use a staking calculator and estimate how much you can gain over a period of time, you can first go to Staking Rewards Calculator.
Choose the asset you are planning to stake/ delegate.
Pick your reward option.
If you are a validator and staking, select ‘Run a Validator Node’.
If you are simply delegating, select ‘Delegate …’
Input the amount you are planning to stake/ delegate in USD or the native crypto asset. (e.g. 888 USD)
Type in the length of time you wish to stake/ delegate your assets. (e.g. 180 days)
If you are delegating, also insert the commission fee that the validator charges in the ‘Provider Fee’ section. For example, MANTRA charges just 2% to their delegators.
Now, you can see the value of how much you are estimated to earn.
One more reason why users might use staking calculators is because PoS staking rewards are changing all the time. For example, many blockchain projects offer higher APYs when they have fewer validators. This means that, in order to capitalize on the high rewards offered by trusted projects, you have to be quick to stake.
A general piece of advice when staking/ delegating is also to look beyond just the APR/APY when considering which blockchain to stake. Unknown PoS chains sometimes offer extremely high rewards for staking their tokens, only for their value to rapidly decrease before the rewards are given out. Hence, it is crucial to also consider the following before committing to stake to a PoS chain:
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are those of the author and the comments, opinions and analyses are rendered as of the publication date and may change without notice. There is no guarantee that any forecasts or predictions made will come to pass. The information provided in this material is not intended as a complete analysis of all material facts or circumstances regarding any country, region or market. All investments involve risks, including possible loss of principal.
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