How Crypto Staking Can Make You a Lot of Passive Income
By Heidi Unrau | Published on 04 Dec 2022
In collaboration with NDAX
Crypto investing just got a lot more flexible. Cryptocurrency is about to stake its claim to high-yield interest rates and the rewards are potentially endless. While Bitcoin and Ethereum 1.0 rely on the pros and cons of crypto mining, decentralized finance is making crypto safer and more profitable through staking.
The NDAX cryptocurrency trading platform is the first in Canada to offer Proof of Stake (PoS) wealth building opportunities. What is staking, you ask? It’s a passive way to earn money by lending out your coins to power the blockchain. The cryptocurrency you stake earns interest, usually at very high rates not possible through a traditional bank.
The blockchain needs crypto staking
Staking is a great way to grow your wealth without buying more crypto. But did you know it’s critical for the blockchain, too? By staking your cryptocurrency, you get to participate more fully in the financial revolution.
The purpose of blockchain technology is to cut out the middleman, like a traditional bank. But in order to do that, it requires help from all of us. That’s where crypto staking comes in.
In order to truly decentralize finance, transactions need to be recorded and stored on a public ledger spread across countless computers, or machines called nodes. Recent transactions are grouped together and stored in blocks that hold a specific amount of data, like pouring water into a bucket. When the bucket is full, you get a new one.
When a block is filled to capacity with transaction data, a new block must be created to store new transactions. Blocks of transactions need to be confirmed before they’re added to the blockchain. By staking your cryptocurrency, you become one of a group of people who help confirm blocks of transactions so they can be added to the blockchain.
But you don’t help confirm every block, every time. Rather, you are in a pool of validators, or miners, for the network to choose from. Validators are chosen based on how much cryptocurrency they have staked. The more you stake, the more likely you are to be chosen to validate blocks of transactions.
You only make money on your staked cryptocurrency when you validate a block. In doing so, more crypto coins are created then paid out to you as a staking reward. The more crypto you stake, the more frequently you will be chosen to validate, and the more rewards you earn.
Ok, put your calculator away, the process is entirely automated. All you have to do is stake your coins. But you can’t stake with just any cryptocurrency.
You need cryptocurrencies, like those traded on NDAX, that use the Proof of Stake (PoS) model to power their network. Other cryptos use a Proof of Work (PoW) method to power their network. So what’s the difference?
Proof of Stake vs Proof of Work
When you stake your crypto coins, you are locking up your crypto on the network, which means you cannot use them during the time they are staked. It is your opportunity cost. In doing so, you help create new blocks of transactions and get rewarded with more cryptocurrency.
Many coins use a PoW model to power their network. PoW is the original way to confirm that transactions on the blockchain are authentic and accurate, and not bad actors doing shady things. It’s how the big daddy coins like Bitcoin and Ethereum 1.0 validate transactions on their networks. But it takes a ton of computing power.
PoW depends on cryptography, which uses math problems so complicated they cannot be solved by the human brain. These math problems can only be solved by very powerful computers. Each math equation is unique, there are no two alike. That’s how the network ensures the transactions are authentic.
As you can imagine, that kind of computing power uses a ton of energy. It’s also kind of slow relative to other crypto networks that can validate transactions much faster. Because PoW requires so much computational power, it is limited in how many blocks of transactions it can confirm at a time. It is not the most efficient way to process blockchain transactions, nor is it environmentally friendly.
PoS solves the problem of time and energy. It’s better than traditional blockchain verification because it doesn’t depend solely on energy intensive data mining, expensive computing equipment, or genius-level mathematics. All you need is to hold PoS coins and to trust NDAX to generate income for you. Yup, that’s it.
How can I stake my coins?
It works like this: NDAX adds your coins to its trading pool. You are loaning your coin’s ability to verify blockchain transactions. You don’t sell your coins, you rent out their potential to the blockchain.
It is just like when you loan your money to a bank when you make deposits to your bank account and earn interest, minimal as it sometimes is. When you do that, you earn interest from your coins’ hard work. With NDAX, some coins, such as Polkdot (DOT), can make you as much as 12% in annual percentage yield (APY). Let’s take a look at the Proof of Stake coins available on the NDAX trading platform, and how much you can earn:
- Ethereum (ETH) up to 5% annual yield
- Cardano (ADA) up to 4.8% annual yield
- Polkadot (DOT) up to 12% annual yield
Ok. Those are some impressive numbers. When’s the last time your bank paid you more than 0.5% annual interest on your savings account? I’ll wait. Are you ready to start earning passive income right now? Here’s how to get started:
First, sign up for an NDAX account. It’s super easy and only takes a few minutes. Then hop on over to the Staking section of your NDAX dashboard. You’ll need to sign up for a staking subscription. Once that’s done, simply select a coin available for staking. If you don’t already hold that coin, you’ll need to buy some.
The lock up period and Annual Percentage Yield (APY) vary by coin. Through NDAX, most of them don’t have a lock up period at all! With Cardano (ADA) and Polkadot (DOT), you can instantly unstake your coins anytime. Choose the one that fits your goals.
Some coins have a bonding period, which is the amount of time it takes to start earning rewards after you stake them. Depending on the coin, the bonding period ranges from 1 to 3 days. With Cardano (ADA) you start earning rewards in as little as one day.
Most coins pay rewards daily or weekly. It’s time you got paid to power the blockchain. Are you ready?
It’s not a lie and it’s not a scam. It comes with risk, every financial decision does. But the rewards are worth it. You get to choose the amount of APY interest you want, because not all coins carry the same weight.
So what are you waiting for? A bank account to give you 12% interest or your coin to reach a new all time high? Open an NDAX account today and start staking your crypto to earn better money.
