Passive income with tools like an automated crypto trading bot became a mundane reality for many. However, the offerings from DeFi protocols significantly expanded the spectrum of opportunities that everyone can access. The massive paradigm shift occurred when Ethereum moved to the new consensus mechanism called Proof-of-Stake and decided to abandon energy-intensive mining. This change led to the popularity of the best crypto staking platforms offering retail investors a way to earn money without actively participating in the wildly volatile market.
What is a DeFi staking platform exactly?
Bitcoin is often considered the foundation of the whole blokchain ecosystem as it provided a viable framework that was later adopted by all other chains. The first widely adopted consensus mechanism called Proof-of-Work was based on the assumption that mathematical problems without any efficient solutions can be used to provide the necessary security and reliability. However, the computational resources required to make this whole architecture to operate are more than just “substantial”. Bitcoin mining along consumes more electricity that come nations with the estimated consumption rate of 121 terawatt-hours annually.
As young millennials and Gen Z who comprise the biggest chunk of the audience for digital assets are becoming increasingly more concerned with the environmental impact of their activities. They do not like the idea of using financial instruments thar are unfriendly to Mother Nature. The alternative was soon proposed by Cardano, the biggest Ethereum competitor which at the time was also a PoW network.
The PoS consensus mechanism does not require computation and instead relies on an army of validators who are interested in and committed to the chain. They validate transactions and receive rewards for locking in their holdings. The interests of the participants are directly tied to the overall health of the chain since they receive a reward only when their node is chosen to validate an operation with the chance increasing with the size of the locked sum.
The transition of the Ethereum network to the PoS mechanism was dubbed as “The Merge” and happened in the end of 2020. The full transition was completed two years later. This move was quite significant as it reduced the energy consumption of the network by over 99.95% incentivizing users concerned with the environment to join the chain.
While the issues with CO2 emissions were prioritized by the media, there are many other reasons to switch from PoW to PoS and other novel consensus mechanisms. For example, networks using alternative consensus often have higher TPS and throughput. The best cryptocurrency staking platforms are DeFi protocols that provide liquidity to markets and ensure higher performance metrics to stay competitive. Many experts believe that using PoS is a good idea for the decentralization as it spreads the influence of validators more evenly compared to mining where large pools often have a lot of power in the network.
This method of investment is a way of locking up funds to receive rewards from the network. PoS and DPoS systems are quite useful and provide a wide range of benefits to stakholders.
Here’s how it all works:
1. An investor starts with getting a wallet. In most cases, you will need to use a network-compatible wallet. For example, Metamask is widely used by Ethereum users. However, Cardano and other PoS networks use different wallets.
2. The next step is to lock in funds. Potential validators deposit their funds in the special wallet to show their commitment to the healthy development of the chain. You can imagine it as a collateral held by the organization while you are in it.
3. You wait to be chosen by the network as a validator. All committed participants have a chance to be chosen to validate an operation. In some systems, the size of investments affects the likelihood of validating a transaction. In others, additional factors are used to ensure fairness.
4. The node of a validator verifies and adds a new block. This process is rewarded with the compensation from the chain. The source of rewards may vary. They may come from gas fees or from newly minted tokens, of from the combination of two.
5. Rewards are usually distributed proportionally. If you have a large stake, you will be awarded a bigger chunk of a reward.
The best platforms for crypto staking allow their users to generate passive income and enjoy other benefits incentivizing participation.
Why staking services for crypto are useful
There are many reasons to engage in this form of investing in the industry. Some think that passive income generation is the sole factor driving up the number of stakeholders across multiple PoS chains. However, the proliferation of these networks is important for the whole blockchain ecosystem due to the following:
- Passive income is the elephant in the room. The most obvious reason why the vast majority of retail investors engage with this sector of the blockchain ecosystem is that they receive rewards for active participation ranging from 5% to 20% annually. The return depends on the size of the investment and the overall performance of the chain during the year which may vary greatly.
- Networks become secure. Stakers provide the necessary level of robustness to the architecture of PoS chains. Attacks are unlikely on networks with a lot of coins locked in. The effort from the community makes chains resilient and resistant to attacks of all kinds.
- Save the environment. One of the selling points of the new consensus mechanism is that it does not require massive amounts of energy to run. A switch to PoS may reduce energy consumption by up to 200 times like in case with Ethereum.
- It is easier to become a validator. Mining is not only energy-intensive. It also requires significant investments in hardware like ASIC units and expensive GPUs. Setting up a farm is also a task for tech-savvy individuals. PoS networks democratize the access to validation and allow more people to contribute to the chain’s health.
- It can be used as an anti-inflationary mechanism. In theory, the minting of new coins is counterbalanced by the amounts of tokens locked in and rewards given away. While we do not know the effect of adopting PoS mechanisms on inflation (there not enough data), the anti-inflationary feature of locking in supply seems to make sense.
- A new tool for diversification. Finding a retail investor who is unaware of the concept of spreading investments across multiple asset classes to reduce risks is close to impossible. You can create a balanced portfolio by becoming a validator on popular PoS chains to offset the unpredictable nature of some market positions.
- The positive effect on volatility. The effective reduction of the circulation supply may stabilize prices and create a more robust economy with enough investors locking in their funds and taking them off the market. PoW chains do not have the same luxury of simply reducing the supply and controlling prices.
Many networks also provide additional benefits to stakeholders. For example, validators may participate in governance and vote on the direction of the chain’s development in the future. Many DAOs are built around PoS blockchains and build a strong community of committed enthusiasts who feel like they are making an impact.
Where to stake crypto
While it is possible to lock in funds using the functionality of the chain itself, there are some issues with this approach that many retail traders do not want to deal with. For example, it is harder to track investments in different chains if you prefer to diversify. You also need to setup multiple connections with each operation increasing the risk of making a mistake.
In many ways, using secure crypto staking platforms that operate as centralized entities is a much more convenient option that allows retail investors to quickly adjust their portfolios, liquidate their holdings when necessary, and enjoy a variety of other useful features making the whole investing experience rewarding and easy.
We believe that the best places to stake crypto are centralized exchange offering appropriate products to their clients. The emergence of pools inviting users to participate in chains has brought a lot of new names to the forefront of the blockchain ecosystem. There are many options to choose from when it comes to selecting places where you can become a stakeholder.
Non-custodial wallets
Many hardware and software solutions support stakable assets. Some products in this category are also acting as hubs allowing you to track investments conveniently by allowing you to connect to multiple chains using a single point of entry.
Ledger
One of the best hardware wallets out there, Ledger is a neat device that can store 26 different coins with many of them coming from PoS networks. Ledger allows users to have up to 7 different cryptocurrencies under management at the same time.
The main reason to purchase this device is the increased security afforded by offline storage of digital assets. Desktop applications, mobile apps, and browser extensions are still vulnerable. If security is your primary concern, working with hardware devices is the best choice.
Ledger also allows users to directly purchase a variety of financial instruments instead going to CEXs. In many ways, this particular wallet is superior to all software alternatives although some believe that it is clunky and requires too much effort to get started.
Coinbase Wallet
This product is released by one of the biggest CEX companies in the world and one of the most popular in the US. The UI is just excellent and clean allowing users to quickly find the necessary features and conveniently manage their holdings. If you do not have much experience with the blockchain ecosystem and its technology, picking the product from Coinbase is a good idea.
Since the CEX itself is a massive hub for stakeholders giving users access to over 500 different digital assets including NFTs, derivatives, and more, you can engage with the market effortlessly. On the other hand, you don’t need an active CEX account to use the wallet. If you do not want to learn how the centralized exchange works, you can keep all your activities on Coinbase Wallet and never visit the parent digital service.
Active traders may still be compelled to register on the CEX part of the ecosystem since it is a great destination for contemporary investors. Here, you can use all sorts of interesting approaches including grid trading strategies and futures trading.
Mycelium
This wallet is used for storage of many things including Bitcoin, Litecoin, and Ethereum. Since it supports a variety of ERC-20 tokens, Mycelium is often chosen to manage a variety of different digital assets. The cold storage feature is great for people interested in securely managing their assets without ever putting them in danger. The app is available for Windows, iOS, and Android making it one of the most versatile options for combined storage of PoW and PoS resources.
Note that your digital assets can be kept in the cold storage while the online interface is available at any moment to provide you with the necessary information about the current state of your portfolio. Mycelium is definitely among the most useful software wallets out there thanks to its usability, convenience, and advanced security features.
If you are looking for good crypto staking apps that can be also used as functional wallets for other purposes, take a closer look at this particular app as it offers quite a lot of features without overwhelming you with unnecessary functionality.
Investment services (CEXs)
Among most popular services for contemporary investors, centralized exchanges stand out as most convenient and reliable. Recently, many large players in the industry started offering passive income products based on investments in PoS networks like Ethereum, Cosmos, and Cardano.
Coinbase
Users of the Coinbase One can invest in 15 different PoS coins to extract APY between 1% and 13% depending on the type of digital assets. Rates are dynamic but you can always check out how much you will earn and how much you’ve earned so far. It is a convenient way of managing the portfolio and checking its composition from time to time.
Thanks to its solid track record, Coinbase attracts investors seeking safer places to start investing in Ethereum, Cardano, Cosmos, Solana, and other networks. Flexible periods are for people interested in testing this investment option or looking into a way of “parking” capital for a fixed amount of time.
Note that US citizens have to comply with taxation regulations if they receive more than $600 in rewards which is something that retail investors often forget. Recently, Coinbase entered a long battle with the SEC as it wants to classify all products allowing users to become stakeholders as securities. These regulatory issues must be considered before you start investing with this exchange.
Binance
This particular company is probably the best crypto exchange for staking thanks to the long list of supported PoS infrastructures and multiple products specifically designed for users interested in passive income with investments in digital assets. The flagship offering is collective investing in ETH 2.0. Instead of making direct purchases and transactions, you can simply swap locked-in funds for $BETH making it easier for users to commit to these investment products while having an opportunity to opt out at any moment. Flexible options allow users to keep their funds working until they need it.
Depending on the product and selected assets, you can expect an ARP anywhere from 0.05% to 6%. If you do not want to dive deep into the inner workings of the industry and PoS networks, choosing the Simple Earn plan is a much better idea. Locked durations and standardized conditions make it easier for newcomers to get started. ARP here reaches 30% depending on the selected instruments.
The auto-invest functionality is also quite useful if you want to see the results of your activities immediately. A fixed amount of your funds is reinvested systematically and all earnings are issued daily allowing investors to keep track of their portfolio in real-time.
Crypto.com
As one of the most popular CEX websites in the US, Crypto.com is offering a variety of financial products aimed at different demographics. Their passive income generation offerings include a wide range of PoS assets including hugely popular Ethereum and Tether alongside lesser-known Elrond and PAX.
You can customize your investment plan according to personal preferences. Private members of the company receive additional perks like 2% higher PA paid in CRO. Rates differ depending on the conditions chosen by investors and vary between 1% and 14%.
The service is custodial and you must deposit funds to start investing. However, many experts believe that it is safer to work with Crypto.com as it complies with regulations and the SEC have never had any issues with the exchange. It is one of the most reliable and efficient ways to do the investments in terms of safety and reliability, but the selection of financial instruments may seem too limiting.
Bake
When it comes to bridging the gap between the world of DeFi and TradFi, projects like Bake seem to be invaluable yet quite rare. The main goal of the service is to provide comprehensive solutions to retail traders who want to quickly move assets from CEX to fiat and vice versa. It is one of the best platforms for staking crypto because you don’t just give your funds into their custody, you join their node via pools and receive rewards as a direct stakeholder.
However, this particular investment product is not the only product offered by Bake. You can also engage in liquidity mining and lend money to other market participants. The list of available DeFi instruments is quite long and offers a wide range of opportunities to those seeking good targets for capital allocation in the world of decentralized finance.
Specialized providers
The industry also has one additional type of vendors offering you an opportunity to earn money passively. Highly specialized pools that operate independently and do not branch into other product categories to deliver an excellent experience to those who don’t want to spread their attention. If you are looking for top staking platforms in 2024, you simply cannot ignore pools.
Stakely
As the name suggests, this project is focused exclusively on various PoS investments and allow users to work with 35 different chains including Ethereum, Polkadot, Cosmos, Avalanche, Solana, and CRO. This diversity attracts a large audience of retail investors.
Rates vary depending on target assets and can be as low as 5% or as high as 17%. You only have to connect a wallet and select the most suitable option making Stakely your delegated validator. The company tries to attract users by offering very favorable conditions like low fees, a massive insurance fund, community guidance, and more.
Stakely is a prominent member of the DeFi ecosystem and can easily connect to rich selection of chains without any issues. If you are looking for a place where becoming a stakeholder is easy and safe, this project should be on your watchlist.
Rocket Pool
It is one of the best Ethereum staking platforms despite not having too many members. Rocket Pool can brag loudly about its metrics since they indicate the general healthiness of the project. Over 36 hundred node operators and close to 1 million ETH in TVL make it a trustworthy player in the growing industry that often focuses on offering a holistic financial product instead of delivering an excellent experience in one specific area.
Rocket Pool allows people who want to run a node a big discount and allow them to start with 16 ETH instead of 32 ETH. Considering the price of the asset, it is a $54 thousand discount at the time of writing. You can also simply join the pool with the standard minimum entry sum of 32 ETH and enjoy steady returns. Node operators receive 7.41% APR if you count in $RPL. Otherwise, you will get 3.02% APR which is also a good rate as prices continue appreciating.
Lido
Our review would not be complete without mentioning Lido which is a decentralized solution for those who want to engage with PoS chains. The total value locked is close to $21 billion. Lido is a well-established Dapp in the Ethereum ecosystem but it also allows you to invest in Polygon through MATIC.
Right now, Lido is not supported by other networks that previously did. Polkadot, Solana, and Kusama are no longer available for users, but the ability to work with stETH and stMATIC to engage with other DeFi applications like Aave and Curve make it quite attractive to Ethereum enthusiasts who seek ways to diversify their investments.
The non-custodial nature of your investments makes it easier to stay active in the market despite earning rewards for committing to PoS networks. While some depegging risks have to be considered, it is still a very good form of investing in ETH 2.0 for people with limited capital.
Should you be using the best crypto staking sites?
Retail investors interested in allocating their capital for long-term reward earning will find PoS chains quite useful. However, these are mostly wealth-preservations mechanisms and may not work well for people who want to earn reliably and quickly. Something like AI crypto trading software is capable of producing much higher returns under the right circumstances.
Options with high APR can be quite risky while barely beating fiat inflation in the US. Using services like Lido to still use some of your funds while they are locked in can be a good idea for active investors. However, the issue with these approaches is that you still rely on the stability of the market and do not use your money effectively.
Let’s put it this way:
- If you have a substantial capital that must be allocated to still earn you something so that the growth can outpace or stay even with the inflation, engaging with PoS chains is a great idea.
- If you have limited capital and want to use effectively right here and right now, you should be looking into other ways to invest in the market.
We strongly believe that passive income with PoS assets can be achieved and feel quite rewarding. However, just in case with bank deposits, the outcomes are better for people with massive holdings who want to preserve wealth instead of trying to build it.