Stake or Stagnate | Nasdaq

Stake or Stagnate | Nasdaq

By Konstantin Boyko-Romanovsky, CEO and founder of validator node hosting and staking platform Allnodes

2022 has brought worry to even the most seasoned crypto investors. The string of unprecedented geo-political events, uncertainty regarding regulations, and generally overzealous trends in the crypto and NFT markets caused many investors to lose faith in cryptocurrencies this year. Yet, despite the ups and downs, strategic investors who stake overcame these circumstances and generated increased revenue. The fact is crypto investors must stake or risk their investments becoming stagnant.

Staking is a passive income investment strategy resulting in higher gains if the staked cryptocurrency appreciates and lower losses if it depreciates. In essence, to stake is to secure a given Proof-of-Stake (PoS) network with locked-up collateral for a period of time. In return for the stake, the network compensates investors with staking rewards, typically in the same coin as the staked asset. These rewards can be compounded periodically, if not daily, yielding even higher potential gains.

There are a few important things for staking investors to keep in mind. First, different protocols offer different staking yields, and different staking providers take different cuts. It’s also highly recommended for investors to use a hardware wallet to ensure all assets remain secure.

The network sometimes specifies how much to stake and for how long. Staking Ethereum, for example, involves a minimum of 32 ETH at all times without an option to unstake until a planned Shanghai update is deployed to the network following The Merge. 32 ETH translates into over 56K USD at the time of writing and might be a hefty price for some investors. However, most PoS protocols don’t require a lot of collateral, and for the most part, the investors can unstake after unbonding periods that vary in duration per protocol.

The chart below demonstrates how staking works with data based on recent coin prices (September 12, 2022) sourced from CoinMarketCap, StakingRewards, and Allnodes websites. For example, if an investor were to invest 1,000 USD into a PoS protocol based on this chart and stake their coins for a year without compounding, the reward rates on the chart below range from 5.96 % APR for Polygon to a whopping 251% APR for Evmos protocol. Translating the data into USD results in the second chart.

Stake or Stagnate | Nasdaq

Staking reward USD

If the same investor were to invest 1,000 USD in Evmos, based on these charts, they would x2.5 their investment in a year just by staking. Specifically, that 1,000 USD becomes 3,560 USD (minus a staking fee or commission charged by the staking provider of their choice). Regardless of potential market moves, the investor who stakes will still make more than a ‘hodler,’ even with the currency depreciation.

Compounding is another benefit to staking, which allows investors to yield even higher results. The more this strategy is taken advantage of, the higher the return will be. To illustrate the power of compounding, let’s continue with Evmos since it seems to be a particular case of exciting opportunities. Daily compounding will increase potential APY to a staggering 1,174% in one year (Source: allnodes.com/evmos).

The more people stake on any protocol, the lesser the staking reward of said protocol. However, the good news is that there are plenty of PoS protocols, and not enough people are staking just yet. So there is ample opportunity to get ahead. Staking should fall into an investor’s long-term investment strategy and a diversified approach. However, numbers don’t lie; if investors are serious about their crypto portfolios, they must stake or allow their investment to stagnate completely.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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