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The entire realm of cryptocurrencies is innovating with new concepts that enable better access to cryptocurrencies. Moreover, these concepts allow users to retrieve maximum gains out of their cryptocurrency assets. While DeFi and yield farming are one of them, another concept that has become popular is the staking of different cryptocurrencies.
Staking is a concept relevant to the Proof of Stake (PoS) blockchain networks and facilitates a way of earning passive income in cryptocurrencies. In this article, we examine the basics of staking, what is staking a coin, and which are the best coins to stake in 2020.
What is Staking?
Staking in cryptocurrencies is a mechanism in which crypto users lock their coins for a certain time duration. In return, users receive rewards in the form of cryptocurrency token. Similar to how banks give you a percentage of interest for locking your funds in their bank account.
This process of staking facilitates operations in a blockchain network. It is performed so as to support Proof of Stake (PoS) blockchain networks. With Proof of Work (PoW), blockchains like Bitcoin, consensus mechanism of a transaction is achieved through mining. However, PoW networks require considerable computational power and thereby limit the factor of scalability.
In contrast, the Proof of Stake mechanism chooses a specific validator in order to facilitate consensus and validate the block. In most cases, the user holding the maximum coins of the particular blockchain is chosen to validate. While the PoS mechanism reduces the factor of decentralization in comparison to the PoW mechanism, it facilitates lower computation power and better scalability.
Users lock funds so as to facilitate operations of a PoS blockchain. In return for crypto staking, users are paid tokens of the respective blockchain network. The interest yield in exchange for locking your crypto tokens has made the concept popular especially in recent times.
Best Staking Coins
Over the years, Proof of Stake coin list has significantly increased owing to the rise in popularity of the staking concept. Let’s take a look at some of the best PoS coins available in 2020.
NOW Token (NOW)
NOW token is a native digital asset of one of the prominent cryptocurrency exchanges ChangeNOW. The token facilitates users to access a myriad of internal products available at the NOW ecosystem. Over the years, with the rising popularity and adoption of its products, there has been a significant rise in value of the NOW token.
The platform now allows users to stake its cryptocurrency and receive yearly rewards in accordance with the duration that you stake the NOW token. The longer you stake its token, the greater the rewards you receive. A user can begin with as low as 10 NOW tokens and freeze the transaction with the provided tools: BEPTools’ Token Freezer or Guarda Wallet’s staking mechanism. After this, its protocol will automatically calculate and yield a reward on a weekly basis. The valuation of NOW token, lower barriers to staking, a greater percentage of interest, and weekly rewards are the reasons that is one of the top proof of stake coins in our staking coins list.
Next in our staking coin list is Tezos, a blockchain network that runs on the Proof of Stake mechanism. It has formalized its inherent governance process by allowing stakeholders to vote on network changes.
The native cryptocurrency token of Tezos is XTZ. Users earn XTZ token through staking, which is known as ‘baking’ in this particular blockchain network. Bakers approve transactions and validate blocks to receive XTZ token in return. The more XTZ token a stakeholder holds, they subsequently have a say in on-chain governance of the Tezos network. XTZ has also become one of the popular coins for delegating to validators. The validators take the charge of approving transactions and staking the XTZ token. In return, they charge a fee for performing operations. Staking Tezos rewards users with an annual yield of 5-6%.
Another blockchain network in our proof of stake coin list is Cosmos. It is a platform that allows the development of different blockchain applications and facilitates interoperability between different networks. Launched in 2019, Cosmos functions on Tendermint protocol and incorporates the PoS mechanism.
Cosmos ATOM can be earned through staking the coin. Users can access Cosmos either through delegating or running a validator node. In the case of delegating, you delegate the responsibility to a validator node that stakes on your behalf. In return, the validator node charges a certain percentage for performing services. Users running a validator node or delegation can earn annual returns of anywhere between 8-10%.
Launched in 2016, Decred is based on a unique model that combines both Proof of Work (PoW) and Proof of Stake (PoS). The hybrid mechanism facilitates better security with PoW’s decentralization and enables on-chain governance by PoS.
With PoW, miners can also take part in Decred’s protocol as processing and validating transactions. With PoS, users can stake their existing DCR tokens which can also be used for on-chain governance proposals. The PoW miners receive 60% of the block rewards while PoS holders receive 30%. Users can participate in the blockchain network either by voting or through delegating. Stakeholders can delegate the power of validation to stakepool. The annual returns for staking DCR token currently stand at around 6% but users do need to make a minimum investment of 138 DCR tokens.
Algorand is a blockchain network that solves the imminent issues faced in the blockchain ecosystem of scalability, security, and decentralization. The blockchain network works on the Pure Proof of Stake (PPoS) mechanism.
Users can access Algorand’s native cryptocurrency token ALGO through staking. Unlike our previous examples, this network does not facilitate delegating to other nodes. Hence, it enables decentralization as it eliminates the possibility of a set of users holding maximum voting power. It holds a relatively simple process for staking. Users need to hold ALGO cryptocurrency token in a non-custodial wallet. Holding a minimum of 1 ALGO will automatically allow users to earn rewards through staking. Currently, an annual reward of 5-6% is yielded by staking this cryptocurrency token.
The cryptocurrency industry is innovating with new methods to access income in cryptocurrencies. Staking is one of them. In our list of top staking coins list, we have reviewed the blockchain systems and their subsequent coins to stake. Additionally, we have also examined the annual yield returns a user can expect from staking different tokens. These cryptocurrencies are one of the best proof of stake coins in 2020 and facilitate passive income in the crypto industry.