What Is Crypto Staking?
As a means of contributing to a blockchain network, crypto staking involves locking your cryptocurrency away for a period of time. Stakers can then reap the rewards in the form of more cryptocurrencies.
Crypto staking is derived from the proof-of-stake (PoS) consensus algorithm, which is a blockchain verification method that is less risky and more energy-efficient, compared to the proof-of-work (PoW) algorithm.
Due to the fact that cryptocurrency staking is a relatively new idea, it is not supported by all blockchains. However if you are holding cryptocurrencies that employ the PoS consensus, you can take advantage and stake your holdings to earn rewards.
Staking crypto gives you an opportunity to earn more of the same cryptocurrencies you currently hold. There is no fancy mining tool needed to stake crypto - only a stable internet connection and a computer is required.
The rewards earned scales according to the amount of crypto you stake, so if you stake more cryptos, your rewards will increase.
Can I Stake On Binance?
Binance offers a staking service called Locked Staking.
Locked staking requires you to lock the coins you wish to stake for a certain period to earn rewards. During the staking period, your cryptocurrencies will be locked and you would not have any access to these coins until the staking period is over.
What Can I Stake On Binance?
Binance currently offers staking for these coins:
How To Start Staking On Binance
Step 1: Navigate to the Locked Staking category on Binance Earn Page
Click on “Binance Earn” and proceed to choose the staking option under the “Locked Staking” category.
Step 2: Review the crypto you wish to stake
On this page, you can find the list of coins available to stake, the staking duration, the minimum locked amount, and the potential rewards to be earned. Select the coin of choice and click “stake now”.
All information pertaining to staking this coin will be shown. Input the amount you would like to stake on and the process is complete! Bear in mind that there is a minimum staking amount to all coins and if your balance is lower than the amount shown, you will not be able to participate in Locked Staking.
How Long Does It Take To Redeem Locked Staking On Binance?
Binance allows the locked coins to be allocated back to your account the day after the redemption process is complete. However, due to differences in timezone, this transfer process may take up to 72 hours.
Should you wish to redeem your staked cryptocurrency before the staking period, note that you will lose some of the rewards earned as the rewards will be deducted from your allocated assets.
Can You Lose Money Staking Crypto?
Staking, like any other form of investment, comes with its own set of risks. Before you start staking, make sure you understand the unique staking terms and conditions for any project you're interested in.
Even though your cryptocurrency holdings will not disappear overnight, these are some risks that you should be aware of prior to staking:
- Lock-Up Period
With staking, it is required that you “lock up” your coins for some time. That means, you will not have any access to your holdings and will not be able to perform any transactions such as withdrawals during the staking period in order to receive the rewards.
Cryptocurrency is undoubtedly a volatile investment. Prices fluctuate constantly and you can expect sudden rises and falls while your coins are being staked and you might not be able to sell your holdings. If you are in it for the long run, then these fluctuations can be ignored as the focus is on the rewards at the end of the staking period.
There are fees that you have to pay depending on the staking platform chosen, so look out for those before you start staking.
I Understand Staking Now, So What About Savings?
Savings and staking works basically the same way for investors, where you lock away coins in order to generate rewards. However with staking, the coins are locked directly on the protocol and staking rewards are generated from validating transactions. For savings instead, the coins are locked with the exchange and the exchange uses it to generate rewards for savers.
How Does Savings Work On Binance?
There are currently two savings options offered by Binance:
The flexible savings feature is where you can earn interest on the cryptocurrencies held on the platform, with the freedom to deposit and withdraw your holdings at any time and the rewards a paid daily. The locked savings feature is where you will get paid after the “lock-up” period ends.
There is a minimum savings amount required for both locked and flexible savings options, depending on the type of coin chosen. So ensure that your wallet has sufficient coins to start saving with Binance.
For locked savings, you have the freedom of moving the coins to your flexible savings account before the locked duration is completed. However, by doing so, you will lose any interest accrued.
Before you place your coins into the locked savings account, be sure that you will not need to use the coins before the duration is up to enjoy the rewards.
Another useful feature on Binance Savings is the auto-subscribe feature. The auto-subscribe feature will allow funds from your spot wallet to be moved to the savings account of your choice at a specified time.
There are two redemption options available for flexible savings :
Fast redemption - Redemption will be done instantly and interest earned on the day will be forfeited.
Standard redemption - The redemption process will be completed the following day so you will not lose out on any interest earned for the day.
Wrapping It Up
The advantage of staking and saving on Binance is that it opens up a lot of possibilities. Users may assess all of the alternatives accessible on the site, as well as the amount of risk they entail.
High rewards are typically associated with high risk, whereas a low percentage of interest investment alternatives are low risk. Whereas flexible saving choices provide incentives on a daily basis but at a low rate of return, locked savings or staking would typically provide a greater rate of return when you fulfill the “lock-up” duration.
Venture into these options to see which suits your financial goals and enjoy the returns!
Regiena is a banker, an avid reader, and part-time freelance writer, currently exploring the realm of blockchain technologies.