The total amount of digital asset staking rewards from all Proof-of-Stake blockchains is set to almost double this year to $ 18.9 billion.
These figures follow from the official report of the analytical platform Staked, which conducted the corresponding research. Last year alone, the same figure reached $ 10 billion amid a surge in the popularity of decentralized finance. This means that new growth of this scale will make staking one of the most popular tools for earning coins. Let’s talk about the situation in more detail.
Staking is a pledge of coins in the blockchain, which allows a member of the Proof-of-Stake network to maintain its performance, participate in the creation of blocks and receive for this reward. So, in fact, it turns out something like mining on video cards, only without any equipment. Funds «reserved» during the staking process cannot be used anywhere else.
It is important to note that staking is possible on Proof-of-Stake blockchains, but not Proof-of-Work. That is, in its pure form, you cannot send your bitcoins for staking, since the main cryptocurrency works precisely on the basis of PoW.
Earning on cryptocurrency staking is already possible. For example, we tested staking on the Binance exchange, which allows you to block funds for 15, 30, 60 and 90 days. The percentage of profitability is different for each period and coin.
We checked the actual data: Solana SOL is currently the most profitable staking option, with an annualized return of 34.49%. This means that if you block the maximum allowable volume of 20 SOL, you will receive 0.28 SOL in fifteen days. At the current exchange rate of $ 46, this would be approximately $ 12.
It turns out a little, but the option is still working. In addition, if the investor does not plan to get rid of the cryptocurrency in the near future and expects to have a long term, this is a good way to increase the amount of savings.
How to make money on cryptocurrencies
The Staked report noted that distributing assets for staking is more profitable for an investor than just keeping them on the balance sheet. Here is an expert comment from Decrypt.
In any case, staking provides a better return than simply owning an asset: the participants in the process received an additional return of about 4 to 34 percent in one quarter.
Note that sometimes the percentages are even higher. For example, we are currently staking 1inch tokens on the Binance exchange. The annual yield is 47.79 percent, that is, from the maximum allowed volume of 50 1INCH, one coin can be earned in fifteen days. Again, this is a good long-term investment, and you can buy multiple staking slots.
Ethereum is currently operating on a PoW basis, but the project is preparing to move to PoS as part of the Eth2 update. Last November, Ethereum opened a staking contract in the second version of the protocol. There are already 4 million coins in the contract, or roughly $ 10 billion.
With the current amount of blocked funds in staking, the yield is equivalent to 7.8 percent per annum. The more people staking coins, the lower the profitability of the latter becomes.
Staked CEO Tim Ogilvie said that Ethereum Protocol 2 staking will become even more popular in the next six to twelve months thanks to two major changes the cryptocurrency will experience this year.
The first is EIP-1559, which will change the principle of the formation of commissions in the cryptocurrency network. A hard fork to implement the update is scheduled for July 14, as confirmed by a recent announcement from the developers. After EIP-1559, base transaction fees will be burned. According to a Staked report, transaction fees are now 3-4 percent of the total coin supply. And burning them can raise the price of ETH, since with the same demand, the number of coins available for purchase will decrease.
The second change in Ethereum is the merge or so-called merge with Ethereum 2.0, the main phase of which is tentatively scheduled for the end of 2021. It is then that ETH1 and ETH2 will be able to interact with each other, which will be an important milestone in the full transition to the second version of the protocol. Note that the merger itself has not yet completed the final transition to Ethereum 2.0.
We believe that if Ethereum staking really pays off this year, the new trend could have a very positive impact on the value of other Proof-of-Stake digital assets. Nevertheless, in this case, users receive an understandable principle of earnings, which is especially suitable for long-term investments in promising projects. This means that investors will have even more reasons to get acquainted with blockchain assets.