There are different methods for staking digital currencies, and each of these methods has its own characteristics and requirements. In the following, we will introduce the methods of sticking in three main categories:
In locked staking or fixed deposit method, the user stakes his assets in the exchange wallet for a certain period of time and receives interest in return. The amount of profit and the duration of locking the cryptocurrencies in this method are different.
In this method, the profit of the asset is calculated on a daily basis, and with the increase in the number of staking days, the interest rate also increases. Usually, time periods are considered as periods of 15 days, 30 days and 45 days.
In this way, the user can withdraw his assets from the deposit mode whenever he wants. Of course, if the withdrawal is made before the due date, no bonus will be given to his deposit. In the image below, you can see the names of some digital currencies that can be staked in the Binance exchange.
Terminology and specialized words related to fixed staking method
APR stands for Annual Percentage Rate and means “annual percentage rate”. APR shows the percentage of profit or interest that you will receive on your investment over a year.
Duration (Days) specifies the time periods required to lock a cryptocurrency. This period can be 15, 30, 60 or 90 days depending on the desired digital currency.
Cold staking or offline staking is the same as locked staking, except that the staking process is done without an internet connection. This method stakes coins using hardware wallets. Obviously, by removing the coins from the hardware wallet, the staking process is automatically stopped and no more rewards are credited to the user’s account.
This method of staking is more secure than other methods and is suitable for people with very high capital. In fact, locking users’ assets in software wallets such as exchange wallets puts the assets at risk of being stolen. Therefore, if you plan to stake a large amount of digital assets, the cold staking method is a better choice because the risk of the wallet being hacked is much lower.
In the two previous methods of staking digital currencies, i.e. locked and cold staking, cryptocurrencies were locked for a certain period of time. This issue is associated with the user’s capital falling asleep and has some drawbacks. Flexible stacking was created to solve this problem.
The flexible staking method does not require funds to be locked and the user can still trade with the asset staking. Of course, the profitability of this method will be lower than the previous two methods.
Since the upgrade of Ethereum to Ethereum 2, some platforms such as Coinbase have enabled Ethereum 2 staking. As you know, the Ethereum blockchain migrated from Proof of Work (POW) to Proof of Stake (POS) in 2021 due to scalability issues and high transaction fees.
To stake in the Ethereum network, you need to lock at least 32 Ethereums in the network. But platforms like Coinbase do not require a minimum number and allow users to lock their ETH coins in staking pools with other stakeholders. Three ways to stake Ethereum: stake through an exchange, staking pools, or run a node personally.
Solana is a public and open source blockchain built to host a wide range of scalable decentralized applications (DApps). To stake Solana, users increase their voting power by providing their assets to validators. This act, known as “delegating authority”, does not transfer ownership or control of tokens, it simply assigns its voting power to validators.
Cardano is a decentralized blockchain that uses a Proof-of-Stake (PoS) consensus mechanism, offering better performance compared to traditional Proof-of-Work (PoW) networks. You can stake ADA coins independently or by handing over to staking pools.
Users who help keep the blockchain secure by participating in staking pools and doing work on the network are rewarded with Ada, the Cardano network’s native cryptocurrency.
Binance Coin (BNB) – 5% annual return
Binance Coin (BNB) is the native digital currency of Binance Exchange, the largest cryptocurrency exchange in the world. With a market cap of $36 billion, the Binance exchange offers a 5% annual dividend for staking its native coin.
By staking BNB, you allow the exchange to temporarily use your assets to support Binance network operations and contribute to the security and functionality of the Proof of Stake (PoS) network.