Crypto

What is crypto betting? All you need to know

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Are you thinking of staking crypto this year? Whether as a method of fighting inflation or because the interest in a savings account is no longer enough, cryptocurrency staking can be a great avenue for additional income.

Cryptocurrency staking locks in crypto assets to earn interest, so consumers can set it and forget it. The recent crypto market sell-off may have left many wondering if crypto is worth investing in at this stage. But rest assured, there are plenty of benefits to staking crypto assets.

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What is crypto betting?

Cryptocurrency staking is a great way to earn passive income from cryptocurrency holdings. The rewards can be particularly attractive for those who already have a significant portion of their net worth in cryptocurrencies.

There are two main consensus mechanisms in crypto: proof of work (PoW) and proof of stake (PoS). The job of consensus mechanisms is to ensure that transactions are legitimate. Once the transactions are approved, a new block is added to the blockchain. In essence, these protocols protect the network.

PoW mechanisms use computational power to protect networks and do not allow crypto to be staked. Rather, PoS mechanisms maintain security through validators that lock cryptocurrencies, or put them into play, which is where the term “cryptocurrency staking” comes from. In exchange for staking crypto to secure the network, validators receive rewards.

How do you bet crypto?

Not many cryptocurrency holders can become validators. This is due to the significant value of the cryptocurrencies required, as well as the need for a hardware infrastructure with sufficient computing power. However, there are crypto-staking options with lower barriers to entry.

Two of these options are:

Participation groups

There are many options for staking groups, such as P2P Validator and Stakin. These platforms offer crypto staking solutions that “pool” crypto assets from multiple contributors. This means that the amount of crypto required to stake is less than if a person became a validator.

exchanges

For most cryptocurrency holders, exchanges are the easiest and most accessible option for gambling with cryptocurrencies. Some of the largest cryptocurrency exchanges, such as Coinbase and Binance, offer cryptocurrency staking services.

Coinbase offers its users rewards simply for holding a sufficient number of particular cryptos in a wallet, with payouts ranging from daily to quarterly. The crypto staked does not even have to be purchased from the Coinbase exchange.

Binance is one of the most comprehensive cryptocurrency staking solutions. It has over 112 tokens that can be staked for 30, 60, 90 or 120 days under most circumstances.

What cryptocurrencies can be bet?

Only PoS crypto can be staked. Some of the most popular and regularly staked cryptos include Ethereum (ETH), Polkadot (DOT), Solana (SOL), NEAR Protocol (NEAR), Cardano (ADA), and Tezos (XTZ).

What are the benefits of cryptocurrency staking?

Cryptocurrencies can be safely stored in a wallet and ownership can be maintained throughout the cryptocurrency staking process. Cryptocurrency staking also provides rewards in exchange for verifying transactions and securing the network.

This reward is a percentage of the return, similar to a dividend payment or interest earned on a checking or savings account. The return is unique to each cryptocurrency staked, but in almost all circumstances, it is much higher than the annual percentage yield consumers typically receive from traditional banks.

Cryptocurrency staking gives people the opportunity to earn additional passive income from their assets. The more cryptocurrencies that are staked, the higher the potential rewards. Therefore, those with large cryptocurrency holdings can become extremely wealthy by gambling. For long-term holders of PoS crypto assets, it acts as a great way to build wealth. If done responsibly, it can be very profitable.

Is it safe to stake cryptocurrencies?

There are a number of risks to be aware of when staking crypto.

A potential downside is the general changes in the prices of cryptocurrencies. As mentioned above, the returns obtained will depend on the crypto token. Cryptocurrencies that are more volatile sometimes offer higher returns, but this carries the risk of a drop in the price of the underlying token.

In such a case, the profits from staking the crypto may result in an overall loss. An example of this is the recent collapse of the Terra LUNA token, which caused losses in the billions. Some crypto stakes require assets to be locked up for a certain period of time, which means that no action can be taken, even when the price of cryptocurrencies crashes.

Hacking of liquidity pools can also result in complete loss of staked crypto tokens. For some, this threat is not worth the potential benefits of cryptocurrency staking.

final shot

Cryptocurrency staking has both positive and negative consequences. The prospect of high returns for little or no effort makes the effort worthwhile for risk takers. However, for the average crypto investor, exchanges are the best course of action for cryptocurrency staking.

Cryptocurrency Staking FAQ

Here are the answers to some questions people ask when considering cryptocurrency staking.

  • Is it worth betting crypto?
    • Whether crypto is worth staking or not will depend on an individual’s risk tolerance. Risk-averse people in crypto may prefer to maintain ownership of their assets without putting them at risk. On the other hand, risk takers would likely be more than happy to stake their crypto for higher potential returns.
  • Can you make money betting crypto?
    • Yes. Cryptocurrency staking can be extremely profitable, and is a great way to earn passive income for long-term believers in cryptocurrencies who are indifferent to price changes. However, it also carries the risk of losing money, so bet carefully.
  • What is the risk of betting crypto?
    • The main risk of cryptocurrency staking is a sudden drop in the price of the underlying cryptocurrency that has been staked. Other risks include hacking of staking pools, which can result in the total loss of the crypto asset staked.
  • Can you lose crypto through staking?
    • Yes. If a stake pool is hacked, the crypto staked can be completely lost.

Our in-house research team and on-site financial experts work together to create accurate, unbiased, and up-to-date content. We verify every stat, quote, and fact using trusted primary sources to make sure the information we provide is correct. You can learn more about GOBankingRates processes and standards in our editorial policy.

About the Author

David is a qualified financial adviser in the Republic of Ireland. He has a bachelor’s degree in business and entrepreneurship, as well as more than five years of investment experience.

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