Unlike fiat currencies, cryptocurrencies are digital assets that only exist in the digital space. And this is why crytos can only be stored on specialized wallets known as hot wallets. Using a hot wallet allows you to send/receive cryptocurrencies seamlessly from one user to another.
But do you know what happens to your tokens when you store it on a crypto wallet?
The answer is simple. Most hot wallets store your tokens locally on an internet connected device. All of which allows you to easily access your cryptocurrencies via your hot wallet.
Over time, hot wallets have become increasingly sophisticated. Far from being a medium of storage, companies that provide these services have now expanded into the financial services sector. That is why looking for the most secure crypto wallet by Tezro is very important.
For example, wallets from reputable providers like Coinbase and Binance offer staking programs that reward you with additional coins when you stake your cryptocurrencies.
So, we now ask the question:
What is Staking?
Staking is cryptocurrency’s equivalent of a high interest bank account. But instead of fiat currencies, you stake selected cryptocurrencies.
In return for “locking” in your assets for a certain period of time, the platform responsible pays interest in the form of crypto tokens.
For example, if you have Bitcoins, you can stake them on the Bitcoin blockchain for a period of time. And this is what lets you literally put your BTCs to work for you.
Staking provides the blockchain with additional processing power and helps to validate new transactions. Most blockchains including Ether and Bitcoin use the proof of stake method.
Types of Staking
Now that you have an idea of what staking is like, let’s take a look at the types of staking you can perform.
Locked. The most inflexible type of staking and similar to a fixed deposit account. Locked staking requires you to tie up your cryptocurrencies for a period of time.
You cannot withdraw your tokens before the term limit is up. Most platforms allow you to stake your coins for a maximum of 90 days.
Flexible. Just like its name implies, flexible staking gives you the freedom to redeem your tokens at any time. This is the best method for those who may suddenly need to use their crypto assets.
DeFi. DeFi staking locks your crypto assets into a smart contract which lets you generate passive income. Unlike other methods of taking DeFi you can also stake NFTs (non-fungible tokens).
As smart contracts become increasingly popular, we can expect to see more and more coins offering DeFi staking in the future.
Best Crypto Wallets For Staking
Let’s take a look at the best crypto wallets that currently support staking.
1. Binance — Supports more than 110+ cryptocurrencies including BNB and SOL
Binance is one of the most reputable names in the cryptocurrency industry. So it should come as no surprise to see that the renowned crypto exchange supports crypto staking.
With Binance, you can stake the company’s in-house crypto known as BNB and other niche tokens such as SOL. Besides that, the company is also known for its generous interest rates and zero fees for staking. All of which make Binance a solid overall choice.
Although, you should keep in mind that Binance has previously faced legislation issues in countries like China and the U.S.
2. Coinbase — Participate in DeFi staking for ETH2, XTZ, and ATOM among others
Coinbase is another big name in the crypto sector. Unlike Binance, it only supports DeFi staking which limits you to currencies like Ethereum 2.0 and Cosmos to name a few. However, if you’re looking to get into DeFi staking, then you certainly can’t go wrong with Cinbase.
3. Crypto.com — Stake mainstream coins like BTC and ETH
Crypto.com is a great choice for those looking to stake mainstream cryptos namely Bitcoin and Ethereum. The site is well-managed and secure with deep liquidity and crypto insurance that covers up to $750 million. You can also stake its native crypto Cronos if you’re looking to earn higher returns.
So there you have it, a breakdown of what happens when you put crypto into your wallet, and a guide to earning passive income with your coins.
Just remember to only invest what you’re prepared to lose and always do your own research.