The crypto ecosystem is emerging as a financial powerhouse supported by its decentralized architecture. Unlike traditional financial markets, cryptocurrencies rely on multiple network participants to function effectively.
To become part of this growing ecosystem, there are several ways, some of which include crypto staking.
Essentially, staking allows one to commit their tokens to support the functionality of a particular blockchain network.
Besides the fundamental value proposition, staking has gained popularity due to the lucrative incentives offered. The crypto projects do it with leverage the Proof-of-Stake (PoS) consensus.
Most of the PoS based projects feature staking incentives for users who commit their tokens to support the network. Notably, these incentives far much outweigh the interest rates offered by traditional banks or investment firms. However, the risk is also significantly higher.
That is not to say that crypto staking will go out of fashion anytime soon. In fact, according to Nansen, Ethereum’s 2.0 launch, which will laucnh sometime in 2022, now enjoys over 7.66 million staked ETH.
The merge will see Ethereum migrate from its Proof-of-Work (PoW) consensus to a PoS ecosystem, effectively lowering the barriers.
While Ethereum’s PoS ambition is significant for the community, others appear to be quite ahead with their crypto staking programs.
Let’s delve into the value proposition of crypto staking as we move to some of the nuances and upcoming trends.
Building the Value of Decentralized Ecosystems
As mentioned in the introduction, staking is a fundamental part of PoS built blockchain networks. PoS blockchain networks reduce the energy needed to create new blocks by introducing network validators, minimizing the resources required to mine new tokens.
These validators facilitate network security and efficiency by staking their crypto tokens to validate transactions.
In return, the network validators get reward through incentives depending on the underlying model of a particular PoS project.
The trend has become a famous way of building value for the decentralized ecosystem.
Most crypto natives that have participated in staking are moving their capital from traditional banks where interests could go as low as 0.01% APY, a drop in the ocean compared to the ROI in crypto staking.
The Nuances of Crypto Staking
By now, it is evident that the crypto ecosystem offers users several staking alternatives. Almost every PoS project that launches features a staking program: however, not all are as good as they may sound.
One needs to understand a couple of nuances before committing their tokens into any crypto staking program.
For starters, some of the available crypto programs feature vesting periods, which means that users’ rewards are locked for a specific period.
This is actually not a bad thing, given that in the past, there have been cases of crypto teams’ rugging’ as soon as users commit their tokens for staking.
Nonetheless, some prudence on the associated vesting periods can save you a dime.
Security is another primary concern when it comes to staking crypto assets. Most of the protocols only feature online staking, which requires users to keep their resources powered at all times.
Though efficient, one can easily be avialable to hackers or lose their staking rewards if they go offline.
Offline Crypto Staking
Thanks to the fast-growing nature of the crypto industry, PoS blockchain networks are now evolving to integrate offline staking.
One of the blockchain networks that currently features an offline staking program is the Qtum public blockchain.
This PoS based blockchain leverages a Decentralized Governance Protocol (DGP), allowing developers to modify the blockchain settings to maximize the utility of smart contracts.
Qtum blockchain runs an offline staking initiative where stakers can earn an ROI of 16% by just committing their Qtum tokens to support the network operations.
With Qtum’s offline staking model, users can delegate their tokens to super stakers instead of keeping their computers on all the time.
Ideally, Qtum staking introduces an inclusive ecosystem as stakers do not require energy-intensive resources to participate.
The project’s tokenomics model follows a deflationary approach, with the first halving expected in December 2021.
While the yield will likely be cut to half, previous halvenings led by Bitcoin have positively impacted the price of an underlying token.
Should it be the case for Qtum, early stakers stand a chance of making lucrative returns due to the dwindling supply.
Cryptocurrencies are still considered the wild west by stakeholders, including long-standing financial market experts and regulators.
However, the narrative is gradually changing as more people embrace the potential of digital assets. Recent months have seen a spike in interest by institutional investors, some of whom are not only interested in the speculative part but the fundamental value proposition.
According to a reporting by Forbes, two Senior analysts at JP Morgan view crypto staking is one of the areas likely to influence a mainstream paradigm shift,
“Not only does staking lower the opportunity cost of holding cryptocurrencies versus other asset classes, but in many cases cryptocurrencies pay a significant nominal and real yield,”
Going by this narrative, it seems inevitable that institutions will jump into the crypto staking bandwagon. That said, the industry is always full of surprises, and only time can reveal which futuristic crypto trends will take the day.