In the past, we’ve discussed how passive income is paramount to building wealth over time. Wealthy individuals usually have multiple streams of passive income, which gives them the financial freedom everyone strives for.
Everyone wants to be able to stop working someday and still have some time left in their life to enjoy the good things. Fortunately, one of the main benefits of cryptocurrencies is that they provide multiple ways of generating passive income.
In this article, we will talk about an increasingly popular method of earning with crypto – cryptocurrency staking. To this end, we briefly explain the concept behind staking and its benefits.
But more importantly, we will provide you a compiled list of the best proof of stake coins to generate revenue on a regular basis. In the end, should be familiar with the staking model and will be able to choose between some of the best coins for passive income to fit in your portfolio.
Let’s dig in.
- What is cryptocurrency staking?
- 5 Best proof of stake coins
- Best staking coins – honorable mentions
- Wrapping up
What is cryptocurrency staking?
Cryptocurrency staking is the process of earning rewards by locking in your crypto holdings to secure the network and validate transactions. The size of the reward reflects the size of the locked holdings. So the more funds you invest, the higher your rewards will be.
Proof of Stake vs Proof of Work
Different blockchains have different methods of rewarding the participants in their networks that provide consensus and validate transactions. The most popular consensus mechanisms currently are the Proof of Stake (PoS) and the Proof of Work (PoW) models.
PoW blockchains such as Bitcoin function through a process called mining. Miners are powerful computers that solve complex mathematical puzzles to secure the network, create transaction blocks, and mint new coins. They spend high amounts of electricity and are compensated through transaction fees and newly created coins.
PoS blockchains, on the other hand, do not require powerful hardware to run. Furthermore, everyone that stakes their funds will receive rewards consistently, instead of just the most powerful miners.
Compared to mining, cryptocurrency staking has multiple benefits for investors, including:
- No upfront investment in expensive hardware – instead of buying expensive ASIC machines for minings, you just need to invest in a certain cryptocurrency to start staking.
- Negligible energy costs and environmental impact – staking solves one of the most controversial drawbacks of PoW, their negative environmental impact due to the high amount of energy they require.
- Faster and more scalable blockchains – staking blockchains are built with scalability in mind, making them future-proof and primed for mass usage.
- Beginner-friendly – unless you are running a full validator node, staking cryptocurrencies is as simple as it gets. You just need to purchase come coins and lock them in your crypto wallet or staking platform of your choice.
All in all, staking is a more reliable, democratic, and energy-efficient way of earning passive income from cryptocurrencies.
5 Best proof of stake coins
Before you delve deeper into our list of the best proof of stake coins, there’s one more detail worth noting.
Staking rewards are usually dynamically adjusted as more coins are locked up in the network. In a nutshell, to attract more investors to their network, blockchains offer greater rewards at the beginning of their lifespan and reduce them as more users stake their coins in the network.
As the most popular smart contract platform available, Ethereum makes the top of our list of the best proof of stake coins.
Ethereum was the first blockchain to introduce the public to the marvel of smart contracts – the self-executing applications that enable us to automate blockchains and deploy decentralized apps.
And while the smart contract blockchain still uses PoW to validate its transactions, it’s actively shifting toward a PoS model. This transition is expected to be completed in 2022, where the PoW model should become obsolete.
Ethereum’s 2.0 update is one of the major upcoming events in the crypto sphere. The reason behind this is that 90% of the DeFi and NFT ecosystems are heavily dependant on the Ethereum network. The switch to PoS should bring faster and cheaper transactions, allowing for increased adoption of DeFi and NFTs.
Meanwhile, you can already begin staking Ether and collect rewards by becoming a validator on the Beacon Chain. However, the minimum ETH required to run a node is 32ETH and the coins will remain locked until the ETH 2.0 update is complete.
While this might seem like a considerable drawback, many platforms such as Binance and Kraken are already offering convenient staking pools. In these pools, users can begin staking with minimal holdings and unlock their ETH whenever they want.
- Current ETH supply: 115 million
- Expected APY: 6 – 7%
- You can stake by running a node or participating in a pool.
- Minimum coins to run a node: 32ETH
Watch the video below to learn how to stake ETH 2.0 on Binance.
With the release of the Binance Smart Chain, the Binance Coin has recently become one of the best proof of stake coins on the market.
The BSC was released in September 2020 to complement the original Binance Chain and offer smart contract capability in the BNB ecosystem.
The BNB token already had some interesting utility including trading fee discounts on the Binance exchange and participating in potentially profitable IEOs. However, the staking mechanism added by the BSC increased its utility exponentially.
Its working status paired with being a low-cost alternative to Ethereum allowed the BSC ecosystem to gain immense popularity in a short time span. This, in turn, has allowed BNB’s price to skyrocket and reach the top 3 cryptos by market cap.
Worth noting is that the rewards for staking BNB are entirely dependant on the success of the BSC. As more transactions are carried out on the network, more fees are distributed among the validators and delegators.
- Current BNB supply: 153 million
- Expected APY: 15 to 25% (beware of high pool fees 10-12%)
- You can stake by becoming a validator or delegating BNB.
- Minimum coins to become a validator: 10.000BNB
The following video will teach you how to stake BNB on Trustwallet.
3. Tezos (XTZ)
Tezos is another smart contract blockchain that is gaining traction in the crypto sphere. In fact, Tezos was the first smart contract platform to offer a functioning staking mechanism on a running mainnet.
The Tezos blockchain uses a liquid PoS consensus system where users gain the ability to vote on network upgrades. To achieve this, they stake their tokens with “bakers” (the network’s validators) who govern the network.
Bakers are incentivized to provide honest work because users can easily redelegate their XTZ to other bakers. This means that users can unlock their XTZ on the fly, with minimal inconvenience.
Tezos already boasts a great portfolio, with more than 100 projects under its belt, including NFTs, dApps, and DeFi applications.
- Current XTZ supply: 876 billion
- Expected APY: 5-7%
- You can stake by becoming a baker or delegating XTZ.
- Delegating can be easily done through a crypto wallet.
- Minimum coins to become a baker: 8000XTZ
Here’s how to stake Tezos on the Exodus Wallet.
Another ultra-popular coin in our list of best proof of stake coins is Cardano. Created by Charles Hoskinson, this blockchain initiated a hard fork in July 2020 (Shelley upgrade) that enabled staking. Staking ADA can be done by either delegating your stake or becoming a stake pool (validator).
ADA utilizes the Ouroboros staking algorithm, which is highly scalable and entirely future-proof. It was designed to provide fast and affordable transactions to a theoretically infinite number of users.
The Shelley update has allowed ADA to become one of the fastest-rising cryptocurrencies on the market, now sitting comfortably in the top 5 by market cap. Finally, the cryptocurrency has a rather substantial roadmap that should bring actual smart contract functionalities to the blockchain in the near future.
- Current ADA supply: 31.95 billion
- Expected APY: 7%
- You can stake by running a stake pool or delegating ADA.
- Delegating can be easily done through the proprietary Daedalus crypto wallet or third-party wallets such as Exodus or Atomic.
- Minimum coins to become a staking pool operator: N/A
Follow the guide below to learn how to stake ADA on Daedalus.
Polkadot is one of the most innovative projects in the blockchain ecosphere, which allowed it to quickly rise up in the ranks of the best proof of stake coins. Created by Gavin Wood, the co-founder of Ethereum, the DOT ecosystem aims to become the foundation framework of the new Web3.
Just like Ethereum enabled the creation of altcoins with smart contracts, Polkadot allows developers to create entire blockchains. The Polkadot ecosystem is comprised of the main blockchain, called the relay chain, and user-created blockchains called parachains.
These parachains can easily interoperate in this ecosystem, and their transactions can benefit from the security of the main relay chain.
Furthermore, Polkadot introduces bridges, which allow parachains to connect and communicate with external blockchains such as Ethereum.
Holders can stake DOT tokens and receive rewards by becoming a validator or by voting for validators and becoming a nominator.
- Current DOT supply: 940 million
- Expected APY: 6-14%
- You can stake by running a validator node or becoming a nominator
- You can become a nominator on the Polkadot UI or use your Ledger wallet to stake DOT tokens.
- Minimum coins to become a staking pool operator: dynamic
This explains the details on how to stake DOT with the UI on their website.
Best staking coins – honorable mentions
In addition to the 5 best PoS coins, there are a few cryptocurrencies with lower liquidity and lots of potential that are still worth mentioning:
Pancake Swap is one of the most successful projects that was released on the aforementioned Binance Smart Chain. This DeFi app is an automated market maker (AMM) that allows users to easily swap tokens, provide liquidity and earn rewards.
By providing liquidity to the pools in the ecosystem, users earn LP tokens that they can stake to earn CAKE tokens. These CAKE tokens can then be staked to earn more CAKE or receive token rewards from other projects.
- Expected APY: 90%
- Staking CAKE can be done through Metamask and requires CAKE and BNB (for fees)
Avalanche is a platform for launching DeFi applications and financial assets and enables users to trade with them. It’s considered to be one of the fastest networks in the sphere, with transactions being completed in under 1 second.
The AVAX token is used for transaction fees on the network, as well as earning staking rewards.
- Expected APY: 10%
- Staking AVAX can be done with the Avalanche Wallet.
Algorand is another blockchain that relies on extreme transaction speed and low fees to remain competitive. It’s an efficient alternative to slower smart contract blockchains such as Ethereum.
ALGO staking is extremely simple, as it requires holding tokens on any non-custodial wallet.
- Expected APY: 5.5%
- You can stake ALGO with any tried-party wallet such as Exodus or Atomic.
Based on the Ethereum network, Synthetic is a DeFi protocol that allows users to trade “synthetic”, user-created assets. The platform uses oracles to track the prices of these synths. Whenever synth assets are created, the SNX tokens are locked as collateral.
Staking SNX rewards the user with a portion of the transaction fees on the Synthetix Exchange.
- Expected APY: 28%
- Staking SNX is done by minting synth assets on the platform. To unlock your SNX, you will need to burn (destroy) these assets.
Polygon (formerly known as Matic Network) is a Layer 2 scaling solution for Ethereum. It allows the Ethereum network to become a true multichain ecosystem, akin to Polkadot.
The MATIC coin has been one of the most successful projects of the current bull run, and is expected to continue its rally. The main reason behind this is because Polygon aims to extend its reach beyond Ethereum and propose its solution to other blockchains in the future.
- Expected APY: 55%
- Staking MATIC can be done through the official wallet.
In this article, we talked about the benefits of staking and provided you with a concise list of the best proof of stake coins including:
- Ethereum 2.0
- Binance Coin
We even included a secondary list of some very promising staking coins such as:
- Pancake Swap
Hopefully, this article will come in handy whenever you need some pertinent information about the best proof of stake coins on the market. Just remember to double-check the current profitability and lock time periods before staking considerable amounts.