7 Things You Must Know Before Cryptocurrency Staking

Interest in staking is growing as a way to earn relatively stable returns while investing in cryptocurrency.

Staking is similar to bank deposits, where you deposit cryptocurrency into a network and receive periodic rewards.

While it’s difficult to achieve hundreds of percent in gains, you can earn 15-20% annually in stable returns, making it highly attractive to stability-oriented investors.

However, staking’s profit structure works differently from traditional finance and can be somewhat complex for beginners. Many investors are curious about how much stable returns they can earn through staking and what the risk factors are.

In this article, we’ll examine the profit structure of staking, along with its stability and risks.

1. What is Staking?

Staking Definition: Earning Returns Like Interest by Depositing Cryptocurrency

Staking is an investment method where you deposit cryptocurrency to contribute to network operations and security, and receive rewards in return.

Simply put, just as you receive interest when you deposit money in a bank, staking is a structure where you receive regular rewards when you deposit cryptocurrency.

It has recently gained attention as the most stable and predictable way to earn returns among cryptocurrency investment methods.

Staking returns vary slightly depending on the cryptocurrency, but you can stably earn 15-20% annually in many cases.

2. How Do Staking Returns Occur?

Rewards Paid as Compensation for Contributing to Blockchain Network Transaction Verification

Staked cryptocurrency is used for transaction verification and security maintenance of the blockchain. Users help with network operations by providing their assets to the network and earn returns in return.

Staking returns are determined by the amount and duration of deposited cryptocurrency. The more cryptocurrency you deposit and the longer you keep it deposited, the greater the returns.

Rewards are usually paid by providing additional cryptocurrency of the same type you staked. Therefore, it’s necessary to stake cryptocurrency that has verified safety and expected future profitability among those that offer staking.

If you want to know more about the structure of staking

👉 See Complete Guide to Staking Basic Concepts↗︎

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3. Are Staking Returns Stable?

Predictable Returns Possible Depending on Blockchain Policy for Deposits

Staking basically provides stable rewards.

Since the reward payment method is disclosed on the relevant blockchain network, anyone can check it. Returns are paid regularly according to the amount of cryptocurrency deposited and the network’s reward policy, making returns predictable.

However, the profitability of staking can also fluctuate depending on the market value of the cryptocurrency itself. When cryptocurrency prices rise, staking returns also increase, and when cryptocurrency values fall, the value of your staked cryptocurrency also falls together.

Therefore, when making staking investments, it’s good to examine the volatility and stability of the relevant cryptocurrency. Or seeking advice from verified exchanges or investment experts is also a good method.

4. Is There a Risk of Losing Your Staked Principal?

No Possibility of Losing Deposited Cryptocurrency, But Value Decline is Possible

In terms of staking itself, the risk of losing principal is low. Since the deposited cryptocurrency is only locked in the network but still belongs to the investor and doesn’t disappear, you can receive both the principal and rewards when the deposit period ends.

However, cryptocurrency price fluctuations are a risk. For example, if cryptocurrency prices fall during staking, even if you get your principal back, its value may have dropped significantly.

Also, some blockchain networks have a lock-up period where you cannot withdraw staked cryptocurrency for a certain period. In this case, it may be difficult to respond quickly to price declines.

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5. What Are the Advantages of Staking Over Individual Cryptocurrency Investment?

Generating Returns Just by Holding, Less Risky Than Individual Investment

Individual coin investment typically expects price appreciation of the coin and earns returns through the resulting price difference. However, staking has advantages over individual coin investment in that you can generate returns simply by holding coins.

Even if cryptocurrency prices don’t rise, you can receive continuous rewards during the deposit period, so you can earn returns more stably in the highly volatile cryptocurrency market. It’s similar to receiving continuous interest while holding assets.

On the other hand, individual coin investment may yield no returns if prices don’t rise. In this regard, staking, which guarantees additional rewards just by depositing, can be considered better.

6. Is Staking Better Than Bank Deposits or Savings?

Up to 15-20% Annual Returns, 4-5 Times Higher Than Bank Deposit Interest Rates

Staking can expect higher returns than bank deposits or savings.

While bank deposits and savings show interest rates around 3% as of 2024, cryptocurrency staking can expect annual returns of up to 15-20%.

In terms of stability, bank deposits are better. If the value of the staked cryptocurrency itself falls, you may not get the expected returns. However, considering the possibility of market price appreciation of cryptocurrency, the potential return rate is much higher than deposits.

7. Can Individuals Also Do Staking?

Technical Difficulty and Computing Costs Are Entry Barriers, Easy Through Verified Companies

Individuals can also do staking directly. However, in this case, you need to install a node on your personal computer and operate the node 24/7 while verifying block generation. The entry barriers such as technical difficulties and computing costs are high.

You can participate in staking through platforms like Bake that professionally provide staking services. Professional companies delegate proof-of-stake to validators and provide the resulting rewards as returns. Since exchanges handle management tasks and find nodes, general investors can easily earn returns through staking.

If You Want to Invest in Cryptocurrency Stably, Try Staking!

Start and Manage Staking Easily on Bake

Staking is gaining attention as a stable investment method because you can receive continuous rewards just by depositing.

At Bake, experts who have been in the cryptocurrency market for a long time analyze the market and provide staking services that offer the most stable and highest returns.

We also provide the fastest and easiest usability in Korea and support the fastest possible cancellation.

With expected reward rates of over 10% annually, start staking now!