Intro
Now many investors earn income directly from trading their assets, but others are looking for more passive ways, such as earning income from staking coins. This method allows owners of digital coins to receive rewards by storing crypto assets in their wallets. However, what are the pitfalls of staking? And what coins to buy for profit in 2023?
This article will help you get an idea about the proof-of-stake (PoS) algorithm and its distinctive features. You will also learn the criteria for choosing the most promising coins for staking and explore the top 10 staking coins in 2023 that offer users the highest rewards.
What Is Crypto Staking?
Staking is the process of freezing digital tokens for a certain period in your wallet. Thus, your crypto assets are held in your account, and the Proof of Stake (PoS) algorithm is used in the staking process. PoS is necessary to protect the blockchain from outside interference and the inaccuracy of the data provided.
Speaking about the Proof of Stake algorithm, it is important to know - the higher the volume of blocked crypto assets, the more blocks can be additionally generated, which helps to increase the number of staking rewards’ tokens. "The main idea is that participants can lock coins, and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block. Typically, the probability of being chosen is proportional to the amount of coins." - Binance.
How to Choose Tokens for Staking?
Since the crypto world is constantly changing and exchanges contain an incredible amount of digital assets, it is important to know what to look for when choosing a cryptocurrency for staking. These factors will help you choose a token with maximum profitability and minimum risks.
- The value of the coin. The most important factor when choosing an asset to stake is its value. You should not buy a cryptocurrency that is highly prone to inflation. ''You may earn big rewards initially, but since the value of the coin is volatile, you may be left with little to no profit." - CoinTelegraph. Moreover, even the final amount, including fiat rewards, may turn out to be less than before investments
- Limited offer. Before purchasing a crypto asset, check that the coin is issued in a fixed amount and the token’s market circulation is limited. Undoubtedly, the decrease of coins in open access leads to its growth, which will give you a chance to receive more rewards after unfreezing.
- Actual application. You can determine the intrinsic value of crypto by analyzing its prospects for real-time use. "If it is widely used for various applications in the real world, such as for digital payments, it will continue to have a healthy demand and price." - Coin Telegraph. Thus, coins designed for existing problems have the greatest growth potential. If the token solves problems in real-time, most likely its value will grow.
- Stability. Stablecoins, compared to other cryptocurrencies, are less volatile, so they are most suitable for staking. Thus, even with the freezing of your assets, stablecoins minimize the risks as much as possible.
- Reward rates. High rates bring more income; however, such crypto assets can be volatile and depreciate, thus becoming risky for investors. That is why it is recommended to purchase several coins with different levels of risk, which will help secure your investment.
When choosing a coin, also pay attention to the trading volume, because the higher this indicator, the more likely it is to grow. Invest in reliable projects that have growth prospects and real-time demand, and do not forget to consider the volatility of the selected asset. Also, professional investors recommend periodically reviewing the investment portfolio and replenishing it with promising coins for staking, getting rid of irrelevant assets.
Top 10 Staking Coins in 2023
After analyzing the market, we have selected the top 10 promising tokens that will bring investments in 2023.
Ethereum 2.0 (ETH)
Ethereum 2.0 (also known as Eth2) is the second most popular cryptocurrency provider in the world after Bitcoin now. “Instead of Ethereum running an energy-intensive proof-of-work algorithm, the Eth2 upgrade (now referred to as consensus layer upgrade) means switching to a proof-of-stake algorithm.” - Coin Telegraph.
The minimum ETH staking threshold in Ethereum is 32, but if you transfer a certain amount of currency to the validator, you can earn while having fewer coins. The number of new coins issued will be calculated considering the volume of tokens frozen using the Ethereum staking method, and the income of validators from staking Ethereum is about 4.5-13% per annum.
Cardano (ADA)
Cardano (ADA) is a blockchain platform that uses PoS and is designed to issue new tokens, develop smart contracts for DeFi, and create Dapps. The advantage of Cardano staking is that it can process several hundred transactions per second and be able to withdraw your assets from staking at any time.
Users can delegate ADA coins to platform staking pools, however staking rewards decrease if many people contribute assets to the same pool. That is why it is important to diversify assets across different pools to get the most profit. The current yield from ADA staking is 3.7-4.2% per annum.
Algorand (ALGO)
Algorand is a powerful blockchain platform with low costs and almost instantaneous transactions. The project uses Pure PoS for issuing digital assets, developing dApps and smart contracts, and issuing native cryptocurrency ALGO.
ALGO is a great staking coin as you only need to own one coin to become a validator. “There are several ways to earn a return on your ALGO, including lending them out to custodial providers or through decentralized lending protocols, running your own validator, or delegating your tokens to validators of your choosing.” - Stakingrewards. The conclusion of a staking contract allows holders of ALGO coins to receive an income of about 5-10% per annum.
Polkadot (DOT)
Polkadot is a decentralized blockchain network that provides interaction between blockchains and issues a native DOT token. The minimum stake for Polkadot is 40 DOT.“When you Stake Polkadot, you put your DOT tokens "to work" and generate more DOT. Whenever you Stake DOT, your tokens are being used to validate / mine the blockchain.” - HoldPolkaDot.
As of April 2023, DOT is one of the best staking coins due to its high annual returns. If you are looking for a coin to invest and generate income, then with DOT you will receive about 13-14% per annum.
Tether (USDT)
Tether is a great coin to invest in 2023 for those who are afraid of market changes and loss of token value. USDT is a stablecoin that is safe due to its huge trading volume and liquidity. You will be able to easily exchange it for other tokens or fiat, as Tether’s stability is provided by the dollar.
USDT token staking yields up to 12.3% and is pegged to real money. Stable exchange rates, fiat security, and instant withdrawal platforms make USDT one of the most attractive staking tokens in 2023.
USD Coin (USDC)
USDC is another stablecoin that is pegged to fiat and is used due to its high value and liquidity. This asset is as transparent as possible, and it can be exchanged and sent anywhere in the world with minimal fees.
USDC staking brings investors about 8-10% per annum, and the stability of USD COIN token quotes is supported by the burning mechanism. The dollar peg, wide range of applications and the ability to withdraw assets make USDC a great staking coin this year.
Solana (SOL)
Solana is a platform that builds a scalable blockchain protocol for developing dApps and smart contracts and ranks seventh in terms of market capitalization. SOL is an excellent choice for staking due to its high speed and low transaction costs. By entering staking contracts, SOL token holders are rewarded while helping to secure the network.
The main mechanism for destroying Solana tokens is to burn a portion of the fee for each transaction. The profit from SOL staking depends on the number of transactions per day, but the average reward is from 7 to 11%.
Cosmos (ATOM)
Cosmos is a decentralized, customizable platform where you can create your own blockchain services. The goal of the project is scaling and decentralized interaction between participants. ATOM token is the native coin of the Cosmos project.“Cosmos stakers can stake ATOM via a centralized exchange, directly delegate to a validator, use a liquid staking pool, or run their own validator node. Each of these methods comes with their own advantages and disadvantages.” - MilkRoad.
You need to have at least 0.05 ATOM to start earning returns from staking. By having an ATOM token, you support the functioning of the ecosystem and get the opportunity to remunerate about 10% per annum.
Tezos (XTZ)
Tezos is an open source blockchain platform that features Liquid PoS. Tezos can also issue tokens and develop dApps.
XTZ is the native token of the Tezos project, which is generated during the baking process and is used to vote, pay commissions on the network, and pay rewards to users. “Tezos validators (bakers) are required to stake a minimum amount of 6,000 XTZ. but users who choose to delegate their stake to a baker can stake XTZ of any amount with no minimum.” - KillFi. The average annual reward for Staking XTZ is 6-10%.
Binance Coin (BNB)
Binance is the most popular crypto exchange in the world that has its own BNB token. “Binance Coin has multiple use cases: Fueling transactions on the Chain, paying for transaction fees on Binance Exchange, making in-store payments, and many more.” - Binance
The BNB token is quite an attractive staking coin as there is no minimum stake requirement. Also, the number of BNB tokens available for purchase is gradually decreasing, which increases its profitability, which is currently 6-10%.
Final Word
Cryptocurrency staking in 2023 is a great investment with the potential to earn up to 20% with minimal effort. Freezing purchased coins helps to keep blockchain platforms running and develop projects. The more tokens you hold, the more you support projects and the more income you get.
Stake or not to stake? The choice is obvious. However, do not forget that any crypto investments are associated with risks, so pay attention to reliable projects with good prospects and keep different tokens in your investment portfolio to get the most profit.
Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.