08-27-2022, 08:09 PM
Passive Income 2: The different type of staking and maximizing those yields with len
<table> <tr><td> <a href="https://www.reddit.com/r/CryptoCurrency/comments/wz3ma4/passive_income_2_the_different_type_of_staking/"> <img src="https://external-preview.redd.it/k0LWlqWGxa19140mqcC-AEprAdYr8EpyS9HDv0_xHR0.jpg?width=320&crop=smart&auto=webp&s=46232a425b14e294f3b9cf996f4ec4e2cca3f519" alt="Passive Income 2: The different type of staking and maximizing those yields with lending" title="Passive Income 2: The different type of staking and maximizing those yields with lending" /> </a> </td><td> <!-- SC_OFF --><div class="md"><p>For those of you who didn't see my prior post on passive income where I covered liquidity pools. <a href="https://old.reddit.com/r/CryptoCurrency/comments/wwu71w/passive_income_liquidity_poolsliquidity_mining/">https://old.reddit.com/r/CryptoCurrency/comments/wwu71w/passive_income_liquidity_poolsliquidity_mining/</a></p> <p>​</p> <p>Anyways, in this post I'm getting into staking. This is to include staking for POS, and other types of staking. Also, staking with your own wallets vs a CEX.</p> <h1>Edit: I will also get into how to make passive income by staking an NFT.</h1> <p>A more detailed video on what is in this post: <a href="https://youtu.be/lreiNlRccm8">https://youtu.be/lreiNlRccm8</a></p> <p>________________</p> <h1>What is staking?</h1> <ul> <li><strong>Staking</strong>: There are two forms of staking in the world of DeFi. The main form is on proof-of-stake blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield.</li> </ul> <p><a href="https://blockworks.co/what-is-yield-farming-what-you-need-to-know/">https://blockworks.co/what-is-yield-farming-what-you-need-to-know/</a> (they summed it up extremely well)</p> <p>Note while their summary does say DEX. It also applies to CEX, but without LP.</p> <p>_______________</p> <h1>What is PoS (proof of stake)? You don't need to know this for passive income.</h1> <p>In Proof of stake consensus algorithm, miners (called validators, delegates or forgers) are chosen or voted for randomly by holders of the native coin on the network. When you hold a given amount of coins in your wallet for staking, your computer qualifies to be a node. For a node to be chosen as one of the stakers, they need to have deposited a certain amount of coins in a bound wallet.</p> <p>The chosen validators then stake the required amount of coins using the special staking wallets. The node will forge or create new blocks proportional to the number of coins in their wallets. For instance, if you have 1% of all the coins, then you can “mine” 1% of the new blocks.</p> <p>Different coins use a variety of PoS systems, but they all work the same by helping verify transactions and to secure the network. Validators get rewarded with block rewards as well as a share of the transaction fees collected per block.</p> <p>______________</p> <h1>2 main types of staking.</h1> <p>The 2 main types of staking is PoS and providing liquidity. Note there is also staking where you get rewards simply for locking your coins to help make the price stable.</p> <p>​</p> <p>But note, on our end much of it looks the same. In fact, without doing more than surface level research, the only way to tell what type of staking you are dealing with is by the restrictions or maybe hoops you have to jump through. For example, if you have to pick a delegator then it is likely a PoS. But note you could be staking for multiple things. Like you can have a PoS going on that locks coins to help make the price stable.</p> <p>​</p> <p><strong>The reason why I'm bringing this up</strong> is some coins which you can't normally stake and much everything says you can't. In some cases, you can. Like BTC for example. On some exchanges you can get staking rewards for just having it or locking it. The reason for this is when you send your coins to an exchange, they are all going into 1 big pot along with everyone else coins on the exchange. This is why on some like Coinbase you can move crypto between accounts for free.</p> <p>Anyways, because the CEX might need extra liquidity in something, they might offer something in their staking rewards program to push for people to leave their given coins with the exchange. Note the difference between this and my last post is you don't get LP tokens for doing this. At least any CEX I know of allows for that.</p> <p>____________</p> <h1>Soft vs hard staking</h1> <p>Soft staking is basically where you can move your coins in and out any time.</p> <p>Hard staking is when you have to lock your coins for a given time</p> <p>___________</p> <h1>Hoops</h1> <p>Some staking might require you to jump through hoops to stake. This can include things like you must vote once a quarter.</p> <p>_____________</p> <h1>CEX vs decentralized</h1> <p>A major thing to note while many will tell you to note keep your coins in a CEX. A CEX might be a good way to earn high yields vs you using decentralized methods. And note, a CEX might be the only way you can stake some coins if you can't meet given limits of that coin.</p> <p>Please note this isn't always the case. So look at the numbers and not feelings of others. Math doesn't lie.</p> <p>​</p> <p>For example,</p> <p><a href="https://preview.redd.it/yqt4exnxt6k91.png?width=571&format=png&auto=webp&s=c4d028e196cce9d38be53f74e170c3c33dd26daf">https://preview.redd.it/yqt4exnxt6k91.png?width=571&format=png&auto=webp&s=c4d028e196cce9d38be53f74e170c3c33dd26daf</a></p> <p>I can stake ETH through decentralized method using my wallet and only get 3.8%, where with Kraken it is 4% - 7%.</p> <p><a href="https://preview.redd.it/xpyehxp6u6k91.png?width=293&format=png&auto=webp&s=d4460deb03077ae6f62ff3febc5da99b77983fb3">https://preview.redd.it/xpyehxp6u6k91.png?width=293&format=png&auto=webp&s=d4460deb03077ae6f62ff3febc5da99b77983fb3</a></p> <p>My point is, if your goal is for ultimate yields. Then you need to look at all options. But note, if you do pick a CEX you automatically lose access to the coins if the exchange overnight wants to lock your account and not let you back in.</p> <p>​</p> <p>Now a major thing you also need to note is some coins like Dot requires 10 Dot to just lock it, and then 100 or so to start earing rewards from your locked coins. Where as in a CEX you can bypass these requirements.</p> <p>​</p> <p>Another thing to note is with a decentralized method on some coins you can limit how often rewards pay out. Where with a CEX this is unheard of.</p> <p>____________</p> <h1>Risk</h1> <p>Risk involved with each is</p> <ul> <li>With a CEX, you are at the mercy of the CEX to not close your account, do something funny, and so on.</li> <li>You need to note fees. Many coins will display somewhere the fees it takes during staking. It should be noted CEX might have fees that are hidden until you find the right page or maybe in the TOS.</li> <li>Obviously if you lock your coins the value can be at risk.</li> <li>NOTE the rewards you get. You might get rewards in another coin.</li> <li>Note for anything locked there could be value loss during that time. The coin could even be rugged and there is nothing you can do about it. This is a trick that happens with some of the newer coins when the makers want to scam people. So again, do your research in what coins you stake, where, and so on.</li> </ul> <p>UPDATE:</p> <p><strong>I forgot to add this but in normal staking where the act of staking helps create new coins of the same type. If the % is too high, then this can lower the value. Most aim for about 9% or 10% on the highest point if they are holding long term. OR things like VET where you stake something and it rewards in another coin.</strong></p> <p>But again, not all staking creates new coins. So do your research.</p> <p>___________</p> <p>NFT Staking</p> <p>NFT staking is highly similar to normal staking in you are getting rewarded for locking up the NFT.</p> <p><a href="https://preview.redd.it/gvv8mn4f07k91.png?width=1600&format=png&auto=webp&s=8df53844580fae1048846879cb09376541e7b6ed">https://preview.redd.it/gvv8mn4f07k91.png?width=1600&format=png&auto=webp&s=8df53844580fae1048846879cb09376541e7b6ed</a></p> <p>It should be noted that NFT staking isn't remotely as common as other methods.</p> <h1>UPDATE</h1> <p>Because a lot of people were asking about how NFT staking rewards people.</p> <ol> <li>The makers want to make it where people hold on to it which makes a stable market. This is assuming you have buyers than want it, and it takes away sellers. Which increases the price and helps stabilize it.</li> <li>From my understanding P2E games some of them use this for some reason.</li> </ol> <p>Note I don't stake NFT. It's not that I don't trust it. I don't trade in NFT and it is such a new thing that hardly any does it. IDK if it will be a fad or something that will grow, so I figure I should add it on here.</p> <p>Note this isn't me saying "go do this". This is still pretty new and the risk on this is somewhat unknown. Even trading NFT is a hit or miss. This was more of a thing just showing it is out there.</p> <p>​</p> <p>If people want, I might make a guide on this</p> <p>_________________</p> <h1>Lending</h1> <p>Something I didn't get into with my last post is some lending you won't get a lending token. For example</p> <p><a href="https://preview.redd.it/o6u0n6ewy6k91.png?width=1525&format=png&auto=webp&s=e20e78288c6dd22a8aa3770ff78d9b23a4112e6a">https://preview.redd.it/o6u0n6ewy6k91.png?width=1525&format=png&auto=webp&s=e20e78288c6dd22a8aa3770ff78d9b23a4112e6a</a></p> <p><a href="https://preview.redd.it/m1gvhwekz6k91.png?width=1554&format=png&auto=webp&s=067bb413d81dd5835e346689ddb40dc6ad7becc7">https://preview.redd.it/m1gvhwekz6k91.png?width=1554&format=png&auto=webp&s=067bb413d81dd5835e346689ddb40dc6ad7becc7</a></p> <p>Note the APY/APR and compare it to other methods. Also note some places does lock the crypto for a given amount of time.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/crua9"> /u/crua9 </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/wz3ma4/passive_income_2_the_different_type_of_staking/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/wz3ma4/passive_income_2_the_different_type_of_staking/">[comments]</a></span> </td></tr></table>
<table> <tr><td> <a href="https://www.reddit.com/r/CryptoCurrency/comments/wz3ma4/passive_income_2_the_different_type_of_staking/"> <img src="https://external-preview.redd.it/k0LWlqWGxa19140mqcC-AEprAdYr8EpyS9HDv0_xHR0.jpg?width=320&crop=smart&auto=webp&s=46232a425b14e294f3b9cf996f4ec4e2cca3f519" alt="Passive Income 2: The different type of staking and maximizing those yields with lending" title="Passive Income 2: The different type of staking and maximizing those yields with lending" /> </a> </td><td> <!-- SC_OFF --><div class="md"><p>For those of you who didn't see my prior post on passive income where I covered liquidity pools. <a href="https://old.reddit.com/r/CryptoCurrency/comments/wwu71w/passive_income_liquidity_poolsliquidity_mining/">https://old.reddit.com/r/CryptoCurrency/comments/wwu71w/passive_income_liquidity_poolsliquidity_mining/</a></p> <p>​</p> <p>Anyways, in this post I'm getting into staking. This is to include staking for POS, and other types of staking. Also, staking with your own wallets vs a CEX.</p> <h1>Edit: I will also get into how to make passive income by staking an NFT.</h1> <p>A more detailed video on what is in this post: <a href="https://youtu.be/lreiNlRccm8">https://youtu.be/lreiNlRccm8</a></p> <p>________________</p> <h1>What is staking?</h1> <ul> <li><strong>Staking</strong>: There are two forms of staking in the world of DeFi. The main form is on proof-of-stake blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield.</li> </ul> <p><a href="https://blockworks.co/what-is-yield-farming-what-you-need-to-know/">https://blockworks.co/what-is-yield-farming-what-you-need-to-know/</a> (they summed it up extremely well)</p> <p>Note while their summary does say DEX. It also applies to CEX, but without LP.</p> <p>_______________</p> <h1>What is PoS (proof of stake)? You don't need to know this for passive income.</h1> <p>In Proof of stake consensus algorithm, miners (called validators, delegates or forgers) are chosen or voted for randomly by holders of the native coin on the network. When you hold a given amount of coins in your wallet for staking, your computer qualifies to be a node. For a node to be chosen as one of the stakers, they need to have deposited a certain amount of coins in a bound wallet.</p> <p>The chosen validators then stake the required amount of coins using the special staking wallets. The node will forge or create new blocks proportional to the number of coins in their wallets. For instance, if you have 1% of all the coins, then you can “mine” 1% of the new blocks.</p> <p>Different coins use a variety of PoS systems, but they all work the same by helping verify transactions and to secure the network. Validators get rewarded with block rewards as well as a share of the transaction fees collected per block.</p> <p>______________</p> <h1>2 main types of staking.</h1> <p>The 2 main types of staking is PoS and providing liquidity. Note there is also staking where you get rewards simply for locking your coins to help make the price stable.</p> <p>​</p> <p>But note, on our end much of it looks the same. In fact, without doing more than surface level research, the only way to tell what type of staking you are dealing with is by the restrictions or maybe hoops you have to jump through. For example, if you have to pick a delegator then it is likely a PoS. But note you could be staking for multiple things. Like you can have a PoS going on that locks coins to help make the price stable.</p> <p>​</p> <p><strong>The reason why I'm bringing this up</strong> is some coins which you can't normally stake and much everything says you can't. In some cases, you can. Like BTC for example. On some exchanges you can get staking rewards for just having it or locking it. The reason for this is when you send your coins to an exchange, they are all going into 1 big pot along with everyone else coins on the exchange. This is why on some like Coinbase you can move crypto between accounts for free.</p> <p>Anyways, because the CEX might need extra liquidity in something, they might offer something in their staking rewards program to push for people to leave their given coins with the exchange. Note the difference between this and my last post is you don't get LP tokens for doing this. At least any CEX I know of allows for that.</p> <p>____________</p> <h1>Soft vs hard staking</h1> <p>Soft staking is basically where you can move your coins in and out any time.</p> <p>Hard staking is when you have to lock your coins for a given time</p> <p>___________</p> <h1>Hoops</h1> <p>Some staking might require you to jump through hoops to stake. This can include things like you must vote once a quarter.</p> <p>_____________</p> <h1>CEX vs decentralized</h1> <p>A major thing to note while many will tell you to note keep your coins in a CEX. A CEX might be a good way to earn high yields vs you using decentralized methods. And note, a CEX might be the only way you can stake some coins if you can't meet given limits of that coin.</p> <p>Please note this isn't always the case. So look at the numbers and not feelings of others. Math doesn't lie.</p> <p>​</p> <p>For example,</p> <p><a href="https://preview.redd.it/yqt4exnxt6k91.png?width=571&format=png&auto=webp&s=c4d028e196cce9d38be53f74e170c3c33dd26daf">https://preview.redd.it/yqt4exnxt6k91.png?width=571&format=png&auto=webp&s=c4d028e196cce9d38be53f74e170c3c33dd26daf</a></p> <p>I can stake ETH through decentralized method using my wallet and only get 3.8%, where with Kraken it is 4% - 7%.</p> <p><a href="https://preview.redd.it/xpyehxp6u6k91.png?width=293&format=png&auto=webp&s=d4460deb03077ae6f62ff3febc5da99b77983fb3">https://preview.redd.it/xpyehxp6u6k91.png?width=293&format=png&auto=webp&s=d4460deb03077ae6f62ff3febc5da99b77983fb3</a></p> <p>My point is, if your goal is for ultimate yields. Then you need to look at all options. But note, if you do pick a CEX you automatically lose access to the coins if the exchange overnight wants to lock your account and not let you back in.</p> <p>​</p> <p>Now a major thing you also need to note is some coins like Dot requires 10 Dot to just lock it, and then 100 or so to start earing rewards from your locked coins. Where as in a CEX you can bypass these requirements.</p> <p>​</p> <p>Another thing to note is with a decentralized method on some coins you can limit how often rewards pay out. Where with a CEX this is unheard of.</p> <p>____________</p> <h1>Risk</h1> <p>Risk involved with each is</p> <ul> <li>With a CEX, you are at the mercy of the CEX to not close your account, do something funny, and so on.</li> <li>You need to note fees. Many coins will display somewhere the fees it takes during staking. It should be noted CEX might have fees that are hidden until you find the right page or maybe in the TOS.</li> <li>Obviously if you lock your coins the value can be at risk.</li> <li>NOTE the rewards you get. You might get rewards in another coin.</li> <li>Note for anything locked there could be value loss during that time. The coin could even be rugged and there is nothing you can do about it. This is a trick that happens with some of the newer coins when the makers want to scam people. So again, do your research in what coins you stake, where, and so on.</li> </ul> <p>UPDATE:</p> <p><strong>I forgot to add this but in normal staking where the act of staking helps create new coins of the same type. If the % is too high, then this can lower the value. Most aim for about 9% or 10% on the highest point if they are holding long term. OR things like VET where you stake something and it rewards in another coin.</strong></p> <p>But again, not all staking creates new coins. So do your research.</p> <p>___________</p> <p>NFT Staking</p> <p>NFT staking is highly similar to normal staking in you are getting rewarded for locking up the NFT.</p> <p><a href="https://preview.redd.it/gvv8mn4f07k91.png?width=1600&format=png&auto=webp&s=8df53844580fae1048846879cb09376541e7b6ed">https://preview.redd.it/gvv8mn4f07k91.png?width=1600&format=png&auto=webp&s=8df53844580fae1048846879cb09376541e7b6ed</a></p> <p>It should be noted that NFT staking isn't remotely as common as other methods.</p> <h1>UPDATE</h1> <p>Because a lot of people were asking about how NFT staking rewards people.</p> <ol> <li>The makers want to make it where people hold on to it which makes a stable market. This is assuming you have buyers than want it, and it takes away sellers. Which increases the price and helps stabilize it.</li> <li>From my understanding P2E games some of them use this for some reason.</li> </ol> <p>Note I don't stake NFT. It's not that I don't trust it. I don't trade in NFT and it is such a new thing that hardly any does it. IDK if it will be a fad or something that will grow, so I figure I should add it on here.</p> <p>Note this isn't me saying "go do this". This is still pretty new and the risk on this is somewhat unknown. Even trading NFT is a hit or miss. This was more of a thing just showing it is out there.</p> <p>​</p> <p>If people want, I might make a guide on this</p> <p>_________________</p> <h1>Lending</h1> <p>Something I didn't get into with my last post is some lending you won't get a lending token. For example</p> <p><a href="https://preview.redd.it/o6u0n6ewy6k91.png?width=1525&format=png&auto=webp&s=e20e78288c6dd22a8aa3770ff78d9b23a4112e6a">https://preview.redd.it/o6u0n6ewy6k91.png?width=1525&format=png&auto=webp&s=e20e78288c6dd22a8aa3770ff78d9b23a4112e6a</a></p> <p><a href="https://preview.redd.it/m1gvhwekz6k91.png?width=1554&format=png&auto=webp&s=067bb413d81dd5835e346689ddb40dc6ad7becc7">https://preview.redd.it/m1gvhwekz6k91.png?width=1554&format=png&auto=webp&s=067bb413d81dd5835e346689ddb40dc6ad7becc7</a></p> <p>Note the APY/APR and compare it to other methods. Also note some places does lock the crypto for a given amount of time.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/crua9"> /u/crua9 </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/wz3ma4/passive_income_2_the_different_type_of_staking/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/wz3ma4/passive_income_2_the_different_type_of_staking/">[comments]</a></span> </td></tr></table>