Staking…And it’s the easiest way to make a passive income from cryptos
Staking cryptocurrencies is the easiest way to make passive income through cryptocurrencies you already hold. But to earn income, your cryptocurrencies need to follow some form of proof-of-stake consensus mechanism.
In case you’re not familiar, Proof of Stake (POS) is a computer algorithm used by cryptocurrencies to reach an agreement – or rather a decentralised agreement – around adding a particular block onto the blockchain.
In POS, blocks are not mined, they’re rather forged or minted. The participants who have a significant stake in the system get selected randomly for forging and then adding blocks onto the blockchain.
Coin staking gives cryptos holders some decision power on the network. By staking coins, you gain the ability to vote and generate an income – similar to how you would receive interest for holding money in a bank account.
There are a number of coins that use POS. To receive income from them, all you need to do is keep these coins in an open-wallet.
But before you invest, remember these 2 crucial points
#1: You need to hold the minimum amount of cryptos to earn an income
This varies with different cryptos.
For example on popular international exchange like Binance…
• EOS cryptos estimated yield is between 1%-3%, but to earn this, you need to hold at least 0.25 of EOS
• TRON earns between 7%-9%, but you need to own at least 5 TRX coins to earn this yield.
#2: Not all cryptos are equal
Just like not all dividend-paying shares are equal, the same goes for cryptos. You see, some lesser-known cryptos offer extremely attractive yields.
For example, a crypto called KAVA – which only has a market cap of $18.6 million – offers a yield of between 14% and 16%.
And TROY (Market of +$5 million), offers yields between 15% and 16%.
That’s quite incredible given that the average share on the JSE pays just over 3% dividend yield. However, as attractive as it seems, there’s a big risk when holding smaller, lesser-known cryptos…
Simply, they could disappear. We’ve seen many cryptos fail completely and when this happens, you could lose your entire investment.
So, what’s the best way to earn crypto-income?
The best action is to hold cryptos that not only offer a decent yield, but that demonstrate huge growth potential in the future.
For example, a crypto called Tezos (with a market cap of under $2 billion) is the number one staking coin.
Right now, if you stake your Tezos, you can earn a decent 6%-7% yield. You just need to own at least 1 Tezos coin.
And it’s not only about the income.
Tezos for instance is becoming known as the future security token offering (STOs). If you’re not familiar, you can read about them here
But in short, crypto guru Sam Volkering recently told me during a conversation that, “there are a number of funds looking to develop and deploy billions of dollars’ worth of security offerings on the Tezos blockchain, which speaks loudly about its potential”.
And investors and traders are firmly aware of Tezos’ future potential.
Ever since it briefly dipped below $1 during the massive sell-offs in mid-March, Tezos has been on a role. It’s currently trading at $2.77, which represents a 195% surge in just six weeks, outperforming Bitcoin.
There are a few other cryptos like Tezos that offer the best of both worlds – you just need to research and of course, don’t invest what you can’t afford.
See you next week.
Managing Editor, The South African Investor