Last updated on October 14, 2019
In this guide, I’m going to explain the cryptocurrency staking basics, type of staking coins, and best staking coins exist and also, the importance of investing in staking coins briefly.
Also, I will show you some of the best staking coins, best staking wallets, and staking platforms, etc.
Let’s dive deep into the cryptocurrency staking basics,
What is staking
Simply, staking is holding a bunch of cryptocurrency coins or tokens in a specific wallet to supports the respective blockchain operation and rewarding where blockchain operations are producing and adding new blocks on the particular blockchain, and providing the consistent blockchain security, and confirming the new transaction is free of malicious.
It is very similar to depositing money on a traditional bank to earn some interest over a particular period.
Normally, theses holding coins can be named as staking coins for getting kind of rewards.
In this case, you should lockup your coins or tokens in a wallet to earn some interest where the lockup period, coins or token amount and interest are different in various coins or token project.
In some cases, you don’t need to lockup your coins or token to earn some interests.
Staking pools are created through pool user’s funds merge together to increase the staking size for getting more chances to becoming the validator node in particular blockchain where staking reward will proportional to the user’s individual size of the staking.
Staking pools are effective in networks where the barrier to entry, whether technical or financial, is relatively high. Also, staking pools charge fees as user’s percentage of rewards for staking pool setup, maintenance, development.
What is cold staking
Cold staking allows users to lockup or store funds on the offline wallet while still receiving staking rewards. In this case, the offline wallet can be used such as a hardware wallet, a paper wallet that brings a significant amount of security of the staking coins.
Risk of investing the staking coins
51% Attack happens on any staking blockchain once the single organization or entity can control majority staking coins of the network. In this case, an attack can be caused to double-spending issues, network centralization, modifying the transaction and blockchain, even loss of funds.
Cryptocurrency is ultra-volatile assets, which can be caused sudden price falling especially in bear markets. In this case, some blockchains require some time to release the staking coins, release time can be affected staking coins price but if you are long term holder, this would not matter.
Types of Staking mechanisms
There is so many blockchain consensuses algorithm where I will explain the popular consensus algorithms. Lets deep dive into,
What is Proof of Stake (or PoS)
Proof of Stake is a blockchain consensus algorithm (Like Bitcoin consensus algorithm) which consists of adding new blocks on the blockchain (forging or mining) and selecting the next validator node according to coin age selection and randomized block selection method. In this case, validator node is computer server holding existing coins or tokens which processes the adding new blocks on the blockchain.
Randomized block selection method consists of randomly select the validator node according to the minimum hash value node in a combination of the size of staking which prevents centralization of the blockchain with the size of staking is public.
Coin age selection method consists of selecting the next validator node according to coin age calculated by the number of staking coins * number staking day where if coin age is higher, higher chance to become the next validator node. To avoid network centralization, chosen validator node coin age reset to zero once the forging process is finished where that node should wait for few time to forge or mine the next block.
Chosen validator nodes check the transactions are valid, add the next block on the blockchain. In this case, validator nodes will receive the reward as a transaction fee associated with the generated block.
What is Delegated Proof of Stake (or DPoS)
Delegated Proof of Stake is a staking cryptocurrency consensus algorithm that consists of a voting system for generation and validation of new blocks on the blockchain. The voting system consists of delegators and stakeholders where delegators will make the votes to maintain the blockchain and elected by the stakeholders. Also, anyone can become the stakeholder and delegator which increase the decentralization and digital democratization of the consensus mechanism.
Voting power is proportional to the number of staking coins each user’s holds which can differ from project to project and reward also, shared proportionally.
If the delegator (also, named as delegator node or witnesses node) misbehave or underperform, these nodes will expel and the new node will replace where misbehaved delegator node lose their reputation.
What is Leased Proof of Stake
LPoS is an improved version of the Proof of Stake blockchain consensus algorithm that consists of leased the user’s coins or tokens for the full node of the network.
Coin or token leasers will receive a percentage of reward taken by the full node and if the node consists of higher leased coins or tokens, higher opportunity to become validator node.
LPoS blockchain allows higher scalability output and higher transaction throughput.
What is masternode staking
Masternode is a kind of network node holding the coins or tokens which verifies the transactions but it can’t create a new block. Masternode may be combined with Proof of Stake algorithm, Proof of Work, Delegated Proof of Stake, together it can be called a blockchain consensus mechanism.
Masternodes staking provides high rewards than the PoS types and it requires a minimum amount of tokens to starting new masternode, these days high reward masternode is too expensive to get started such as Dash, Energi, Zcoin, etc.
Proof of Stake vs Proof of Work
Proof of Work is a blockchain consensus algorithm consists of solving the complex mathematical puzzle using computer hashing power where the next block validator will select according to the maximum computer hashing power supplier(Miner)0at the time.
In this case, Proof of Work algorithm requires more electrical power than the Proof of Stake consensus algorithm.
Also, PoS is more scalable than the PoW algorithm which means PoS algorithm provides fast transaction speed, more transaction per second, etc. And it helps to scale the network globally without any network clogging, high transaction fees.
Still, PoW is considered more secure than the PoS or DPoS system.
Best PoS, DPoS, LPoS staking coins
There are many staking coins which consist of huge potential to go bigger in the future. I will show passive income staking cryptocurrency or coins you can buy. Let’s deep dive into the best staking coins exists,
Tezos is a new platform for smart contracts and decentralized applications. It aims to combine a self-correcting protocol and on-chain governance to manage network modifications. It consists of the native currency called XTZ.
- Ticker: XTZ
- Approximate annual return: 7%
- Where to stake XTY: Tezbox, Trustwallet, Binance Staking
- Where to buy XTY: Binance or Coinbase Pro
Cosmos is an open-source, decentralized ecosystem of blockchains that can scale and interoperate with each other. ATOM is the native and staking coin used by the network and also, tokenizes transactions.
- Ticker: ATOM
- Approximate annual return: 10%
- Where to stake ATOM: Lunie, Cosmostation, imToken
- Where to buy ATOM: Binance or Hotbit
Decred (DCR) is an open-source, Bitcoin fork that emphasizes development funding, on-chain governance, and consensus mechanisms where Decred use both Proof of Work and Proof Stake consensus mechanisms. PoS adds an extra layer of decentralization to Decred and allows users to vote on suggested network changes.
- Ticker: DCR
- Approximate annual return: 10%
- Where to stake DCR: DCRwallet
- Where to buy DCR: Binance or Changelly
Qtum is a Proof-of-Stake smart contract blockchain platform and value transfer protocol where smart contracts capable of run on multiple virtual machines.
- Ticker: QTUM
- Approximate annual return: 5%
- Where to stake QTUM: QTUM desktop wallet, Binance staking
- Where to buy QTUM: Binance or Coinex
Ark is a decentralized, blockchain ecosystem that offers a suite of tools to create an ecosystem of interoperable blockchains. Ark completely operated with the delegated proof of stake consensus mechanism.
- Ticker: ARK
- Approximate annual return: 10%
- Where to stake ARK: Ark wallet
- Where to buy ARK: Binance or Changelly
Navcoin is decentralized, open-source blockchain-based on proof of stake consensus mechanism that is developed for digital payments with fast, secure and private. Volunteers can propose contributions and get paid for work through NavCoin’s decentralized Community Fund.
- Ticker: NAV
- Approximate annual return: 8%
- Where to stake NAV: Next wallet, Navcoin core
- Where to buy NAV: Binance or Changelly
Waves is a blockchain platform that you can use to create your custom token which consists of the decentralized application platform, a decentralized exchange for waves tokens any more. Waves use the Leased Proof of Stake consensus mechanism.
- Ticker: WAVES
- Approximate annual return: 7.5%
- Where to stake WAVES: Waves desktop client
- Where to buy WAVES: Binance or Coinex
Best masternode staking coins
There are so many masternode staking coins exists, in this guide, I will include the trusted, established and popular masternode staking coins. If you are want to explore the potential masternode coins, check out Masternode.online.
Dash is a privacy-focused cryptocurrency for instant payments with high speed, near-zero transaction fee. Dash uses both Proof of Works and Proof of Stake consensus algorithm where PoS enables the special features such as InstantSend, PrivateSend, and Username feature.
- Ticker: DASH
- Masternode collateral size: 1000 DASH
- Approximate annual return: 6%
- Where to buy DASH coin: Binance or Coinbase Pro
Energi is the cryptocurrency for world adoption which consists of proof of stake consensus mechanism and masternode, smart contracts, and governing system. Energi self-funding treasury gives confidence of the Energi development and It will ensure the rapid growth of the Energi ecosystem.
- Ticker: NRG
- Masternode collateral size: 10000 NRG
- Approximate annual return: 40%
- Where to buy NRG: Kucoin or Changelly
PIVX is open source, a decentralized blockchain-based cryptocurrency focused on achieving fungibility, transaction privacy, community governance, network scalability, and real-world utilization to become one of the most technically advanced globally-accepted online digital currency.
- Ticker: PIVX
- Masternode collateral size: 10000 PIVX
- Approximate annual return: 9%
- Where to buy PIVX: Binance or Changelly
Zcoin is a privacy-focused cryptocurrency which is used both masternode staking and Proof of Work consensus algorithm. Zcoin operates a multi-node model where Proof of Work nodes verify blockchain transactions and Masternodes store blockchain data.
- Ticker: XZC
- Masternode collateral size: 1000
- Approximate annual return: 15%
- Where to buy XZC: Binance or Changelly
Blocknet is a second layer blockchain interoperability protocol that enables communication, interaction, and exchange between different blockchains. Blocknet also uses both Proof of Work and Masternode staking for facilities different features.
- Ticker: BLOCK
- Masternode collateral size: 5000 BLOCK
- Approximate annual return: 13%
- Where to buy BLOCK: Changelly
Best staking coins wallet and exchange platforms
01. Trust wallets
Trustwallet is Binance’s official wallet which is a multicurrency wallet and supports the few coins staking such as Tezos, Vechain, Tomochain, Calisto, IoTex, and Tron.
02. Huobi wallet
Huobiwallet is multicurrency wallet which owns the Houbi group. It supports staking coins such as ATOM, Ontology, IOST, and IRIS, IoTeX, LOOM, etc.
03. Binance staking
Binance exchange supports staking coins such as QTUM, Algorand, Steller, Komodo, NEO, etc.
Conclusion – What is staking & staking coins
In this guide, you are will know what is staking and best staking coins or cryptocurrency which make passive income for you.
If you can start masternode listed above, it will make passive income monthly basis otherwise staking PoS, DPoS, LPoS coins.
Also, you will know the best staking wallets and service.