Old School Crypto Staking For High Yield
Easier For Most Investors Than New Restaking Craze
Cryptocurrency investors should consider staking at least one of their coins, taking the yield, and letting it ride. For retail investors, staking is like locking up money in a high-risk investment for the promise of interest payments over a lock-up period. Staking is very much like private equity or bank CDs, but with a higher risk. Staked crypto can lose up to 90% of its value in a year.
Staking is best suited for long-term crypto investors, not active traders. Keeping some of those coins tied up through staking, or even the new trend of restaking, can help put that digital money to work.
“The primary difference lies in what's being held and where. In staking, you're holding cryptocurrency in a digital wallet or a staking pool, not a bank, and participating in the economic and security operations of a blockchain network rather than just saving money,” said Dheeraj Borra, co-founder of Kelp DAO.
Staking involves a consensus method known as proof-of-stake, which some blockchains use to verify new data. Participants, or validators, purchase and lock away their coins to keep the blockchain active and secure.
Sort Of Like The Crypto Junk Bond Market
Staking is somewhat like the crypto version of the junk bond market: high-risk investments with the promise of high payouts. Some of the biggest yields in the market currently are:
- Injective Protocol: 19.14%
- Casper Network: 12.42%
- Kusama: 11.81%
- Polkadot: 11.50%
- SKALE Network: 11.45%
- Avalanche: 8.02%
- Tezos: 5.89%
“Investors don't have to specify how long they'll stake their tokens. You can stake for as long as you want. There's no penalty for early withdrawal, though there may be a delay in getting your tokens back,” said Xiaohan Zhu, co-founder of Sumer.money.
The “New Staking”, Best Known As Restaking
Restaking allows investors to stake the same tokens on multiple blockchains, offering higher yields for undertaking this multi-chain risk. Restaking is a more advanced concept pioneered by the startup EigenLayer.
Restakers hold Liquid Restaking Tokens (LRT). Many new projects are exploring the best ways to use restaking, and investors are looking for more yield for the risk.
“It all just started last year as more Ethereum holders sought stable returns,” said Zhu.
The biggest restaking crypto is Lido Staked ETH, with a current market cap of roughly $33 billion but an APY of just 3.3%.
“Restaking is our core business at the moment and during the last two years we had around 50 grantees we allocated just under $3 million to build various applications and tooling for our network,” said Alon Muroch, founder of SSV Labs.
EigenLayer enables ETH holders to re-stake their tokens on blockchains other than Ethereum, for additional rewards. If an investor staked $100 of ETH for 10 years at a rate of 5%, they would have $127. But if they re-staked it across two protocols at the same rate, they would have $154.
The writer of this article stakes Polkadot and used to stake Algorand, but sold that position last year.
