Earn Passive Income By Just Holding CryptoMar 09, 2022
If you were born before the year 1980 you may remember a time when leaving your cash in a bank account actually earned you money.
However, in today's times, the cash you leave in your account is literally losing money every single day. This is because the interest rate that the bank pays you is so close to 0 that it earns essentially nothing. Factor in the effects of inflation and you're literally losing money by keeping it there.
Normally the most logical thing to do would be to stick your cash in some sort of low-risk appreciating asset.
But in today's times, everything seems to be on fire. Before you even get to learn “how do I invest in stocks”, you get to hear news saying that the stock market is crashing, rates are rising, and inflation is spiking -- leaving many investors wondering where to put their money.
So in today's analysis, we are going to explore one potential option (we will release more options throughout this week and next).
But for today, we are going to focus on something called staking. So, what does staking crypto mean? Let's get into it below:
How Staking Works:
If you've been with us for a bit, this may sound familiar.
This is because we've discussed forms of staking in other analyses (see it here).
We won't get into the nitty-gritty details here on staking (if you want to learn more, just click the link above), but the summary of staking service is below.
Crypto staking is essentially the process of staking (aka locking up) your crypto holdings in order to get paid staking rewards (aka interest). This is essentially what happens at a bank. You give them your cash and they pay you interest. But in the crypto world, instead of getting paid by the bank you're getting paid by the blockchain. The reason this happens is because blockchains exist to verify and publish a record of transactions. In proof of stake (Read more on PoS here) blockchains, users need to stake their crypto in order to verify the transaction on the network. So in exchange for staking your crypto, these blockchains pay you staking rewards in order to incentivize you not to move or sell your crypto on their network. When staking, there is little risk associated with the actual mechanism. The only real risk you are actually bearing is the price of the coin dropping substantially as you're getting paid in a non-stable digital asset vs. getting paid in USD or some other currency at your local bank. While there any plenty of criticisms in getting paid in fiat, given it is constantly debased (aka inflated), the relative value stays constant (1 USD always equals 1 USD).
And now that you're caught up on what staking is, the reason we're discussing it today is because staking is a great place to park your crypto or other assets during this time of extreme volatility, especially when you don’t have any interest bearing crypto accounts.
This entire analysis is taken from the perspective that crypto will rebound. If crypto plummets and never rebounds then the value of the reward from which you stake, will continue to decline.
But if you're holding crypto over a long period of time this is a great way to accumulate more crypto that will eventually recover in price.
And so when we analyze which crypto coin have the best staking opportunities, we do so from two perspectives:
The first and most important perspective is the outlook for the coin. If we don't believe in the coin over the long term, then as we mentioned above, there isn't much of a reason to get paid in a depreciating crypto asset.
The second perspective is the mechanisms of the staking itself. In this example we're looking at:
The minimum stake: This the base amount you need to stake in order to get paid the rewards.
The lockup period: The lockup period is the amount of time that you must stake for, before getting paid rewards by the blockchain.
The slashing risk: The slashing risk is the risk you take if you do not adhere to the coin's staking rules. If you do not obey the staking rules, then you run the risk of having some of your coins "destroyed".
Annual Interest: This is the amount of interest you can expect to get paid from the coin each year. For example, if the interest is 10% and you hold 10 ETH coins, then you should get paid 1 ETH coin per year.
Therefore the coins below are all analyzed under these two key perspectives. Not only do they all have upside potential in terms of the price per coin, but their mechanics also favor investors the best.
Top Crypto Staking Coins:
1) Avalanche ($AVAX):
As we mentioned last time we wrote this coin up, Avalanche has huge potential for 2022 and beyond. This is because Avalanche is:
Faster than most other blockchains
Has great security
Is low cost
And is eco-friendly
They've also gotten massive investment from VC's and are using that money to expand their network faster than most others can even dream of.
At a 9% annual yield and minimum stake of 25 $AVAX (~$1,800) for 14 days, this coin has a high barrier to entry for many investors. But the high barrier of entry ensures good actors and that is why there is no risk of slashing on their network.
And when looking at the chart above you can see that the uptrend is one of the strongest alt-coins out there. While this is definitely high risk in general, it is the lowest risk of the coins on this list.
Here is the link to the Avalanche wallet where you can stake directly: see it here
And here is more info on how to stake in $AVAX directly: here
2) Cosmos ($ATOM):
Next on the list is a new coin that we have not covered before and that coin is called Cosmos.
Cosmos mission is to deliver on interoperability -- which is the future of crypto. If this sounds familiar it is because Polkadot is trying to do something similar.
The reason we have not put Polkadot here though is because similar to AVAX, the minimum for many investors is too high. Therefore we're chosen to put Cosmos on this list given their is no minimum investment.
The reason we like Cosmos though is largely due to what they've already built. This includes:
- Their SDK (software development kit). This SDK can be used to create blockchains from the ground up in just a matter of weeks. And what you may not realize is that BinanceCoin and Terra used their SDK to create their own coins!
- The next is their verification process called Tenderment. Cosmos verification method allows them to process up to 10,000 transactions per second.
But outside of the future of the coin, the cryptocurrency staking mechanics are very favorable as well.
While there is a 21 day lock up period, the coin yields 12%, has no minimum, and has no slashing. While this does come with more risk than $AVAX, the upside potential is higher because the coin is valued at a much lower level.
On top of this, by owning Cosmos, you'll get airdrops from other cryptocurrencies too!
3) Harmony One ($ONE):
Harmony One is another coin we've long been fans of too.
Harmony is another Ethereum alternative and is going straight up against Avalanche too.
While this coin is in a very crowded space, the Harmony team was able to combine the best elements of the top cryptos! But this project is still extremely young and is very early stage.
This is the most risky pick on the list but also comes with the most upside on price.
Right now the Harmony staking reward is 7.5% and you need to stake a minimum of 1,000 $ONE tokens (~$130). There is just a one-day lock-up period and the slashing penalty is very low.
Bonus: Algorand ($ALGO):
As a bonus, we're giving you a 4th coin to stake and that is Algorand.
$ALGO is one of the few crypto projects with massive long-term potential. And this is because they have a lot of connections with institutions globally.
While we can't comment on this directly, Algorand is rumored to be chosen by the Fed to build the US's digital currency. If this were to happen this would be huge for their price!
But similar to Harmony, Algorand is still very early stage and has significant risk associated with the price of the crypto coin itself.
But when looking at the cryptocurrency staking directly we see that their reward is relatively low at only 3% a year but has no minimum stake, no slashing, and no lock-up period.
But if you participate in their governance process you can actually get your yield up to 10% a year!
While the chart above looks poor, this was largely due to selling pressure that ended at the end of 2021. Therefore the long-term stability of the project is now more intact than ever.