Below, we collected the most frequently asked questions about staking and we will answer all of them. Whether you’ve done some staking before or no staking at all, you’ll learn something new. So read on!
Q. What is Cryptocurrency Staking and how to earn using it?
A. Cryptocurrency staking means holding stake-able coins to support the functionality of a blockchain network. I.e. you verify transactions (“seal the blocks”) and sometimes make governance decisions. For doing this, you receive rewards in the form of the coins emitted by the respective blockchain. Hence, some people look at staking as a kind of way to get a passive income by simply storing the specific coins in your account for a particular period of time.
A while ago, we described how to earn with staking on CEX.IO in this article.
Generally, participating in staking requires either running a node or delegating your coins to someone’s node. The former takes cost, time, and a good understanding of how staking works under the hood. The latter can get complex too.
But, with CEX.IO, staking is much easier — all you need to do is to buy the supported for staking crypto or deposit it to your personal account on CEX.IO. We handle the rest! Your staking reward will be added to your balance automatically. No additional actions or technical knowledge are required.
What’s more, some exchanges or staking services lock the staked coins. It means you can’t use them during staking period. At CEX.IO, we don’t lock these funds. You can trade or withdraw them any time you wish. You can earn by staking your coins and trading them at the same time. The reward is calculated exactly until the moment your coins remain in your account.
The more detailed explanation of the staking process and the advantages of CEX.IO Staking are outlined in the article “CEX.IO will Enable Automatic Staking for Clients”.
Staking with CEX.IO is an extremely simple process: you just hold stake-able сoins or tokens and receive a reward. No extra steps or technical knowledge are required.
Q. What coins are suitable for staking?
A. If you want to earn with cryptocurrency staking, it’s important to understand that not all cryptocurrencies support staking. It must be a coin of a blockchain with a specific working principle — Proof-of-Stake (PoS) consensus.
For example, Litecoin (LTC) is a Proof-of-Work (PoW) coin. Hence, it can’t be used for staking. While Cosmos (ATOM) is a Proof-of-Stake coin, thus, it does participate in staking. It’s important to understand this difference.
Therefore, it is worth noting that the criterion of whether or not a coin is suitable for staking does not depend on the platform (an exchange or a staking service). In other words, if a cryptocurrency does not support Proof-of-Stake, it is not possible to stake it.
“But I stake Bitcoin elsewhere!”, you may say. Well, what you do there is not staking. You essentially lend a platform your Bitcoin for an interest, so they can use it to derive income. Though looking similarly, the staking process is very different. But we’ll get to it!
Currently, CEX.IO Staking allows you to stake Cosmos (ATOM), Tezos (XTZ), NEO (GAS), Ontology (ONG), Tron (TRX), MetaHash (MHC), Cardano (ADA), and MATIC and receive rewards.
Q. Can some other assets be converted to a stake-able coin?
A. Some cryptocurrencies are just “good as they are”. For example, you can’t earn from Bitcoin staking, but you can benefit from trading or just holding BTC and waiting for its price growth. If your cryptocurrency portfolio is full of cryptos that do not support CEX.IO Staking, you can exchange some assets for stake-able coins or just buy them for fiat money like USD, EUR, GBP, and RUB.
Everything depends on the coin you want to buy or exchange your money to. But, in most cases, you can exchange almost any cryptocurrency available on CEX.IO to USDT, Bitcoin, USD, and EUR.
Q. Does staking work like a bank deposit? How do they differ?
A. Often people compare staking with bank deposits. They have something in common, but the basic principle of operation is still different.
Banks allow you to earn interest on a savings account. Banks themselves are actually earning on borrowing your deposit money and lending them to other bank clients or investing them in low risk financial instruments. The interest rate that banks give you is their way to compensate you for using your funds.
The concept of staking is a bit different. While staking, you get rewards for delegating your coins for facilitating a blockchain. Whoever you delegate your coins to, will use them one way only – as a “staking power” – which determines a node’s weight in the blockchain’s decision-making process. Be that a governance vote or what transactions get confirmed.
Because some people look at Staking as a form of a deposit, the percentage of staking reward becomes a source of confusion, too. We’ll dive into it a couple questions later, but here’s one important thing. The staking reward percentage is determined in the coins you stake, not in fiat value.
Here’s a simple example. If you deposit $100 in a savings bank account with 10% interest, your deposit will turn into $110 at the end of the year. Very easy.
But what if you have a hypothetical staking cryptocurrency CEXAGON (because why not?) with 10% staking reward. You will also have 110 CEXAGONs if you patiently staked them for the entire year. But here’s a twist! The dollar value of your coins would fluctuate. I.e. if the coin price increased, you are in for double gains: from staking and from cryptocurrency appreciation. So, your 10% staking reward can be a multiple of that in dollar equivalent.
Lastly, your savings interest in a bank often depends on whether you hold your deposit for the entire year. I.e. you either lock your funds and wait or turn them into a checking account and give up the interest. Did we mention that we never lock your staking coins and provide rewards all the way until you decide to sell or transfer them out? Yes we did!
Savings interest and staking rewards, though seem similar, differ by how they are derived.
Q. Why do staking rewards have a minimum coins requirement? What if I hold less coins than required for staking?
A. Limits on the CEX.IO platform are very transparent and understandable. Moreover, the minimum amounts required for staking are not that high, as we tried to establish limits affordable for every user.
As we mentioned before, there are two ways of staking – to open your own node or to use a suitable service. CEX.IO offers a convenient and easy to use automatic staking solution. We take this burden of finding a right node, or setting it up and maintaining it, from your shoulders.
Though you pay nothing upfront for staking, operations are laborious and costly for the platform. So that CEX.IO could maintain the smooth and hassle-free staking process for you, we set minimum staking amounts. Staking is ineffective below these limits. We will not be able to ensure the seamless process for you. If you hold staking coins, but less than the minimum amount, the bonus will not be credited and you will be just holding your asset without a reward.
So get over that limit (literally) and start earning from your stake-able coins like a champ!
Q. How often will I get staking rewards?
A. Rewards are calculated every hour and sent to your account once a month. Soon we plan to send the payouts more frequently.
If you only stored the coins on your account for a portion of a period (we call them “reward sprints”), you’ll still get a proportional reward. So, it’s never late to join!
The rewards are calculated based on the amount of the coins you stored in the account. They also include the coins in open trade orders, which are not yet executed. If the order is executed the reward amount will be adjusted accordingly.
Q. Why does the staking reward differ every month?
Why is the reward not exactly the percentage number I see on the CEX.IO Staking page? Why are rewards sometimes shown as a range?
A. These are probably the most common questions we receive from our customers. So we decided to group them into one block. These queries are quite similar. They also depend on related reasons, and have the same answer.
The “estimated reward” you see on the CEX.IO Staking page is the most likely reward percentage according to our calculations. And it’s not only us who give the approximate numbers, it’s everybody (though they may show them as precise).
The approximation exists because it is impossible to provide a precise number. Why? The rewards represent an outcome on many factors, a lot of which do not depend on the individual staker:
- The network emission, i.e. how many coins are emitted to compensate stakers, can be fixed or vary, according to the network’s protocol.
- The number of stakers and total coins staked can change how much reward a particular participant gets, as the “pie” splits among all.
- The growing staking power of one node (how many coins delegated to it, how strong of servers they run) can diminish the staking power of another node.
- The network governance decisions may sometimes alter the staking rules and principles.
- A node, to cover its expenses, may also change that small piece of total rewards it takes as compensation for the services.
The combination of all of these factors influences the staking rewards amount. That’s the reason your payouts vary and that’s why we display the reward amount as a range, not the exact number. The best thing you can do? Read individual white papers to understand how staking works for specific networks and how staking participants affect the rewards distribution. A step further, get an idea of the current state of staking for a specific network you like:
- blockchain’s token economics and coins emission
- the number of users and stakeholders
- total amount of coins staked on the network
- the amount of coins the validator is staking
- period of time when the validator has been actively staking
The reward for staking differs from coin to coin. For example, between MHC has 20% estimated annual yield and Atom around 8-9%. And deciding on which coins to stake, a larger percentage reward does not always mean a better coin. Remember, your rewards are in specific coins and each coin price changes while you stake.
Q. The “Earnings Calculator” on CEX.IO Staking page. How does it work?
To see your staking reward, choose a coin which you are staking (or going to stake) and select the number of coins you have (or planning to). We will automatically calculate the estimated earnings you can get for staking this coin with CEX.IO.
The “Estimated annual yield” reflects the most probable percentage of reward you’ll get for a year. However, since a staking reward depends on many factors, the percentage may change within time. Remember that payout amounts are not fixed!
The “Daily earnings” shows the estimated amount of gain that “accrue” for the day of staking the specific coin. It is determined by the quantity of assets in the hold.
It is important to understand that you’ll be receiving your staking reward once a month — on a specific date. It’s not the daily payout mode. For your convenience, you have the payout date right on your dashboard.
Even though the Earnings Calculator shows an estimated amount of staking rewards, it helps you get an idea of possible income and plan your portfolio as well as trading activities.
For a while, staking rewards would just arrive to a user’s account in a dedicated transaction on the Finance page. Yet, we do know how important it is to manage your expectations and understand what rewards you are in by the end of a reward sprint.
So we (quietly) introduced a Staking Dashboard where you can monitor your rewards accruing to you in a live mode! While this is still work in progress, for now, you can log into your dashboard from the Staking Page
- the prices of the stake-able coins in US Dollars;
- estimated annual yield (EAY);
- your balance in these coins;
- your shares (essentially, a representation of your staking power for the period);
- the amount earned for each of the coins you stake in this reward sprint.
Also, there you will see the day of the next reward settlement.
For your convenience, you can see your portfolio structure in the ratio of coins.
Expect the Dashboard to evolve into the real control center for your staking operations. We are certainly excited for it.
Today, the number of coins that support staking is growing. Even blockchains with other consensus algorithms are moving towards supporting PoS in the future (ETH for example). Hence, the number of people interested in staking is also increasing significantly.
The CEX.IO team has made a lot of efforts to make the staking process as simple and hassle-free as possible. Your questions help us gauge your interest and understand what matters to you the most. This knowledge is what allows us to continuously improve our products for you.