Earn Interest on Crypto: A Beginner’s Guide to Staking

Interest in the possibilities of cryptocurrency is growing every year, but not all people have sufficient knowledge to conduct various financial transactions with it. However, having a certain amount of crypto can be an excellent source of passive income, in which the original amount is not only preserved intact but also grows due to interest accrual. You can successfully earn interest on crypto if you use staking and crypto savings accounts.

What is staking and how does it work

Staking is the process of receiving passive income from cryptocurrency, a certain amount of which is fixed in an account or wallet. Interest accrual is possible using the Proof of Stake mechanism — proof of ownership. PoS protects investments from third parties and errors in the provision of data.

When the owner of the funds sends part of the cryptocurrency to the wallet and uses the blockchain that applies the Proof of Stake algorithm, interest is accrued on the deposited amount — a reward for maintaining the functioning of the system. The level of profitability of the process can vary from 2 to 24% per year, depending on some conditions.

Staking & crypto lending platforms

You can use staking and crypto savings accounts to receive additional passive income on the following platforms:

• Cryptocurrency Exchanges — an option more suitable for advanced users. It carries a certain amount of risk since cryptocurrency exchanges are a frequent target for hackers. However, the percentage of accruals on the exchange will be quite high.

• Staking Platforms. They must be chosen carefully, based on good results and ratings.

• Hardware Wallets, reminiscent of flash drives. This method is suitable for beginners in the staking field since it provides a higher level of protection from outsiders.

The main condition for receiving profit from staking is the constant presence of cryptocurrency at a certain address. When moving funds, interest accrual will stop. Also, some types of blockchains require a minimum amount. If the number of crypto coins is below the established norm, staking will not work.

Types of staking & crypto savings accounts

Those who are just starting to use staking to receive passive income from cryptocurrency deposits need to choose the simplest and most understandable options, and then, if desired, move from simple to complex. Existing types of staking and crypto savings accounts are related to the storage location and type of deposit.

By storage location

Depending on the platform used, staking is divided into the following types:

• Technical. This staking option requires not only significant knowledge, experience, and training, but also special equipment, as well as handling large volumes of cryptocurrency. It is not suitable for beginners.

• Exchange, in which money is used by crypto exchanges, and a reward is paid for blocked deposits. This is a simpler and more accessible type of staking.

• DeFi. Cryptocurrency is frozen to ensure the operation of a specific entity, for example, a crypto exchanger. It offers high returns and a level of protection from fraudsters. Interest is calculated automatically.

When choosing a storage location, you need to evaluate all the pros and cons of each available option.

By deposit type

Cryptocurrency for staking can be provided for a certain period or indefinitely. The first option brings a higher percentage per annum, but you cannot touch the funds during the entire blocking period. In the second option, interest accrual is not limited to a certain time, and the owner can manage his finances. Accrual will stop after the withdrawal, exchange, or sale of crypto.