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Revolut has launched its cryptocurrency staking service. Their official website reads:
“Currently, we support staking for Ethereum (ETH), Cardano (ADA), Polkadot (DOT), and Tezos (XTZ). We’re working hard to support more crypto tokens in the future, so stay tuned! Our XTZ staking product is Powered by TzKT API.”
The initiative has not yet been promoted extensively, and was revealed only yesterday by altfi.
For now it is limited to ETH, ADA, DOT and XTZ, although in the future the cryptocurrencies that can be staked on Revolut may increase.
Crypto staking and how it works
Strictly speaking, crypto staking is the locking of tokens on a validator node of a Proof-of-Stake (PoS)-based blockchain. Indeed, validator nodes in order to validate blocks with PoS need to have locked a certain number of tokens (for example, 32 for ETH), so PoS-based blockchains must mandatorily have validator nodes with many tokens staked.
For example, currently on Ethereum’s new Beacon Chain there are almost 16.4 million ETH in staking, or more than 13.5% of all existing ETH.
The thing is that those who stake their tokens are being rewarded with a return paid in the same currency, thanks to the distribution of transaction fees and eventually the creation of new tokens. Right now for example the APR for ETH staking is 4.9%, so if it were to remain fixed for 12 months it would allow for a 4.9% increase in ETH staked.
A large number of exchanges offer staking, which means that they offer the ability for their users to stake tokens on nodes operated by the exchange or exchange partners. So far, Revolut did not yet offer this opportunity, but thanks to the TzKT API it now does.
Crypto staking on Revolut
Revolut on its website writes that cryptocurrency staking offers the opportunity to earn rewards in exchange for owning certain tokens on Revolut. Earning these rewards is easy, because all you need to do is accept the terms to activate the staking service, and send your tokens to the service itself.
The service is actually based on a third-party provider, so it carries some risks. In addition to those related to the blockchain on which the tokens are based, there are also those related to the service provider, which is not Revolut.
As far as ETH staked on Revolut are concerned, these are actually sent to the validator, while other cryptocurrencies remain on wallets owned by Revolut.
ETH placed in staking cannot be unlocked or withdrawn until the Shanghai update, which is expected next month, is implemented. Other tokens, on the other hand, can be unlocked right now, although unlocking is not necessarily instantaneous.
In order to withdraw tokens placed in staking, they will still need to be unlocked first.
Revolut has also imposed a minimum number of tokens that can be staked. This limit varies depending on the cryptocurrency, but it is very low.
How it works with crypto fees on Revolut staking
The company has decided to charge a fee on the returns earned from staking. This commission is 15% on the gains obtained with ETH, 20% for Cardano, 25% for Polkadot and 30% for Tezos. The APY displayed to users are already net of these fees, as are the returns actually paid by Revolut on staking. For this reason they will appear lower than the official ones.
Finally, Revolut warns its users that they may have to pay taxes on these returns, and that the company is not responsible for making these payments. The taxation regime for crypto staking income varies from state to state, so it is necessary to be well informed so as to avoid unpleasant surprises in the future.
It is worth noting that Revolut has about 25 million customers worldwide, but the vast majority are concentrated in the United Kingdom and the European Union. It has been offering crypto services for several years now, even though it is not a company specializing in crypto services but a digital bank.
Banks and crypto
Digital banks like Revolut have given a very strong innovative push to this very traditional industry.
Indeed, for example, there are still very few traditional banks offering crypto services, and probably none that offer staking.
By contrast, the new digital banks from the very beginning wanted to add cryptocurrency-related services to their services, partly because they are targeting consumers who are generally much more interested in financial innovations than traditional ones.
The fact is that it is not easy for a truly regulated bank to offer crypto services with compatible levels of security that it is obliged to comply with. However, innovative digital banks like Revolut have preferred a strategy that is perhaps more difficult to carry out in total security, but more able to meet the needs and desires of younger targets.
Banks and crypto: a difficult relationship
The relationship between banks and cryptocurrencies is still complicated, mainly for two reasons.
The first is precisely that of security, since for many banks it is too risky to offer crypto services to customers who demand almost absolute certainty and security. While there really are no such things in the financial field, the need of traditional banking customers in this respect is so deep and ingrained that many banks prefer not to even want to take the risk of giving the idea that they are willing to venture into this area.
The second reason, on the other hand, is cultural, seeing that cryptocurrencies are for all intents and purposes a direct challenge to the very world of banking, which is centralized, trusted and not at all disintermediated. Indeed, true cryptocurrencies are decentralized, trustless and disintermediated, thus offering users a completely different alternative to what banks offer.
For this reason, the traditional banking world sees the crypto sector as a kind of rival, if not even a would-be aggressor. Furthermore, this conflict is mutual, so there is no good blood at all between the crypto sector and the traditional banking world.
Digital banks like Revolut act as a conduit, because they have their roots in both worlds. They could turn out to be a real bridge that not only connects these two worlds that are still so far apart, but in the long run could bring them so close together that many of the barriers that currently keep them apart, especially at the cultural level, fall away.
Then again, it is no mystery that younger segments of the adult population in developed countries prefer the new digital banks to the old traditional banking services, so much so that it is only a matter of time before crypto services make their way en masse into the entire banking system.