As investors, we always look for opportunities to grow our portfolios. And regardless of the investment, we often keep part of the funds in cash. Maybe you’re taking profits, or you’re reserving for the next dip.
Still, it’s unused capital that could be earning ROI somewhere else.
If you want to max out your gains, why not put that money to work? What if you could store crypto with the similar security of a bank? It’s called staking, and it yields about ten times more than traditional banks.
And you don’t need any financial background to get +10% APY. It’s available to anyone who wants to use it.
What Does Staking Mean In Crypto?
In blockchain, staking is a feature exclusive to cryptos that use the PoS consensus model (proof-of-stake). Users get paid to secure the network by locking their tokens. And unlike lending, you’re guaranteed to get back your amount and earnings (in crypto, hence the price risk).
In exchanges, staking refers to all rewards you can earn regularly, including non-PoS tokens. Which might include fiat interest, inflation rewards, or liquidity-pool tokens.
Furthermore, some NFTs are adding staking to improve holders’ loyalty. So you might buy a CyberKong and earn 10 daily tokens on their currency.
In practice, staking means the investor earns variable rewards in crypto. The APY updates constantly just like the price, and the more people stake, the lower rewards will be. So staking is a short-term strategy.
How Does Crypto Staking Work?
If you never staked before, the easiest way to start is with exchange staking (AKA delegated stake):
- Find an exchange that supports staking (check the four platforms below)
- Buy the coin and find the stake option
- Choose the amount and lock period to start staking immediately
Behind the scenes, it’s not that simple:
- PoS involves validators to verify transactions
- Users choose validator users based on their stake, history length, and responsiveness.
- Validators earn block rewards for their, which they then distribute among users.
The exchange might be a validator, and by staking with them, you’re indirectly choosing. Each validator can choose how much to distribute, which is why all exchanges have different APYs. Doing it yourself would require $10K+ and technical knowledge, so exchanges are the most accessible option.
Best Coins To Stake?
There are no APY guarantees when staking. And because of locking periods, you need to think long-term to manage the price risk. So what would the ideal coin look like?
- A promising coin you don’t mind holding (e.g., $10K is possible for ETH, $100+ for DOT, ~$200 for LUNA)
- A big market cap for lower volatility (e.g., ETH, SOL, CRO)
- Coins below the staking target (e.g., DOT, 54% of 75%)
Here are some safe choices:
DOT yields up to 14% on exchanges like Binance, Kraken, and Nexo. Most of these allow flexible staking in case you need your tokens somewhere else. But you still have to respect the lock periods to keep the rewards.
PolkaDot is still hard to find among platforms, most of which offer ~10%. But now with parachain auctions and 2022 projections, it’s hard to lose on price.
Ethereum 2.0. ~6.5%
Unless you have 32ETH+ to earn 8.5% (as a validator), you can still get 6.5% APY. Buy Ethereum, stake in the exchange, and collect interest every few days.
This 2022, there are over $160 billion worth of Ethereum staked (versus $16B last year). So you can expect consistent rates, or higher (if the volume reduces).
Since AVAX crossed $100, staking has become attractive for investors:
- Earn 8% via locked staking or liquidity investing
- Earn 0.50% as a savings account on Binance
- Earn up to 17% APY staking on Nexo.io
DeFi makes it possible to earn from stablecoins like USDT. Compare that to the yearly 1% APY you get on savings accounts (or ~2% when lending). Here, you get 5% APY with flexible locking periods.
Regardless of inflation, even Canadians can benefit from Tether Staking (e.g., as an exit strategy).
Best Staking Platforms In Canada
Surprisingly, none of the major Canadian exchanges offer Staking in 2021. The most you can find are liquidity pools and crypto loans. None of them are exclusive to Canada.
Instead, here are the Top worldwide platforms for staking (and trading):
#1 Crypto.com: Best All-Around Platform
Crypto.com started as a crypto-card service. And this 2021, it has silently outperformed the Top 10 most traded coins. Their users get ~12% APY, cashback rewards, and loyalty bonuses in CRO.
It pays off to trade with Crypto.com, as the token went from $0.06 to $0.90 this 2021 (~$0.60 now).
To stake, you go to Products on the main page, then DeFi, and Earn. It sends you to the app (Crypto is mobile-based for most features):
- From the app, go to Accounts > Crypto Earn > Start Earning Now
- Choose the coin, term, and amount
- Preview, confirm, and start staking
Heads up: Some tokens have higher minimum amounts, such as Crypto.com (5,000 CRO, ~$2.5K) and Ethereum (0.15ETH, ~$600). But most coins will require <$50.
#2 Kraken: The Most Secure
Along with KuCoin, many consider Kraken the best Binance alternative. Almost 100 coins to trade and up to 0.28% in fees. Users can now stake crypto as well:
- (Delegation) Staking: Earn 4–20% RPY on 12 coins (0.25% on Bitcoin)
- (DOT) Parachain Slot Auctions: Earn rewards by crowd-funding a project. If it doesn’t win the auction, you get your staking amount back within days. If it does, it stakes for up to two years (yielding rewards with the new token)
You’ll need a verified account for Parachains. But if you just want the classic staking, all you need is to open an account and set up the 2FA code. You then transfer the coins you want to stake (or buy them) and go to Kraken Earn:
- Sign in to Kraken or click on My Account on the top right corner
- A new menu appears on the top, where you click on Earn
- Find your coin in the table and click on Stake where the Actions column
You can select the token amount and preview the order. When you confirm, it will stake and show your rewards compounding in real-time. And if you don’t have the coin, you’ll appear in the Deposit/Buy window instead.
While Kraken doesn’t mention lock-up periods, rewards are only available 1–2 times per week. The RPY includes the 15% staking fee, so what you see is what you get.
#3 Binance: Highest APY
For traders and yield farmers, Binance offers dozens of functions within one platform. P2P trading, swap farming, fan tokens, parachain auctions, futures, loans, VISA cards, NFT marketplace, liquidity pools. Also staking, called Binance Earn.
To find it, go to Top Menu > Finance > Binance Earn
It’s called Earn rather than “Binance Stake” because of the many ways to earn passive crypto. Binance supports locked staking, parachains auctions, launch polls, dual investments, the “vault,” auto-investing (see DCA), and high-yield staking.
If you want the simplest option, here are the steps:
- Find the coin you want to stake on the list. As for November 2021, there are +78 locked-staking and +11 defi-staking options. Find it on Binance Earn before you buy the coin.
- If you do, buy or send the coin to Binance Wallet
- Click on Stake and enter the amount
- Confirm to start staking that same day
- Track your rewards and Unstake when convenient
Binance Earn fits for both Hodlers and short-term traders as there are fixed and flexible savings plans.
The first type will lock your principal while offering higher yields. If you stake long-term, coins like ETH 2.0. can yield 5% to 20%. For the second one, it’s 5% to 15% APY (and up to 90% if it’s high-yield).
Flexible staking has no lock periods, but payout timing still applies. Even though Binance credits rewards every day, each network has a different distribution date. If you unstake before that time, you may lose up to seven days worth of rewards.
So if you want to stake dozens of coins with 0% fees, plus countless features, Binance can’t be ignored.
#4 Celsius Network: The Most Accessible
It’s surprising so few know about the Celsius DeFi Network. It’s available worldwide, has no fees, and offers almost 60 coins to stake. Some of which you can’t find on Binance.
Only verified accounts can earn on Celsius. Once you do:
- Go to Dashboard > Weekly Reward Rates to find your coin
- Buy/Send the token to Celsius
- Click on the coin, which will appear in the dashboard on the right
- Click on stake, enter the amount, and confirm
The downside? It only yields 2% to 10% per year and distributes rewards every Monday. If you aim for +15%, here are some quick fixes:
- Celsius rewards: You get up to 25% more rewards when holding the platform’s token (CEL).
- Celsius Loans: Besides staking, you can borrow crypto as well. You can boost staking rewards by reinvesting your loan. Assuming a reasonable interest and deadline, it’s less risky than leveraged lending.
Celsius launched in 2017 with the vision to replace banks. It’s available in +150 countries (limited features in the US) and its token trades over $5M per day. It’s a defi-only platform with no exchange, which limits the listing of new coins.
Ironically, the best selling point is the 10% APY on stablecoins. So if you want to hold dollars in crypto, Celsius easily beats the 0.50% on traditional savings accounts.
Is Staking Crypto Worth It?
If you can’t decide between holding and dollar-cost averaging, staking is the middle option. It works like recurrent buy orders, except you don’t pay anything. It’s also the safest strategy for yield farmers.
If you want an additional stream of passive income, staking might be for you. If you prefer more risk-reward, there are better options (liquidity mining, leveraged lending). Still, staking makes a great complementary tool to profit from idle crypto.
Q: How Is Crypto Staking Taxed in Canada?
At least in regulated platforms, the Canada Revenue Agency can request user trading history from exchanges. So whether you’re paying or not, it’s worth learning tax just in case.
Staking rewards qualify as business income, and they contribute to your income tax bracket.
Example: In 2021, the CRA taxes 15% for the first $49,020 in annual taxable income. If you earn $49,020 (e.g., from a job), your staking APY would fall in the 20.5% range.
You can learn more about crypto taxes in Canada on Koinly.
Q: When Can I Unlock My Funds?
Exchanges have enough liquidity to let you unstake anytime. But if you want the best rewards, you’ll have to select locked staking and wait for the rewards. Many exchanges distribute them daily, but they only credit to your account once/twice a month.
Another restriction: you need a minimum balance to generate APY. So if the exchange requires 3 DOT and you stake 2, you don’t get rewards. If your balance falls below the minimum before the payment, you might lose the yield too.
Each platform has different rules, so document yourself before investing. Here’s Coinbase Earn as an example.
Q: What Coin/Platform Has the Highest APY?
Polkadot in Binance. And if you look for other rewards besides staking, Axie Infinity (AXS, 100%+ APY). At least in 2021.
Depending on the market, the answer to this question will change. Crypto investing is about competition. So as soon as there’s a “best way” to make money, it’s a matter of time before it stops working. The only way to earn the APY is by regularly watching these platforms.