Staking is a good alternative to bank deposits and investments in securities. It’s an opportunity to make money on cryptocurrency without trading, just storing it. Let’s see if this is true with the example of Binance staking.
Staking can be done independently or through a pool. To do it on your own, you need to start a Staking Node.
Launching a Staking Node is an event comparable to launching a Master Node: you need to freeze a minimum amount of money in a node for its launch, rent a VPS and configure the software. At the same time, if the master node gives a stable reward, then the betting node does not give a guaranteed income, it is partly a lottery – the more coins in the node and the longer they are stored, the higher the chance to get the reward.
That’s why pools are very popular in staking, as opposed to masternodes. There are a lot of pools, their list, as well as the list of currencies for staking can be found at https://www.stakingrewards.com. Data on yields and commissions of pools on the site does not always correspond to reality. But as a general guide to pools and currencies for staking, it will do quite well.
We will select Binance from the entire list of pools. The reasons are simple:
- The most liquid cryptocurrency exchange (according to coinmarketcap.com)
- Offers a lot of currencies for staking
- No commissions for staking
- No need to deal with additional software settings
You can buy crypto for staking either for fiat or other cryptocurrency. You can even bring your existing crypto into an exchange and start staking with it. To enter fiat you need to be verified on the exchange, but you don’t need to do it when entering cryptocurrency.
What you can stake on Binance
Binance offers three types of staking: Locked Staking, Flexible Staking (the exchange no longer offers this service) and Defi Staking. We will consider each of them in detail.
This is a type of staking where the exchange locks the user’s funds for a specified period of time. The blocked cryptocurrency will not be allowed to move or make transactions with it.
Funds can be blocked for a period of 7 to 90 days, the longer the period, the higher the rate of return.
After blocking the funds, they disappear from the main wallet and are displayed in the tab “Deposit account”. There is also a button in the tab that allows you to exit the project early. If you exit early, the exchange unlocks the funds, but the interest earned will not be paid. If you meet the storage period, the exchange guarantees the payment of the declared fixed interest.
(This product no longer exists on Binance, with an increased number of cryptocurrencies available for Locked Staking and for Floating Rate Deposits)
Represents staking with a flexible term of locked coins and a floating rate of reward. That is, you can engage in staking without locking your funds for a long time, essentially just keeping them in your exchange account.
Interest is calculated daily and paid once a month on a certain date. The calculation is based on daily snapshots by the exchange of the balance of the wallet of the user. To receive remuneration, the minimum period of storage of funds without movement is equal to 24 hours.
How remuneration is calculated for each cryptocurrency:
The user’s daily reward = the daily total reward received by Binance * the user’s position coefficient for that currency.
The user’s position coefficient for that currency = the number of coins held by the user / the total number of coins of that crypto held by Binance.
Simply put, the amount of reward is proportional to the user’s share of Binance’s staking node for that cryptocurrency.
This is participation in Binance’s pool for investing in DeFi projects. Binance provides 13 types of Defi Staking. The main ones available at the moment are DYDX, AAVE, BNB, USDT, BUSD.
The entry threshold is low, the topic of DeFi is not completely clear, and staking on DeFi at all. In addition, Binance, seems to guarantee the declared percentage of profitability, but writes: “…Binance does not take responsibility for possible losses associated with the safety of on-chain contracts.
Deposits on Binance
As an alternative to staking, you can deposit funds. There are floating rate deposits and fixed rate deposits.
Binance provides 10 fixed rate deposits. Investments in them are similar to LockedStaking.
And there are about 140 floating rate deposits.
Floating rate deposits are similar to Flexible Staking, with the following differences:
- Different composition of cryptocurrencies
- No minimum entry threshold
- The percentage of income is lower
- Remuneration is calculated and accrued daily
From an investor’s perspective, in terms of income and investment mechanism, staking can be compared to a bank deposit or the purchase of securities to receive dividends. Like them, staking has a low entry threshold for investments. That said, a significant plus is the simple investment procedure and flexible holding periods, and the high frequency of interest payments.
With all of these pluses, it is important to remember that all interest returns are stated and paid in the cryptocurrency that we are staking. That is, if BNB and TRON are in staking, then the interest is paid in BNB and TRON, respectively. The exchange rate value of the crypto will change during the time of staking and one can make both additional profit from its growth and suffer losses from its decline.
Therefore, when choosing a cryptocurrency for investment, one should take into account not only the expected rate of return, but also its general state: the level of capitalization, the dynamics of price changes, community activity, etc.