Cryptocurrencies have quickly emerged as a new asset class to utilize as an investment or speculation. Knowing you can stake your crypto to increase the value of your holdings is essential if you want to use your current coins wisely.
What Is Staking Crypto?
One of the methods used to secure a cryptocurrency blockchain is Proof of Work (PoW). Several individuals with specialized mining equipment use it to help verify transactions on the blockchain.
Another method used to provide effectiveness and security to the blockchain is Proof of Stake (PoS). If you’re helping the network by utilizing this method, the cryptocurrency coins you stake help confirm transactions. Doing so allows you to get rewarded for your contribution.
Utilizing this method is an excellent way for you to earn passive income with the coins you’re holding and not have to worry about purchasing or maintaining the mining equipment.
According to the financial experts at SoFi, “It may be helpful to think of crypto staking as similar to depositing cash in a savings account. The depositor earns interest on their money while it’s in the bank, as a reward from the bank, who uses the money for other purposes (lending, etc.).”
Here are five benefits you can receive by staking crypto:
1. Earning Passive Income
If you’re investing or speculating in specific cryptocurrencies, like Ethereum, it can benefit your portfolio’s value by staking crypto with SoFi. Instead of holding your coins in a digital wallet and waiting for them to go up in price, you can stake your coins and receive a small percentage back regularly. You’ll receive rewards when you help the network stay secure and complete transactions.
2. Avoiding the Purchase of Expensive Mining Hardware
Staking crypto with SoFi only requires you to buy specific coins and hold them in your digital wallet. Taking this action is easy and inexpensive compared to mining.
However, if you choose to mine cryptocurrencies, you’ll have to purchase ASICS or several video cards, keep them in a cool area and maintain them regularly. Paying for this type of hardware can be expensive, especially if you choose high-end video cards, costing $1500-$2000. Staking lets you avoid this hassle and still make passive income.
3. Putting Your Money to Work
Working a job is one way to earn an income. However, letting the money you’ve earned by working sit in a bank account may not be productive. Taking your earned funds and staking them can put money to work and earn you extra income. Why let your funds sit idle when you can have them increase in value with little effort?
4. Receiving Guaranteed Returns
Purchasing cryptocurrency places you in a volatile market. If you purchase a coin and it goes down in price, you’ll lose the value you initially put into the investment. Speculating or investing in crypto typically requires dollar-cost averaging to ensure you avoid this unwanted consequence.
While you’re accumulating coins, you can get a guaranteed return by staking crypto with SoFi, making it highly beneficial to own specific coins.
5. Diversifying Your Portfolio
Reducing risk by staking cryptocurrencies is an excellent way to diversify your portfolio. You can use it alongside real estate, stock market, or similar investments.
Earning money with a job and then watching your funds grow in value using this method is an excellent way to keep the assets you have working for you positively.
Getting involved in staking can be an excellent way to diversify your portfolio, earn extra income and get a guaranteed return.