Staking is an important concept that works well among proof-of-stake (PoS) blockchain projects. It is one of the several ways in which people make money in the cryptocurrencies industry. In this article, we will look at some of the best cryptocurrencies to stake in 2022.
What is staking?
It is vital to look at the main difference between PoS and proof-of-work (PoW) blockchains to understand what staking is.
PoW blockchains use mining or solving complicated mathematical calculations to generate new coins and verify transactions. As a result, the technology is widely known for its inefficiency, slow speeds, and high costs. Examples of cryptocurrencies that use PoW are Kadena, Bitcoin, Litecoin, and Monero.
PoS blockchain, on the other hand, uses a group of people known as validators to verify transactions and run nodes. These people must have a stake in the network in the form of owning a certain amount of the token.
Staking is a process where anyone can participate in a proof-of-stake network by providing their coins to validators through an exchange. As a result, the holders of these coins will be rewarded a certain amount of interest.
A common question is where these rewards come from. While most blockchains are different, the most popular source of these rewards is from the transaction fees that the network charges and from newly minted coins.
Another common issue about staking is that it leads to inflation by increasing supplies of a coin. This challenge is usually solved through the concept of burning, which reduces supply by locking a certain amount of coins in an unopenable vault.
How to stake cryptocurrencies
The process of staking cryptocurrencies is relatively easy. In most cases, you just need to have an account with a broker or exchange that provides staking services. After this, you should select the coin to stake and then make a deposit.
After doing that, you will be receiving your staking rewards every month. However, wise stakers should do more to ensure that they are investing in quality coins that have a probability of appreciating in value in the long run. Indeed, some of the worst coins tend to have higher yields. So, here are some of the best cryptocurrencies to stake in 2022.
Ethereum is the second-biggest blockchain platform in the world after Bitcoin. It is a second-generation network where people can build decentralized applications (dApps) of all types, such as the metaverse and non-fungible tokens.
The original Ethereum had its challenges. As a PoW platform, it was energy inefficient slow, and transactions in its network were a bit expensive.
Ethereum 2.0 solves these challenges by shifting to a PoS platform and embracing the concepts of sharding and staking.
Anyone can stake Ethereum 2.0 by buying a certain amount of it in some of the leading exchanges like Coinbase and Binance. Data by Staking Rewards shows that investors have staked over $27 billion worth of ETH 2.0.
It is a good cryptocurrency to stake because of the popularity of Ethereum and the fact that its currency will likely rise in 2022 when the merge completes. The chart above shows the results of Ethereum staked in a year.
Solana is a well-known Ethereum-killer that is becoming popular among developers and investors. The network’s token has a total market capitalization of over $38 billion, making it one of the biggest in the industries.
In the past few years, Solana’s ecosystem has been growing rapidly as developers embrace its speed, ease of development, and lower transaction costs. Nonetheless, the price of its token has declined sharply from its all-time high in line with the performance of other coins.
SOL is a good coin to stake because of the growing ecosystem and the fact that analysts believe that its price will recover in the long term. Its staking yield is about 5.8%
Avalanche is another Ethereum-killer that is showing strong growth in industries like DeFi and the metaverse. Data compiled by IntoTheBlock shows that the platform has grown its total value locked (TVL) has grown to over $10 billion, and it has become the fourth-biggest platform in the industry after Ethereum, Terra, and BNB Chain. Most developers love it for its blazingly fast speeds and low costs.
Some of the top reasons why you should consider staking Avalanche are its growing market share, strong historical performance, and its recent investments in the metaverse. Avalanche yields about 9.1%, making it highly attractive.
Polkadot is a fast-growing blockchain that uses the concept of parachains and relay chains to help developers build high interoperable projects. It is known for its parachain auctions, where investors sell slots to their favorite apps in the ecosystem. Some of the popular parachains in the network are Acala Network, Moonbeam, and Effinity.
Polkadot is expected to have an influential role in the decentralized industry, which explains why many investors have embraced it. Indeed, over $11 billion worth of DOT has been staked, which is a significant number since the network has a total market cap of over $20 billion.
Polygon is a layer-2 network that helps developers supercharge their Ethereum applications. It uses several technologies, including zk rollups and through EVM sidechains. Polygon has become popular among developers and investors. For example, its DeFi applications have a total value locked of over $4 billion.
Polygon is a good cryptocurrency to scale in 2022 because of the strong growth of its market share and the fact that more developers are using it to scale their apps. It also has an attractive yield of about 20%, which makes it friendly to investors.
Staking is one of the most popular ways to make money in the cryptocurrencies industry. It is also an easy thing to do since all you need to do is to deposit funds in an exchange and buy a coin. However, like stock dividends, the idea only works well when the price is rising. Therefore, it is always recommended to stake coins that have a bright future such as those that we have looked at here. Some of the others to consider are Cosmos, Near Protocol, and Terra.