Staking CoinsPassive Income With Cryptocurrency

Looking to earn some passive income with cryptocurrency? Staking coins is a great way to do it without having to pay a huge initial investment and spending hours in front of the computer. In a nutshell, all that is required of you is to buy coins, hold them in your wallet, keep it online 24/7 and in return, earn a profit.

In this all-in-one-guide, you will find everything you need to know about the staking process and my recommendations for the most profitable currencies, alongside detailed reviews of each one.

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What is Staking

Simply put, staking is the process of buying and holding coins with the goal of receiving interest. It is done using a designated wallet on a network that uses the Proof of Stake consensus algorithm or some modification of it. Where staking differs from mining is in the fact that it doesn’t require a powerful machine, nor do you have to invest large sums of money to be competitive.

The more stakers there are in each coin’s blockchain, the higher the decentralization is and as a result, the network becomes more secure and provides equalized opportunities for everyone to earn an income. Some networks are hybrids and have chosen to use both Proof of Work (PoW) and Proof of Stake (PoS) as ways to reach an agreement to further increase speed and security.

There are pros and cons to each approach – that is why I’ve reviewed in detail the top available coins currently. You can find summarized info and links to individual reviews further down in the article. Before that, however, let’s discuss how PoS and PoW are dissimilar.

Differences Between PoS and PoW

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I already cleared there are two main ways to reach an agreement in the blockchain – Proof of Stake (PoS) and Proof of Work (PoW). Proof of Work is about showing you have done the work. In the world of blockchain work refers to solving a complex mathematical problem. Whoever solves the task first gets to decide what is included in the block.

Proof of Stake, however, is about who has invested in the network. Unlike PoW where it’s easy to determine who validates the block – in PoS it’s a bit trickier to determine who validates the new block. Suffice to say, it’s a complicated reward algorithm that considers coins invested, time in the blockchain, total stakers in the blockchain and unfortunetly, luck is also a factor when determining who validates the block.

Having said all that, we can also make the distinction that while Proof of Work or mining involves an active participation, Proof of Stake or staking involves a more passive participation. It is also important to note, you can only stake coins in PoS networks, but you cannot stake coins in PoW only networks.

Staking and Masternodes Differences

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Although they have some similarities, staking and masternodes are two different things with different reward systems and responsibilities. When staking coins, you can do it with whatever amount you want (at least, in most cases). However, when it comes to masternodes, there is a minimum requirement of coins you need in order to host a masternode.

With staking you reserve the coins you have in your wallet and that’s it, masternodes, however, perform additional functions to the blockchain (such as InstantSend and PrivateSend). Setting up a staking ecosystem is easy, and I will discuss it below, while setting up a masternode is a cumbersome task and requires more technical knowledge and not everyone can do it.

How Does Staking Coins Work

When you decide to stake your coins, you set up your wallet to create, approve and validate transactions in the network. The wallet, you are staking with, goes over the blockchain transactions, checks them and makes sure the people sending the money both have the money and can send them. What’s more, if the network does not have masternodes, the staking nodes give a portion of their computer resources so that additional network functions may operate.

When talking about how staking works, I should also mention coin age, maturity period, network weight and total weight. Coin age refers to the time your coins have been in an address while the maturity period is the number of confirmations needed before you are eligible to start staking. When you successfully stake coins or move them from one address to another, coin age is reset to 0 and you have to wait for the maturity period again. Network weight refers to the sum of coins which are mature enough, while total weight refers to the sum of mature coins total.

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Necessary Steps to Start Staking

You might be asking yourself what to do, to start staking crypto coins today. If so, check the steps below:

You will need a dedicated PC with a reliable internet connection to run your wallet 24/7
After having chosen a coin to stake, obtain the desired amount from an exchange
Install the appropriate wallet
Backup and Encrypt Your Wallet (optional, yet highly recommended)
Supply your wallet with coins and optimize your holdings to maximize your chances of winning
Unlock your wallet to start staking

Earning Money by Staking Coins

When it comes to staking, you have two major variants available. The first option is to stake yourself while the second one is to delegate a validator (via a smart contract) which will stake on your behalf.

No matter which alternative you choose, in the end, they all work on the same principle. By holding coins in your wallet (i.e. staking) you have invested a certain sum into the network and thus support it. For that, you are granted the chance to create blocks and receive rewards for your service. Not only do you help keep the blockchain secure, you also prevent attacks and the higher number of stakers there are, the higher the decentralization is. The drawback of delegated Proof-of-Stake (DPos) networks, however, is that they suffer from centralization and as such, I would not recommend them.

Whichever option you choose though, the network will reward you based on a pre-defined set of rules that take into consideration the amount of coins you have, their age, maturity, etc. In the upcoming section, I’ve covered in detail the ways of optimizing your chances of winning a reward, which include joining a Staking Pool and using Coin Control.

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Ways to Optimize Your Income

There are a lot of factors determining your staking rewards – from coin age, through network weight to the blockchain of the coin and different tweaks that might increase your chances of making money quicker. Regardless, there are several things to consider that are applicable for each coin in order to maximize the frequency of getting rewards.

Staking Pool

Some networks require a lot of coins to be staked before you are eligible for a reward. Staking pools are one solution in that case. They are built around the idea of combining staking capacity from many users to increase their chances of being eligible for a block reward. Nevertheless, staking pools are risky and should be avoided when possible. A good rule to protect yourself – if a certain staking pool is not recommended by the coin’s team, be mindful and think twice before choosing it.

Coin Control

Whenever you stake your coins and receive a reward, the address you staked with is split into two addresses if you’ve staked 1000 coins and there is a fixed reward of 2 coins you will end up with two addresses with 501 in each, then if you continue staking with one of those 501 addresses they will, in turn, be split to two 251.5 addresses and so on. Coin control allows more advanced setups to be performed to the wallet you are staking with – specifically – to manually split or combine addresses.

Split Addresses

Split addresses are all about splitting the coins from one address in smaller portions to optimize reward frequency and earn more money. Every time you successfully stake, the coin age of those coins is reset to 0 and you must wait for the coins to mature again before you can stake. By splitting addresses, you optimize that waiting time for the coins to mature to put it simply. The trick here is to find the golden middle between reward eligibility and staking time.
Dust Collection

Let’s go back to the example above. You successfully stake your crypto coins, the address is split to two blocks, then the process repeats, and the splitting continues until at some point you end up with tens or hundreds of addresses with little coins in each of them. This is where dust collection comes into play. The idea of it is to combine those smaller addresses into one or a few bigger ones, combine their reward odds and stake with those one or few big addresses instead. Now, having 1000 or 500 coins seems like enough to stake with on their own but imagine having 1.37, 3.56 and 8,07 coins. In that case, dust collection starts to make more sense and combining all 12 coins into one address and staking with it will be the smart thing to do.

*Disclaimer: Dust Collection is not an official term but since this practice does not have a dedicated name, I coined the phrase Dust Collection.

Choosing a Coin for Staking

Choosing a coin to start staking with can often be a bother with so many things out there, different plans for each coin and great volatility. Nevertheless, my experience shows there are universal thing you can consider when making up your mind:

Entry priceLower price, equals more coins for your money, thus higher chances of a reward while staking
Unique selling pointsDeciding whether it has a specific feature that can potentially increase the currency’s value
Coin’s roadmapIf the coin’s team has shared an official roadmap, you can evaluate the coin’s future potential
The development teamInformation on the core development team provides you insight on how serious the project might be
Estimated ROIHaving a rough idea of your potential income offers you the chance to plan future investments

Keeping in mind the above criteria and having done extensive research regarding different cryptos, I have compiled a list of the top 10 staking coins that might pique your interest. You can read in detail about each one in its respective review.

Top 10 staking coins
Cryptocurrency	Price (Change 24h)	ROI%	Consensus	Learn more about
. Pivx (PIVX)	$ 0.19 (5.95%)	6%	PoS Masternode	PIVX Staking
. Particl (PART)	$ 0.12 (-3.50%)	4%	PPOS	PART Staking
. QTUM (QTUM)	$ 2.33 (5.14%)	7%	PoS	QTUM Staking
. Phore (PHR)	$ 0.00 (0%)	37%	PoS Masternode	PHR Staking
. Stratis (STRAT)	$ 0.00 (0%)	1.5%	PoS Masternode	STRAT Staking
. Neblio (NEBL)	$ 0.00257 (0.06%)	8%	PoS	NEBL Staking
. NavCoin (NAV)	$ 0.02815 (0.74%)	4%	PoS	NAV Staking
. NXT (NXT)	$ 0.00072 (5.93%)	0.3%	PoS	NXT Staking
. Decred (DCR)	$ 12.42 (7.81%)	13%	PoW/PoS	DCR Staking
. StakeNet (XSN)	$ 0.0105 (0%)	20%	TPoS Masternode	XSN Staking

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James Miller Entrepreneur

James’s mission is to deliver knowledge about various cryptocurrency investment diversification strategies, namely teaching his tactics on staking; which coins to pick, what the advisable relative quantities are and how to handle them once attained..

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