This article tends to give a complete overview of advantages for Stablecoin staking vs. Earn interest on Crypto. Volatility is a core Crypto currency characteristic and here we give the information how holders could possibly decrease the risks.
To gain full insight into this article, it is important to first explain what a stablecoin is. As the name implies, a stablecoin refers to a cryptocurrency project which is less prone to price movements. Stablecoins are pegged to non-crypto assets such that their value is essentially the same as that asset’s. Thus, a stablecoin pegged to fiat currency like the dollar will normally have a value equivalent to the currency’s. Stablecoins can also be backed by commodities such as oil or gold.
In plain language, stablecoin staking can be said to be the act of locking or storing tokens within a network such that they contribute to validating transactions. The owner, who is unable to access or use the coins for a period of time, is rewarded with fresh tokens in return.
The term ‘staking’ applies to projects that use the proof-of-stake model to validate transactions and add new blocks. To stake, you pledge your coins to the protocol, sometimes for a stated period. Your stake allows you to be chosen to validate a fresh block of transactions. And the higher you stake, the higher your chance of getting selected. Staking your coins means you get gifted with additional tokens.
You can stake your coins using cryptocurrency exchanges.
The proof-of-stake consensus mechanism is based on the amount of coins a participant holds. Thus, if you stake a high quantity of coins in the network, you are more likely to be selected to validate a block. Proof-of-stake is seen as more sustainable and eco-friendly than its proof-of-work counterpart due to the energy the latter consumes.
These are the most popular examples of coins you can stake:
A major benefit of staking cryptocurrency is interest rates. By locking up your holdings, you can access as much as 5 to 15% interest rate each year. This offers you an alternative way to make money on your holdings while you wait for upward price shifts.
Staking also allows you to participate in the validation process without high-end equipment. Under the proof-of-work mechanism, users rely on powerful computers which exhaust large amounts of energy solving cryptographic puzzles and validating new blocks. But in contrast to this, proof-of-stake, allows you to create blocks by merely storing your coins in the protocol. This minimizes the damage that would otherwise have been caused to the environment.
In addition to these, staking enables you to contribute to the growth of your crypto project. By storing your funds, you make the project more efficient and less vulnerable to attacks.
| eToro | Binance | Coinbase |
| Monthly rewards for staking crypto | Offers high rewards for staking new projects | Charges high commission for staking |
| Heavily regulated by financial authorities, thus reliable | Funds secured by Secure Asset Fund for Users (SAFU), with insurance coverage against breaches | A public company, thus regulated |
| Users can stake crypto of two different assets | Users can stake crypto of over a hundred digital assets | Few digital assets for staking |
As you can see, staking is getting quite popular, but due to some reasons, it might be not as beneficial as it seems at first glance.
The following are some downsides of staking your stablecoins:
Alternatively, you could opt to save rather than stake your crypto assets. Crypto savings are largely similar to financial setups with banks. Like traditional savings accounts, you keep your funds in a designated wallet. The institution lends this money to other persons and institutions and passes some reward to you in the form of interest.
The difference here, however, is that with crypto savings, you can earn returns in a different asset from the one you invested. You also earn more in terms of interest than a traditional bank.
Depending on the platform and the cryptocurrency, a user can get as high as 20% APY on a crypto savings account. A platform like CoinRabbit, for instance, provides more flexibility to the asset holder. Below, we outline some benefits of saving your stablecoins on CoinRabbit:
| Crypto Savings | Crypto Staking |
| While saving your cryptocurrency can earn you substantial interest, it is important to consider some potential risks. First, crypto savings accounts do not come with FDIC insurance like traditional savings accounts. This implies some level of diligence on your part. | This is not the case with staking, regardless of your level of due diligence, it does not absolve you of the high risk attached to the staking scheme. |
| The interest that would accrue to you from saving is more stable and certain. This is why it has been advised that crypto savings are the best option. | With staking you can easily lose your interest. Although the profit interest is relatively more than those of savings, however, it is riddled with uncertainty and instability. |
| With crypto savings, you can be assured that nothing is going to happen to your initial savings. | When you stake your coin, once there is a fluctuation in the market, it does not only affect your interest but also your main account. |
| Experts are in charge of your account. | You are to handle your account yourself which is not of best practice if you do not understand how cryptocurrency works. |
All in all, this table makes it quite clear that crypto earning interest is way more profitable than staking due to the risks of the last option.
The following are steps to follow when opening a savings account on CoinRabbit:
Q: Can you stake stablecoin?
A: Yes, even though it’s a pretty slow way of passive earning on your stablecoins
Q: How much can you make staking stablecoins?
A: By locking up your holdings, you can access as much as 5 to 15% interest rate each year
Q: Which stablecoin is the best for staking?
A: Tether (USDT), Ethereum 2.0 (Eth2), USDC, Binance (BNB) are the most popular stablecoins to use for staking
Q: Can you make money with stablecoin?
A: Yes, you can use staking, or savings services like CoinRabbit if you need a safer choise
Q: What is the safest stablecoin?
A: Tether (USDT), Ethereum 2.0 (Eth2), USDC, Binance (BNB) are the most popular stablecoins to use for staking
In conclusion, while saving, like every crypto venture, is fraught with risks, it also offers users sufficient value in terms of interests. It must however be stated that the promise of high returns should not be an immediate prompt to save. Rather, investors should conduct adequate research on the platform’s fee structures, its reputation among users, coin offerings, the level of security, and regulation. It is equally important to emphasize the need for a diverse portfolio as this hedges the investor against volatility.
Also, since stablecoins possess much lower risks than traditional assets, they are a more reliable saving option.
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