The Ultimate Guide to staking

Sylvain
Sylvain
Sep 11 · 6 min read

Due to public demand from our readers, I am dedicating this article to staking. There is a ton of information on staking online; some are amazingly good while some are just a mess. I will give you a guide from an investor’s point of view and advise you on what to look for when researching and during your staking process.

What Is Staking?

Well, a stake is a form of voting right you earn after buying a certain amount of cryptocurrency coin which will allow you to vote. The size of your staking pool of coin will determine the power of your vote. Investors use this to push the companies to develop the areas they are interested in. The more coins you have in your staking pool, the more voting rights you get.

Secondly, stake investors earn annual or monthly or quarterly returns from the company which they have staked in. The most common stake coin is Tron (#TRX).

The success of Lydian Stater spread to Europe, and in particular Greece, where the potential of money as a system of mutual trust was copied, adapted, and rapidly improved in the 6th century. The result was the profound transformation of the Greek economy, the growth of its cities, and the emergence of a more sophisticated society.

Before the arrival of the coin money, ancient Mediterranean world used primitive currency that would not have powered the kind of revolution that Greece underwent.

Over 4,000 years ago, people in ancient Mesopotamia used clay tablets to commit themselves to particular financial transactions. With the success of agriculture came the need for people to exchange the surplus goods they produced for those they did not have.

These transaction promises edged on clay did not have inherent value, not like bars of gold or silver coins, but they functioned as money because the parties involved in the transaction trusted it. It is justifiable to say that money has evolved to be what it is because people trust it.

The money counting problem of Europe

The use of coins as money was quickly embraced across Europe and Asia, becoming a big hit where it was introduced. In some societies, coins were minted out of precious metals such as gold and silver and wherever it was accepted, commerce thrived and the economies boomed.

By 1200 AD, independent states in Europe that arose with the fall of the Roman Empire were co-existing and even engaging in commerce with each other. There was however the problem each state developed its own coinage, and this hindered smooth trading to a large extent.

For instance, in popular commercial cities such as Pisa and Venice, it was not uncommon for traders to use as many as seven different types of coins. This really complicated business such that even the smallest transactions required complicated calculations.

Further, these states used the Roman numerical system which was ill-suited for complex mathematical and financial calculations. With this development arose the need for merchants to keep records of their money as they traded, and this led to the invention of the Abacus, the first computer.

In the East, the Suni Muslim Caliphate, the Indians, and the Chinese Empire were far more advanced in money technology than those in Europe. In fact, Europe only began to catch up with them with the introduction of the Hindu-Arabic numeral system after the publication of the book Liber Abaci (Book of Calculation) by Leonardo of Pisa, best known by his nickname Fibbonacci in 1202 AD.

The new number system was more practical when applied to book keeping and currency conversion. It, however, led to the introduction of one new function of money that changed the history of finance: credit and interest.

Emergence of credit and money lending

1. Risk

Staking gives you an excellent deal of rewards as well as the risk of loss.

Price fluctuation

For example, you might stake on a coin, and its value drops dramatically. This means that your stake value will drop a similar percentage as the coin value drop.

Value Changes

Secondly, some companies tend to change staking rewards from time to time. They get away with these selfish acts since cryptocurrency is not as transparent as stock markets. A good example is Tron which changed their trading rewards from 7% to less than 4%.

Delisting of Coins

Another risk is the delisting of coins. If your coin platform holding your stake is delisted, it means that you will lose the amount of money staked. Companies that are not doing so well or violate the terms of service often get delisted.

Lack of solid backing of the staked coin

Coins without physical backing run the risk of getting blacklisted or traded out in the market. If this happens, you will lose your stake.

The lock-up period

The lock-up period is the time it takes to convert your coin stakes back into cash. Tron has a lock-up period of 3 days. The value of stakes can fall during the lock-up period since the crypto market fluctuates considerably.

2. Staking vs. Dividends

There are a lot of similarities between dividends and stakes. However, there are differences between investing in the two.

Firstly, dividends earn investors less money than a similar amount of stakes on cryptocurrency. This is because there is a physical backing to dividends on stocks. Furthermore, blue chips stocks follow strict regulations. This highly reduces the price fluctuations in the market.

Therefore, stock dividends are easier to get into than crypto stakes. Stock companies are also transparent on the risks and profit involved, which reduces the responsibility of the investor since there is less management.

3. Staking Vs. Smart USD

Firstly, smartUSD is more profitable than staking. Secondly, there are fewer risks involved than staking since the market is less volatile than the cryptocurrency market.

Just like dividends, smartUSD requires less management in terms of research and education from investors. SmartUSDs are more accessible to set up than staking.

Lastly, staking is free of charge but investing in smartUSD is a process which requires money.

4. Important Tools in Staking

Well, to manage your stake research and trading, you need some efficient tools to work with. Here are our top picks.

  • For comparison and analysis processes, it is advisable to use; stakingrewards.com
  • You also need a tool to analyze the price history, and it is advisable to use tradingview.com, although there is a bunch of similar tools online.
  • Capital money; yes, you will need initial finance to buy stakes.
  • Any other information can be traced on Google, including how-to videos.

5. Staking gains

Is staking worth the effort?

Well. Let us have a look at TRX.

In 2018, the yearly stake yield of TRX was 7.00% which dropped to 4.37% in 2019.

Its yearly prices changed from 63% in 2018 to 17% in 2019.

On the contrary, let’s have a look at the dividends in AAPL, which is a bullish stock in a less volatile market.

In 2018, the yearly dividend yield was 5.90% which dropped to 4.8% in 2019 one quarter to go.

Therefore, dividends are easy to manage, which, unlike crypto stakes, requires keen management due to volatility. However, when done correctly, stakes can earn you good returns in the short term than dividends.

6. The Upsides

There are several advantages to staking, dividends, and smartUSDs trading.

Firstly, it is an excellent source of passive income if you make it a side hustle. The investment also grows over time as it accumulates. This is ideal if you master the art of reading the market.

It requires little effort, unlike your 9 to 5 job. Lastly, it is the right way of saving your money since you cannot access your money when you own stakes. This reduces any tendency of overspending or wasting your money. Lastly, it gives you money management mindset over the years.

7. General tips

Before you venture into staking, please have a look at these final tips.

  • Analyze your desired asset price history. This will help you predict the possible price movement in the future. Pay attention to the entire process in general and not the profit alone.
  • Create a solid ground to your decisions by conducting thorough research on the process of staking.
  • If staking is not working for you, please venture into other methods of earning passively other than staking. This can only be achieved if you stake in what you believe in and not out of peer pressure.

Conclusion

Well, if you follow the above steps carefully, you will be a happy stake investor. Please check our article and videos for further guidance on the process of staking and money management.


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Sylvain

Written by

Sylvain

Business Developer at 4C Trading| Experienced Writer about Blockchain and Cryptos | Cryptography passionate.

4C-Trading

4C-Trading is a team of professional market analysts, lawyers and marketing veterans with years of experience in the cryptocurrency and financial markets. We provide qualitative signals, information, analytics and advice on cryptocurrencies.

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