Thinking out loud about POS coins and passive income in crypto
PLEASE BE CAREFUL! This article is older and many of the mentioned coins are garbage! For a more actual and critical view please read my article https://medium.com/@JiuCrypto/a-critical-view-on-masternodes-and-pos-coins-4396280ac3f9. Thanks! For “historical reasons” you can still read the following:
Hello world! Since this is my first medium post and also my first crypto-related article ever I’d like to point out some things first. I am NOT writing this article as an expert. I’m still quite new to crypto and there a whole lot of things I don’t understand yet. Still I’d like to share my personal experience with and thoughts on POS coins as I have got the impression that this issue is still very underrepresented in the public discourse (Twitter). Many OGs are mainly involved in mining and they may have very good reasons not to look that much on staking that I don’t understand yet. Also my impression is that even very successful traders lack knowledge about this issue and the possibilities connected with it. But even if you never want to stake a coin: To trade POS coins you need to understand the ecosystem too (especially the inflation) so I hope this article is also helpful for guys that do nothing but trading.
I am NOT writing this article as an advisor or teacher. Rather I see us on the same side: The side of learning people! So I really hope that this article won’t be a one way street but an exchange between us that will contribute to my learning process as well as to yours. For that purpose, I want to put my views up for discussion in the following article. Sorry in advance for my “English” :D!
After trading altcoins quite successfully for over a year I started to question myself: Is there a way to create passive income in crypto? I found four ways:
1. Mining
2. Setting up masternodes
3. Make term deposits
4. Staking
Until now I got no experiences in mining but what I know is that it can bring great returns if you know what to do and how. Notsofast (on Twitter) is a legend in this domain. A disadvantage in comparison to staking is: It is technically very complex and requires skills and an understanding that only can be achieved over a longer time.
I set up several small masternodes — ENT / Eternity, ARC / ArcticCoin and DAS (NOT the DA$ from Cryptopia!) — as an experiment and they bring nice small gains on a regular basis. But a disadvantage is: Setting up masternodes is not easy for many people either. It is much less complex than mining but still quite a task for people not too deep in tech. I have to admit that it was a tough job for me — but I hope I will reap the rewards in the future. The annual returns for the masternodes above are somewhere between 90–150%/year (please consider that there are small expenses for vps-servers, too). Really interesting it is getting when you get high returns and the price rises at the same time. Good overviews about different masternode coins you can find here: (please note that some data might be incorrect!)
The cheapest vps I could find (1 Euro / month; please note that I got no personal experience with tha provider!):
https://www.arubacloud.com/vps/virtual-private-server-range.aspx
You can find the links to exchanges where the mentioned coins can be bought on the bottom of this article.
Term deposits are offered for some coins and it might be a good idea for coins that you would hodl long-term anyway. I personally have or had term deposits in ERC / Europecoin and POSW. Also, Cryptopia is offering term deposits for $DOT. EXP / Expanse if offering something similar with the “Expanse rewards” option. Please note that the interest rates are quite small usually (~ 5–12%/year). So this really only makes sense for coins you believe in long-term. Also know that the coins are locked up for the time frame of the deposit so if the price goes x100 in the meantime you won’t be able to sell. Please be VERY careful with term deposits on exchanges. Poswallet.com just got hacked and several $BTC got stolen. POSW coin has not been affected and I’m confident the team will handle the situation properly BUT: It just showed again that centralized exchanges are NEVER 100% safe. So the risks outweigh the small staking benefits imho. If it is offered in the wallet as with ERC it is something different as you still have the private keys. If you know other coins that offer attractive term deposit options please let me know in the comments!
Now (after two sides of reading :D ) we finally come to the main subject of this article. POS (Proof of Stake) coins that offer staking rewards. In comparison to mining and setting up masternodes staking POS coins has a big advantage: It is just dead easy! It is so dead easy that I can explain it here in a few words: To stake POS coins you just need them in a wallet that is unlocked for staking and let the computer run 24/7. Is it really that simple??? Yes, it is really that simple, you don’t need to work in IT to do it :D. Please note that I expect the readers of this article to understand the basics of security as I cannot explain everything here. Please dyor (do your own research) on that!
I personally let an old notebook run 24/7 with wallets of around 20 different coins. Notebooks take much less electricity than towers and the CPU and RAM of an older or very cheap notebook are enough to keep several wallets staking. This is because the wallets don’t require much computing power for that process. You should also try to optimize your energy settings. If you are using Windows 10 the settings are quite confusing. Try to limit the energy consumption, especially by determining when the screen is switched of. But also mind that the notebook may not be deactivated if you want to stake 24/7. I had to change the settings in the expanded options for that. I think that I still didn’t find the perfect way to set my energy options but at least the staking runs 24/7 and the screen switches of after some minutes. If you are an expert on that and want to share your knowledge in the comments, I’d be very thankful!
What are the advantages of POS coins in general? Well, a big advantage is that you get stakes while your coins are still flexible, not locked. You can send them anytime anywhere you want. Not having them on an exchange is better anyway but apart from security aspects it has another advantage: It might keep you from overtrading. If you’re are staking and getting small or even big regular returns you might not get impatient with a coin or sell it for small profits only. It increases the probability that you just hold and stake until a really full moon becomes foreseeable. Then you can send it to an exchange and sell it (probably to buy back much lower later). But be careful! Where there is light, there also is shadow: Staking coins in a wallet also can mean that you miss quick strong pumps on exchanges. Not for well established, solid projects, but especially for smaller, unknown coins that often see quick random pumps. How long do you need to stake to get the same gains as if you sell on a x10 or x20? Right, an eternity!
A very important factor for POS coins is the ROI (rate of interest) or APR (annual percentage rate). Why is it important? Because 1. it just tells you how big your annual interests are if you stake and 2. they tell you something about the possible inflation on the ecosystem.
Of course, we all wish for interests as high as possible. But still the highest staking coin isn’t necessarily the best pick and actually many very high staking coins have gone to almost zero in price. Why that? Because the inflation is so strong that more and more money is needed to enter the ecosystem to keep the price just stable. The more money comes in, the more money needs to keep coming in to keep the machine running… Sounds familiar to you? Right, classic ponzi scheme! Those who are in early enough might make crazy gains, those who come late lose much of their investment. Please note: This warning only applies for VERY high staking coins! I will give examples for different categories of POS coins further down.
Do you remember what I wrote in the beginning of this article? That also traders need to understand the staking rate and inflation of a coins’ ecosystem? Why that? Because high staking POS coins are successful even if the price just stays stable or goes a bit down. Imagine you stake a coin with an APR of 1200%: Would you mind if the price dropped 30 percent in that year? Nope. You still had great passive profits. Just buying high staking POS coins without staking them brings you in a huge disadvantage towards those who stake. They might be able to sell on 20% of their buy price after a year and still be in great profit.
But another fact that should be considered: The APR is not the inflation on the whole ecosystem. This is because not all coins in the ecosystem are staking. Let’s take RADS as an example: The APR is around 18% right now which is not too high compared to some other POS coins but still very high if you consider that RADS is a very solid project with a great future perspective. But what you should know is that only about 1/3 of all RADS in circulation are actually staking. So, the inflation on the entire ecosystem is much smaller, in this case 18%/3, meaning 6%. This is very small for an outstanding project like that. It will not be difficult to get even much more new money into the RADS ecosystem so I expect a price rise and good staking rewards what makes RADS one of my favourite POS coins.
Before I give you some examples of different categories of POS coins I’d like to add another point: There usually is no certain amount of coins you need to stake but if you have too little coins your “weight” is quite low and you will need to wait much longer until you get rewards. It doesn’t change your APR but it increases the periods of time between your payouts and that effects your compounded interest. How that? I give you an example: Imagine you hold an POS coin with an APR of 200%. Scenario 1: You hold only very little so you get a payout only once in that year (in the end of the year)… How much will you end up with? Right, x3 from your initial investment… But do you know what is crazy? If you get 4x a 50 percent payout you will end up with a x5 from your initial investment. Why? Because after your first payout you stake additional 50% and so on! And if you get a small daily payout of 0.547% (200/365) you will end up with a x7 from your initial investment. Some coins even pay out several times a day!
In the following I will try to categorise POS coins and give examples. All the coins I give as examples I was or am holding myself. Please show me other coins in the comments!
- Solid projects with great perspectives and a significant APR
A coin that perfectly fits into that category is RADS. I’d hold it even without staking rewards but with additional staking rewards of 18% (!) this is just a no-brainer. The inflation of about 6% is tiny for a strong project with a market cap that is still quite small so the price has much room to grow! For this coin it also really is an advantage when staking keeps you from overtrading. I expect the market cap to be several hundred millions in the next 2 years and this is quite a conservative expectation.
2. Solid projects with great perspectives and a small APR
An example for this category is NAV. NAV offers staking rewards of about 5%/year. This is really not much but hey: If you stake 1000 NAV and get 50 on top in one year: This might not be much now… But imagine NAV being traded for 50 or 100 USD one day… Then everything looks totally different, right? And as anon coins are booming and NAVs market cap is still low it is not unrealistic. Like RADS I’d hold NAV even without the staking but it is just a small additional goodie. Also for NAV it is good if staking keeps you from overtrading. And the low APR makes the inflation even smaller of course.
Good looking newer and smaller projects that also offer a small APR:
Coin — — — — — — — — —- APR
ONION / DeepOnion — — — 10%
XSPEC / Spectrecoin — — — 10%
CBX / Crypto Bullion — — — 6–12%
3. Small cap projects that look solid, already got some attention and offer a good but realistic APR
These projects are still quite small in their market cap but already got some attention in the crypto community. The interests they offer are high but still manageable. Examples:
Coin — — — — — — — — — -APR
NETKO: — — — — — — — -~50%
PIE: — — — — — — — — —-20% (attention: will switch to masternodes soon!)
TRI / Triangles: — — — — — 33%
V / Version: — — — — — — 60%
A still very unknown coin that might fit in that category soon is:
JAPAN: — — — — — — — — 55%
It has still a very tiny market cap and is very cheap so I got myself a small portion. I get payouts several times a day so I hope the compounded interest is even higher.
You find links to places to buy all of the mentioned coins at the bottom of this article.
PLEASE note that the inflation in this category is already much higher than in the ones above!
4. Coins with an APR on a borderline-level
For this category, I would like to give a coin as example that I never staked but traded for very good profits: RAIN / Condensate. If I had understood the crazy staking possibilities I probably wouldn’t have sold or at least would have rebought… Now I’m salty I don’t own any as it brings outstanding returns to the holders and the price is rising. The APR of RAIN is around 200%. Congrats to the holders, for me it is out of buy zone here, especially with the high inflation (remember our compounded interest example from above?)
I really don’t know what to think of coins with an APR like this in the long-term as the inflation is really crazy. I will watch RAIN with great interest (missing great interests, lol) and just see it as a new economic experiment in crypto.
I did some research and found a totally unknown and very cheap coin with similar interest rates: KOI / KOI coin. It has a tiny market cap and can even be bought for one satoshi right now. The APR is 175%. I already stake it and get dozens of payouts a day so I hope the compounded interest is even much higher. I only put a small portion of money into this one as the project might never move away from the one satoshi price range or even die. Mind that some coin worth less than one satoshi can still easily be traded on the DOGE markets!
PLEASE note that the inflation in this category is already VERY high and should make you concerned about the long-term perspectives of the price!
5. ULTRA-high staking coins
Coins that fit into that category have ULTRA high staking rates. There is this crazy Asian guy on twitter who is specialized in those and knows a lot about them:
https://twitter.com/ProgrediMan
He also set a telegram group called “POS coin community”. I want to cite his pinned message here:
“ I recommended :
1. 808coin -> 17% eligible after 8.08 days, recommended block size amount is 500k (~ $300-$350), if can buy 1million is the best.
2. WomenCoin -> 1000% APR (~2.74% daily and it is compounded) calculate your potential profit in www.compoundaily.com
Recommended amount to start maybe about 2000 WomenCoin.
3. $MAY (TheresaMayCoin)
The profit is about 1% daily for now.
Remember all the coin that high pos like this contain risk (inflation high can drag the price down), so you need the strategy to keep your profit max.
Also don’t put all of your money in one coin, diversifying your money will good.”
In addition he published this sheet about the compounded interest of 808:
https://twitter.com/ProgrediMan/status/896764092194705408
PLEASE note that the inflation in this category is ULTRA high and should make you VERY concerned about the long-term perspectives of the price! Still I think that these coins offer great chances. If you look at the sheet for 808 for example you see that even if the price drops to 5% of your entry price after around 180 days you will still be slightly in profit. If you sell at 10% of your entry price you will have doubled your initial investment. Crazy stuff, I know :D !
Please note that this category is even more risky than the ones above! I got me some of all the coins that are mentioned above but only an absolute minimum % of my total portfolio. Never risk more than you can afford to lose without losing your smile 😉!
I really hope you enjoyed the article and got some new insights! Please share your experiences / feedback / tips in the comments! Thanx!
Also feel free to follow me on twitter: https://twitter.com/JiuCrypto
