Staking, High-yield and Risk-free? Oh, You Wish.

Johnny Lyu
May 31, 2019 · 4 min read

Yesterday after work, quite late at night, I bought half a dozen banana tarts for my kids, hoping to make up for missing the game time I promised them a day before. But it was so late that my one-year and three-year boys were long asleep.

So, what’s the ending for those six tarts?

It was a happy one, of course! They ended up in my stomach and will hopefully grow into a sturdy fat layer that helps me to stand against the cold when winter comes.

Do I prefer enjoying the gratification of eating sweets, or having health and a good-looking six-pack?

What a dilemma!

An intractable choice indeed. And there are thousands of even tougher decisions to make day to day. Life is about making choices, after all — analyzing the pros and cons, balancing them, and giving up certain interests, all while still dreaming of gaining all the benefits.

Investing, unexceptionably, is about trade-off. Between pragmatism and greed. Between risk and return.

Recently in the crypto world, however, we have seen a rising star — not necessarily a project or an infrastructure technology but indisputably an innovation — Staking, which does a pretty good job coping with the yield-stability contradiction, to a certain extent.

What is Staking?

Judging by its name, the concept is derived from the cryptocurrency consensus algorithm Proof of Stake (PoS). By depositing their assets, the token/coin holders will get newly-issued tokens as rewards, given that they (as nodes) make a contribution by validating the transactions in the network.

Sound familiar?

There is an asset class called fixed income which pays investors fixed interest income on top of the original capital on the maturity date. The most common ones are treasury bonds and bills, municipal bonds, corporate bonds, and certificates of deposit.

Staking is similar, but still fundamentally different.

To compare bond investors and stock investors in the traditional financial world, the former’s risk appetite is usually much weaker as fixed income investments are designed with the feature of capital preservation — at least that’s what the issuers claim. For the latter, though the upside of capital gain is larger, the risk of losing everything is no less small.

Now here comes the beauty of Staking.

The room for token price to fluctuate, both upwards and downwards, is big enough for risk chasers to make considerable capital gains — like growth stocks.

Meanwhile, by depositing the tokens, the holders will be able to get an extra number of tokens when the Staking matures — like dividends.

But a growth stock, commonly seen among listed internet companies, rarely pays dividends to the detriment of a high-speed expansion plan, which asks for a large amount of funds.

Plus, how many growth stocks are even making profits? Spotify or Tesla? Come on, I don’t think Google recorded positive net cash inflows in its first decade.

However, Staking covers both, or at least many believe so.

According to, the locked market-cap in Staking stands at approximately US$8 billion, about 3% of the total crypto market-cap, while the existing tokens/coins that are adaptable to Staking equal roughly US$25.5 billion.

It seems to be a perfect investment, doesn’t it? Oh please, even an idealist like me wouldn’t believe that there is truly flawless thing on this blue planet.

Among others, I’d like to point out the two most crucial uncertainties — the concerns over security and technology capacity.

For individual Staking holders, as the mechanism works on the back of making contributions to the network, it asks for a 24/7 online state, which sets a very high-level functionality request for the holder’s device.

More importantly, being always online also indicates a higher risk of exposing IP addresses, which might lead to severe consequences like being hacked, not to mention that some Staking networks request for private key online state.

You may think, fine, it is indeed tricky to do Staking on my own, I will just turn to those Staking-specialized institutions, which pool tokens from hundreds of holders and run as super nodes — some PoSs work in a ‘more-Staking-higher-yield’ kind of way — fantastic!

It surely is an option, and could be a wise one — except for the fact that you must trust these institutions’ technology capacities on: a) protecting your assets from hackers; b) capability to agilely adapt to various coding languages applied by different chains.

Therefore, here are the keywords, and please do bear these in mind — security and tech capacity. Ring a bell?

Well, no offense (to all our Staking platform friends), but the thing is, security and technological compatibility are the baseline parameters for an exchange. Ok, I think I’d better stop at this point.


KuCoin aims at providing users digital asset transaction and exchange services which are even more safe and convenient, integrating premium assets worldwide, and constructing state of the art transaction platform.

Johnny Lyu

Written by

KuCoin Co-founder & VP, doubles the partner of KuCoin’s investment affiliate Phoenix Global Capital, blockchain frontrunner, investor and advisor.


KuCoin aims at providing users digital asset transaction and exchange services which are even more safe and convenient, integrating premium assets worldwide, and constructing state of the art transaction platform.

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