How To Stake On The Top Layer 1s?
Buying and holding major cryptocurrencies has proven to be the most straightforward strategy for most gains. For example, if you had hodled BTC or ETH from any previous cycle, you would be in profit. However, there are other ways to earn money and invest in crypto—staking.
In particular, with Proof-of-Stake (PoS) cryptocurrencies, you can put your tokens to work and earn rewards while you hold the tokens you have conviction in. This is called Staking. Staking is essential to secure a Proof-of-Stake network and even non-technical participants can easily delegate their stake to a third party for minimal work to earn extra tokens.
Staking On Ethereum
Ethereum is currently the second largest cryptocurrency by market cap and recently transitioned to PoS. Ethereum offers around 4.1% APR in ETH tokens. There are several ways to stake Ethereum:
- You can run your own validator node and stake the minimum required 32 ETH.
- You can use Staking-as-a-Service and let service providers like Blox take care of hardware and uptime. For this, you will need to give the service providers 32 ETH which is the minimum staking requirement and a small fee. The most popular service provider is Blox Staking which is non-custodial.
These options lock your ETH till EIP-4895 is activated. EIP-4895 is a proposal to allow stakers to withdraw their tokens.
However, for most users who do not have 32 ETH, there’s a slightly riskier option called liquid staking. Liquid staking services issue tokens representing your staked amount. You can buy/sell these tokens anytime on the market, but there’s always a premium.
Since liquid staking is the most accessible solution, let’s learn how to do it on a platform called Lido.
Lido is the most popular staking solution and is currently offering 5.3% APR to stake ETH. To use it, head over to Lido and click on the ‘Stake Ethereum’ button.
Once you do that, you’ll see a box pop up (in the picture below). If there’s an option to get a discount (like the one shown below), it’s recommended you use it. The discount is available because many people are selling their stETH token because they locked their ETH. If you choose to get the discount, you will be redirected to 1inch which is a DeX aggregator that offers you the best prices.
The DeX is very straightforward. Just type the amount of stETH you want and click swap. You are done! You will generate daily rewards proportional to your stETH position.
Staking On The Internet Computer (ICP)
With regards to staking on the Internet Computer, which is a network similar to Ethereum in vision and capability, the minimum staking requirement for ICP is just 1 ICP, which currently sits at around $6. The minimum staking period is around 6 months and you need to lock tokens for at least 6 months to earn any rewards. However, you can also stake for up to 8 years.
Your tokens will be locked till the specified time. Currently, the reward ranges from 10.5% (6 months lockup) to 19% (8 years lockup).
Despite the lockup period and market drawdown, the number of stakers seems to be increasing according to the staking rewards website.
Step-By-Step Guide To Staking ICP
First, you need some ICP. You can use exchanges like Binance, Kraken, and Kucoin to buy ICP. Once you have some ICP, you can create your account and start staking. To create your account, visit the Network Nervous System. It sounds like a complicated website but it’s actually quite simple and intuitive. Once you’re there click Login and you’ll be redirected to a page that requires you to make an Internet Identity (see the picture below).
To move forward, click on create Anchor and put your device name. Now a popup will ask you to choose a place to store your information. If you’re using a mobile phone, the popup might not show up and it would just use your phone as the device. The safe option would be to use an external USB key, but if you don’t have that or you think you might lose it, click ‘This device’.
Enter the captcha and you’ll be given your Identity Anchor. Keep this number safe because you’ll need it later and it allows you to access your money.
The next step will ask you to create a recovery system, which you can set up later, but it’s recommended you do it now to keep your money safe. It’s also preferential to choose the seed phrase since it’s more secure. Now you will see many words on your screen under ‘your seed phrase’. Write these words down on a piece of paper and keep it safe.
You should then see your account on the screen which looks like the picture below.
Next, you need to send the ICP token you bought from a centralized exchange to this account. To do so, on your exchange app click withdrawal for ICP and put in the address shown above. It is the random characters written below ‘Main’ (also highlighted in the image).
Once you have the tokens in the account, you can go to the Neurons tab and click on Stake. You can create many neurons to stake for different amounts of time. Once you click create you will get an option to select lockup period. Choose your desired lockup period and click ‘Set Delay’.
On ICP, you get rewarded for voting in addition to staking. However, you can let someone else vote on your behalf if you think they’re making the right decisions. To do so, follow the neurons you like.
Now go to your Neurons tab and you’ll see your active neurons. Click on the one you just created. Click on the ‘start dissolving’ button to put your tokens to work. If you don’t do so, your tokens won’t unlock.
Ethereum and ICP create a good pair in terms of staking since Ethereum has been around for a while and has low risk/rewards outcomes. On the other hand, ICP provides a higher APR for a “riskier” staking option. Staking in general is a better strategy than holding since your holdings are increasing with the emission of a token and thus you won’t lose value due to the supply side of tokenomics.