COIN - 3 Things You Should Know Before Staking Crypto For Passive Income
2023-11-18 08:30:00 ET
While crypto staking has existed for years, it really only became mainstream with investors during the past year. This coincided with the transformation of Ethereum (CRYPTO: ETH) into a proof-of-stake blockchain as part of The Merge. Suddenly, people began asking what crypto staking was, and how they could make money from it. As a result, crypto staking went from something only the early blockchain and crypto pioneers were doing to something the average investor on Main Street was doing.
What makes crypto staking so unique is that it is both a technical process that involves the inner workings of a blockchain, and a form of financial investment. At times, this duality can be confusing for investors, who may only be thinking of crypto staking as a form of passive income. With that in mind, here are three things to keep in mind before staking your crypto.
The classic analogy is that crypto staking is much like depositing your funds in a high-yield savings account. You are depositing your cryptocurrency with a blockchain, much like depositing your dollars with a bank. And, in exchange for doing so, you are paid a specified reward rate, usually expressed in terms of an annual percentage yield (APY). For most cryptos, these APYs range from 2% to 10%. For example, on Coinbase Global (NASDAQ: COIN) , you can currently earn 3.35% on your Ethereum holdings.
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3 Things You Should Know Before Staking Crypto For Passive Income