What is Binance Crypto Staking?

Staking is a popular way of passive earning on cryptocurrency, when you simply buy the necessary cryptocurrency and hold it for a certain time on a staсking platform, for example, on Binance, the best cryptocurrency exchange, and get a percentage for it. In this article, you will learn in detail how staking works, what advantages and disadvantages it has, and how to start making money using staking on Binance.

What is staking?

The whole point of staking is to store certain cryptocurrencies in your Binance account. The following rule applies here: the more of these coins you have, and the longer you hold them, the more you can earn from them. Thus, staking is mainly related to the concept Proof of Stake.

You cannot use staking on any cryptocurrencies. Only coins whose blockchain uses the Proof of Stake concept can be used for staking. You may also encounter other conditions, such as the minimum investment size (the threshold for entering the staking) and the minimum term of the staking. During this period, you store a pre-determined number of coins on your Binance account, with which you can place bets.

How does staking work?

With the advent of the new Proof of Stake consensus algorithm, it became possible to make money on staking cryptocurrencies. But why would someone pay for holding certain cryptocurrencies? To do this, it is necessary to understand how the Proof of Work algorithms differ from the newer Proof of Stake.

The idea of Proof of Work is the fact that when people contribute the computing power of their computer to the search for new blocks in the chain, they get rewarded for it. This process is also known as "mining". The miner receives a reward for the work that his computer actually does.

Now computers can no longer support the necessary computing power in the Bitcoin network, so expensive specialized mining equipment is used, for example, ASIC. Blockchains running on the Proof of Stake algorithm save their users from such difficulties. All you need to earn money is just to keep coins on your wallet or platform.

Thus, with Proof of Work, miners receive a commission for mining, and with Proof of Stake, a commission for staking is paid.

See also how to make money on the fall of bitcoin.

Types of staking

There are three types of staking:

1. Fixed staking. The user chooses the asset placement period convenient for him, after which he receives a fixed payout. If you pick up the coins ahead of time, you will lose compensation.
2. Unlimited staking. With this approach, the user places assets indefinitely and can withdraw coins at any time without losing compensation. In this case, the stakes are much lower than with fixed staking.
3. DeFi-staking. DeFi-staking involves third parties (companies or other users) who take cryptocurrencies from the owners at a percentage. All actions are controlled by smart contracts, so the risk of fraud is excluded. The main advantagesthe advantages of this type of staking are: fast withdrawal of funds (compensation is accrued every day, so there is no need to wait a month) and a high yield of up to 100% per annum, depending on the cryptocurrency and the term.

Binance uses two types of staking: fixed and DeFi-staking.

How to start making money on staking on Binance?

If you want to get started with staking on Binance, you will need a Binance account. Fortunately, it's very simple, as you can create your own account on Binance in a few clicks:

1. Go to the Binance website.
2. Click on the yellow "Register" button.
3. Specify the country where you live.
4. Click "Create a personal account".
5. Enter your email address and a strong password.
6. Enter the verification code that you received by email.
7. Enter your phone number and confirm it.

Then you can deposit cryptocurrency or buy cryptocurrency with a credit card. Your Binance account has been created.

Staking on Binance

Now that you have created a Binance account, you can start betting. At the top of the menu bar, you will find the "Earn" menu item and select "Staking" from the list.

After that, you will be taken to the main screen of Binance Staking, where you can select the necessary cryptocurrency for staking and see its profitability indicators for a certain period.

See also what anonymous cryptocurrencies exist.

The best cryptocurrency for staking

As you can see, there is an extensive selection of cryptocurrencies that you can use for staking. You can see the name of the cryptocurrency, the estimated annual yield, the period from 10 to 90 days and the minimum entry threshold. Theoretically, we can say that the best choice is the highest expected annual return. But in practice, it's a little more complicated, because there are a number of factors that need to be taken into account in order to make the best choice.

Consider the example of the Cardano cryptocurrency (ADA). What should I pay attention to?

1. Minimum threshold. The minimum threshold determines the amount of the corresponding cryptocurrency that you will need to invest in order to participate in the staking. In our example, this is at least 1 ADA.
2. Estimated annual profitability. The ADA yield ranges from 7.75% to 35.67% per annum. Of course, you want to get the maximum possible profit from your bets. At the same time, it is necessary to understand that the higher the yield, the higher the risk associated with exchange rate instability. You can get a large percentage of compensation for staking, but at the same time lose on the fall of the cryptocurrency exchange rate. However, this does not apply to long-term investors who are aiming for big profits in the future, and staking helps them to make additional profits while the cryptocurrency is on the decline.
3. The term of staking. You can choose the staking period for 10, 30, 60 and 90 days. Please note that the estimated annual yield varies depending on the staking period. When choosing the staking period, be guided by the fact that during the staking you will not have access to your cryptocurrencies, you will not be able to exchange or sell them, and the withdrawal of coins before the end of the staking period will deprive you of compensation.

What cryptocurrencies can be used for staking on Binance?

On Binance offers a wide selection of cryptocurrencies for staking, which involves such coins like Cardano (ADA), NEAR Protocol (NEAR), Avalanche (AVAX), Solana (SOL), Terra (LUNA), FC Porto Fan Token (PORTO), BinaryX (BNX), Zilliqa (ZIL), Mines of Dalarnia (DAR), New BitShares (NBS), Axie Infinity (AXS), pNetwork (PNT) Elrond (EGLD), ARPA Chain (ARPA), Binance Coin (BNB), Cosmos (ATOM), Algorand (ALGO), TRON (TRX), NEM (XEM), Dash (Dash) and others. In total, Binance has more than 80 cryptocurrencies for staking, and the list of coins is constantly being updated.

Advantages of staking

• Unlike mining, you can also earn money without investing heavily in expensive computer equipment.
• Does not require technical knowledge or experience.
• Perfect for hodlers.
• A passive source of income.
• Minimum time.

Disadvantages of staking

• You will need a lot of cryptocurrency to get a good profit from this.
• Your cryptocurrency is not under your own control (on your software or hardware wallet), but is ultimately on the Binance exchange.

Conclusions

Thus, staking is a passive way of investing cryptocurrencies. It can be compared to a deposit in a bank. You get a percentage for investing your cryptocurrencies in staking for a certain period. Staking will not make you very rich, but it will allow you to receive additional passive income while you wait for the price of your cryptocurrencies to rise. In any case, staking is extremely limited in terms of risks, and you can always access your own cryptocurrencies.

Read also the article "What is peer-to-peer trading on Binance".