What is staking?
Staking is a way cryptocurrencies that use the Proof of Stake (PoS) model verify their transactions. It’s the process that involves committing your crypto assets to support a blockchain network and confirm transactions. This usually happens via staking pools. Participants can earn rewards according to how many coins a person holds.
What is Proof of Stake?
Unlike Proof of Work (PoW) where the algorithm rewards miners who solve a mathematical problem that creates a new block, the creator of a new block is chosen from a pool of users that have staked a certain amount of cryptocurrency. This means that in the proof of stake system there is no puzzle to complete and so no reward for doing so. Instead, the miners take a feat from every transaction. This also means that because nobody is competing to solve every block, there's no massive energy requirement. This process is much more energy-efficient than the Proof of Work (PoW) mechanism.
The penalty for approving a fraudulent transaction is the possibility of losing part of their stake. This sum could easily be worth thousands of dollars. In order to take over a proof of stake network, one would need to own at least 51% of the supply of the cryptocurrency on that chain. This would be an expensive undertaking for any major player.
How to stake on Coinbase?
Staking on Coinbase is pretty straightforward. You can choose to become a full validator or delegate tokens into staking pools.
The first option might be challenging to most Coinbase customers as it requires a substantial minimum investment (for example 32 ETH), technical knowledge, and a computer that can run validator nodes non-stop.
Fortunately, Coinbase created a simpler way to participate in the staking process. You can now delegate your crypto assets into staking pools. There is no minimum investment to entry and investors don’t need to operate their own validator hardware. You retain full ownership of your assets and earn rewards while Coinbase stakes and validates transactions on your behalf.
What cryptocurrencies you can stake on Coinbase?
These assets earn staking rewards on Coinbase:
- Algorand (ALGO) - 0.45% APY
- Cosmos (ATOM) - 5.00% APY
- Ethereum (ETH) - 4.50% APR
- Tezos (XTZ) - 4.63% APY
- Dai - 0.15% APY
- USD Coin - 0.15% APY
Are there any fees for staking on Coinbase?
Remember that Coinbase takes a commission on all rewards received. This sum is calculated depending on the number of staking participants of each network.
There is also a small fee for every single transaction on Coinbase.
Who can stake on Coinbase?
Staking is open to anyone who wants to participate, however only with an assumption that your identity has been already verified on Coinbase.
Are there any risks for staking on Coinbase?
The volatility of crypto prices is a well-known issue. Prices can drop quickly, which could outweigh any interest you earn in rewards.
There might be a minimum lock-up period. It’s not possible to transfer your assets for a certain period of time.
How to start staking on Coinbase?
You can use the Coinbase webpage or their IOS/Android native app.
First, you need to create an account, verify your identity, and transfer to your Coinbase wallet cryptocurrency you intend to stake. Once you deposit the tokens, staking automatically begins, and rewards will be sent when available.