Imagine sitting on your hands and doing nothing while your computer gives you money. Possible? Yes! If you’re staking your coins.

*Disclaimer: This is not financial advice, the opinions expressed in this article are for educational purposes only.


A Quick Introduction

Imagine sitting on your hands and doing nothing while your computer gives you money. Possible? Yes! If you’re staking your coins.

You may have heard of mining bitcoin; but mining is noisy (it sounds like 10 hair dryers blowing at once) and consumes too much electricity. Also, your house might catch on fire.

By contrast, staking is silent and less energy intensive: you put your tokens in your wallet … and it gives birth to more coins. For example, you can stake with QTUM, ARK, NEO, ZEN, VEN (just to name a few!)

In this article, I’ll give you a step-by-step guide you on how to stake. By end of this article, you’ll learn which coins to stake to earn passive income while you sleep.

Sounds good? Let’s get to it.


Table of content:

1. What Exactly Is Staking? How Does It Work?
2. How To Stake Your Coins For Fun and Profit
3. What is the ROI from Staking?
4. Let’s Evaluate Staking Risks!
5. Conclusion

What Exactly Is Staking? How Does it Work?

Everyone knows about mining bitcoin — but what about staking?

Staking (or Proof of Stake) is pretty similar to Proof of Work … but instead of noisy machines grinding away to earn you free coins, you ‘stake’ your coins (put in a certain amount that will be lost if you’re a ‘bad actor’) to secure the block. In return, you gain coins as a reward. Pretty simple!

Think of staking as gaining dividends or interest on your crypto “bank account”.

There are two types of staking: being a “masternode” (Proof of Stake), or being chosen as a “delegate” (Delegated Proof of Stake). To be a masternode, you need to have a computer with the software running, as well as having it connected to the internet 24/7. For “delegated proof of stake” (DPOS) you can just leave the coins in your wallet and close the software … and still earn free coins! Examples of DPOS would be ARK or NEO* (technically NEO is dBFT)

Is it hard to be a masternode? Absolutely not.

For example, I use an old laptop to stake my QTUM. Basically, you run the wallet software and have it connected it to the internet 24/7 to earn the free coins. If you don’t have an extra machine around, that’s okay. You can rent a machine (Virtual Private Server) for $20 a month to stake your coins.

Next up, let’s learn how to stake your coins …


How To Stake Your Coins For Fun and Profit

“I’m ready to stake some coins for that nice passive gains! Show me how!” Sure, I’m here to please.


Proof of Stake

For QTUM, here’s what you do:

1. Download the wallet from https://qtumeco.io/wallet

2. Install it.

3. You want to encrypt your wallet. It will prompt you to enter your own pass phrase. (I write down my pass phrase on a paper; plus, I use 7 random words for extra security)

4. Be sure to back up your .dat file on the options menu. Remember: encrypt it first, then back it up. (really important!)

5. Put the QTUM into your wallet

6. On the menu, be sure to “unlock” your QTUM wallet for staking (important). Leave your wallet opened and connected to the internet 24/7

7. Now have your QTUM wallet opened, have your coins mature, and enjoy your free QTUM.

You can use a Virtual Private Server, an old laptop, or a raspberry pi to host your masternode. Whichever is convenient for you is great.

There is little to no technical barrier involved: it’s a just pointing and clicking. Nothing is stopping you from staking your coins like a boss!


Delegated Proof of Stake

I personally prefer Delegated Proof of Stake because you can put the coins in your wallet without having it connected to the internet 24/7).

A delegate functions much like a masternode. For ARK’s example, there are 51 delegates that secure ARK’s blockchain. But to be a delegate, they need to be voted into the top 51. When you vote for a delegate, they will stake the coins on your behalf, and then you get your share (this is why you don’t need to leave your wallet connected and opened 24/7)

How to stake your ARK:

1. Download the official ARK wallet at https://github.com/ArkEcosystem/desktop-wallet/releases

2. On the main page of the wallet, click “create new account”

3. Write down your seed words

4. Buy and transfer ARKs from an exchange (like Binance) to your ARK address

5. On the wallet main page, click “vote”. You want to vote for a delegate, I recommend “biz_classic”

6. You will get your free ARK 24 hours later!


“Sounds abit too good to be true. What is the ROI from Staking?”

Generally speaking, you can expect 3–6% ROI annually (not spectacular, but at the very least it beats inflation). If a coin promises 20% ROI per month then you should run away. That would REALLY be too good to be true.

Here is a list of staking calculators to see your daily, weekly, monthly and annual ROI percentage:

ARK: https://classicdelegate.biz/calculator

PIVX: http://pivx.cryptonode.co

NEO: https://neotogas.com/

QTUM: https://qtumexplorer.io/qtum-staking-calculator

VECHAIN: https://thorcalculator.com/

These are just some of the coins that you can stake, or be a masternode, for passive income.

There are new coins coming out every day that use the POS or DPOS model; be sure to read the whitepapers and to see if they mention “stake of proof”, “staking”, “masternode” or “delegate stake of proof”. If you like what you see, go ahead and set up a new stream of passive income!


Let’s Evaluate Staking Risks!

Staking has some risk (but so does driving). Say you bought NEO at $60 and you’re expecting 3% per annum. What happens if crypto goes on a prolonged bear market and NEO drops down to $35 or lower? If you’re staking, you’re continuously getting NEO for free: even in the worst case, you’ll be gradually bringing your cost down. On the flip side, if NEO goes up to $150+, you’ll be laughing all the way to the bank.

The secret — out in the open — is to buy a massive number of tokens to stake (for example, ARK was at $0.01 during ICO and now it’s at $2.50. I know a guy who bought 1 million ARK to stake … you do the math). However, you’re taking much bigger risk by being an early adopter.

It’s important to do deep research on the project (by looking at the team and whitepaper, use-cases, market cap, the locked period for the tokens etc.) and decide for yourself if it’s worth investing early and going big.


In Conclusion … It’s Time To Stake Your Coins Like A Boss

If you like passive income but hate noisy machines, then staking your coins is the way to go. You make free satoshis while you sleep; however, if you pick the wrong coin, it could tank to zero (developers abandoned the project, it no longer has a supporting community etc.)

Proof of Stake is the future, I suspect. Even Ethereum (the 2ndmost popular cryptocurrency), is looking to move toward Proof of Stake because it retains a high level of security, but uses less energy. The best part is, anyone can stake their coins for profit — it’s time for you to join the fun and make some money.

Setting up a masternode isn’t hard, it has a much lower barrier to entry, and anyone can become a masternode!

If you’re lazy like me, you can stake your coins that feature DPOS, so you can shut down your wallet and still make free satoshis. Life is good when you’re making satoshi gains while you sleep.

Thanks for reading and stay tuned for the next CryptoGrinders article. Give this article a thumbs-up and join our telegram channel here.

I’ll see you in the next article, my friends.

PS: Found this article informative? Then check out …

How To Construct Your Portfolio Like A Pro

How To Make Your First $100K With Crypto


Brian Li

13 June 2018