Crypto Staking Guide: Top 10 crypto staking strategies
If you're a crypto investor, you need to understand staking, a strategy that has quickly become one of the most popular ways to generate passive income for crypto holders.
In essence, it involves locking up your assets to secure a blockchain and validate its transactions. In return, you are rewarded with additional tokens, usually paid out periodically.
Crypto staking is important because it aligns the interests of token holders with the health of blockchains, offering an energy-efficient alternative to the traditional mining process used in Proof of Work systems, while simultaneously allowing participants to earn rewards from their holdings.
In this guide, we will explore 10 different strategies of crypto staking, how centralised exchanges simplify the process, and how you can leverage these opportunities to engage in staking in a transparent and user-friendly way.
10 Best Staking Strategies
1. Direct Staking
Direct staking, which is the native method of participating in the staking process, involves locking your assets directly on the blockchain to participate in consensus mechanisms, such as Proof of Stake (PoS).
In this process, you lock your tokens directly on the blockchain to help validate transactions and ensure the network’s security. In return, you receive rewards in tokens, which are distributed based on the amount of cryptocurrency you have “staked.”
This model differs from mining in Proof of Work (PoW) blockchains by eliminating the need for massive computational resources, relying instead on the number of tokens committed to the validation process. To ensure network security, validators who act maliciously face penalties, such as losing part of their tokens in a process known as 'slashing' .
The advantages? Direct staking has the advantage of keeping full control over your assets. In this model, you maintain your private keys, and the tokens are directly under your custody. Although returns can be attractive, this process requires some technical knowledge to set up the necessary infrastructure (such as a validator node), especially in networks that require a minimum number of tokens to participate, like Ethereum, which requires 32 $ETH to become a validator.
In summary, direct staking is an excellent option for those who want to be directly involved in the functioning of a blockchain and earn rewards, but it requires some technical knowledge and a certain immobilisation of assets.
Examples:
- Ethereum (requires 32 $ETH to become a validator)
- Cardano (using the Ouroboros PoS protocol to validate transactions)
- Solana (allows direct staking of $SOL to validate transactions and create blocks)
2. Cold Staking
Cold staking involves keeping tokens in a hardware wallet (such as Ledger or Trezor) for offline staking, which significantly enhances security since the assets remain offline .
While this provides stronger protection against online attacks, the downside is the lack of flexibility, as you need physical access to the device in order to perform transactions.
Example:
- Ledger and Trezor (for staking Ethereum, Tezos, and others)
3. Fixed-Term Staking vs. Flexible Staking
In the fixed-term option, you lock your tokens for a predefined period to earn higher rewards. However, the tokens remain unavailable until the end of the lockup period, which can make it difficult to react to sudden market movements or take advantage of short-term opportunities.
In contrast, flexible staking allows for the withdrawal of tokens at any time, offering greater liquidity but typically lower rewards. The choice depends on your financial goals, risk tolerance, and how much flexibility you need to navigate the market.
Examples:
- Fixed-Term Staking: higher returns, less flexibility
- Flexible Staking: lower returns, more flexibility
4. Delegated Staking
Delegated staking allows you to delegate your tokens to validators who handle the validation work for you. This method is ideal for those who want to participate without the need to set up a validator node, which requires technical knowledge. It's like taking the weight off your shoulders!
In Delegated Proof of Stake (DPoS) networks, such as TRON, validators are selected based on the number of tokens delegated to them. The reward is then distributed proportionally among all delegators.
Examples:
- TRON (delegation to "super representatives ")
- Tezos (the “baking ” system for validation)
5. Liquid Staking (LSDfi)
Unlike other forms of staking, in liquid staking, your tokens are locked, but you receive representative tokens (e.g., $stETH for $ETH) that can be used across DeFi platforms for additional opportunities. This maintains the liquidity of your assets while still allowing you to earn rewards.
Example:
- Ethereum staking pools on Lido and Rocket Pool (Ethereum staking with receipt of $stETH or $rETH )
6. Pooled Staking
Pooled staking allows investors with a limited number of tokens to join forces, increasing their chances of validating blocks and earning rewards. After all, teamwork makes the dream work! The rewards are distributed proportionally to each member's share in the pool.
While it’s an easy way to participate without needing a large number of tokens, the rewards tend to be smaller due to the division among participants. So, while teamwork is essential, choosing the right pool is crucial to maximise your returns.
Example:
- Ethereum pools on Rocket Pool (pools for participants with less than 32 $ETH )
7. Staking On Platforms
Some platforms offer an easy way to reap the benefits of staking without having to interact directly with the blockchain, making the process more straightforward. They handle all the technical infrastructure, making staking accessible and hassle-free for everyone.
At SwissBorg, we make it simple with SwissBorg Earn . Our platform offers a range of staking options, including popular tokens like $USDC , $ETH , and $SOL , so you can tailor your investments to match your risk and return preferences. Unlike many popular crypto platforms, we provide full transparency over the protocol used to generate your yield rate so you can be confident in how you are earning on your crypto and perform extra due diligence should you wish to.
8. Yield Aggregators
Yield aggregators are DeFi platforms that optimise the yields on your assets by moving them across different protocols to maximise returns.
They use algorithms to find the best reward opportunities. The advantage is automation and risk diversification, but like any DeFi platform, there are risks associated with market changes or protocol failures.
Examples:
9. Layered Staking (Staking in DeFi)
Layered staking involves using DeFi platforms to add an extra layer of yield to your staked tokens. By combining traditional staking with other DeFi strategies, such as yield farming, you can increase returns.
However, this can also add complexity and increase risks, as it involves multiple protocols and yield opportunities that need careful management.
Exemple:
- Uniswap and Curve (examples of DeFi platforms that facilitate additional yield through liquidity pools , e.g., $ETH/$stETH pools)
10. Non-Custodial Staking
Non-custodial staking refers to any approach where you retain control of your own assets, without delegating that responsibility to a third party, thereby eliminating the risks associated with relying on platforms such as exchanges. This method offers greater security, as your funds are not exposed to hacks on platforms, but it also demands more responsibility, as you must manage the security of your tokens yourself.
Example:
Conclusion
In this guide, we've explored the diverse range of staking strategies available to crypto investors, from direct staking to more complex DeFi integrations. Each approach caters to different risk appetites, technical knowledge, and liquidity needs.
As with any investment decision, it's essential to DYOR (do your own research), understand the specific risks and benefits of each method, and decide which approach works best for you.
To help you further evaluate your options, we've summarised the pros and cons of each staking strategy in the table below. Use it as a quick reference to determine which strategy aligns best with your goals and risk tolerance.
