How to Become a Staker without Having a Staking Operation

Thousands of people are staking their crypto and generating crypto rewards while they eat, sleep, and go to work. But having your own staking operations can appear very daunting. Beyond the computer rig and line of code required, staking on your own has a high capital barrier. But worry not. We are here to teach you how to become a staker without having a staking operation! We are past the early days of cryptocurrency and several avenues exist for you to take advantage of staking.

Different Types of Staking Operations

While Proof of Stake remains the most popular of staking methods, other similar consensus mechanisms provide opportunities for stakers to earn rewards. At the same time, many other cryptocurrencies such as Solana, Cardano, and Atom support staking. Let’s define the different types of staking operations:

1. Proof of Stake (PoS):

In PoS, the consensus mechanism selects validators to create new blocks and validate transactions based on the amount of crypto staked. By locking in crypto, these validators have skin in the game and are deterred from performing malicious actions as they can lose the staked coins. Under PoS, certain factors influence the chance a validator gets picked. This can include the amount of crypto locked up as well as the length of time. In reward for their services performed, validators receive newly minted coins native to the network. PoS can limit the validation process to wealthier crypto users. After all, if the amount staked counts as a factor in validator selection, then those with more have a higher chance of obtaining staking rewards more frequently as well.

2. Delegated Proof of Stake (DPoS)

DPoS seeks to address some of PoS’ limitations by introducing democratic infrastructure and processes. Stakers pool their tokens together and assign these to a delegate. The delegate with the most tokens will go on as the chosen validator (also known as a witness) and will earn staking rewards. The rewards are then distributed to the supporting stakers based on the amount each user staked. With this voting process, even a small player can still participate by placing his or her vote with a delegate.

Delegated Proof of Stake, from OKX

Furthermore, network control continues to remain with the stakers as they can choose to withdraw their vote from one delegate and place it with another.  Popular cryptocurrencies such as ATOM (Cosmos) rely on DPoS. While DPoS solves the wealth centralization issue in PoS, it can lead to centralization of validators. Going back to Cosmos, the blockchain only has 180 validators. Should there be performance issues, these may disrupt network functionality. In contrast, Ethereum has over 850,000 validators spread out across 6,000 nodes throughout 80 countries.   

3. Masternodes

Some blockchains operate on a masternode consensus mechanism. While there is staking involved, one should not confuse masternodes with proof of stake as the former adds an additional layer to strengthen the network and is commonly combined with mining or staking. Unlike nodes which can become transaction validators, masternodes operate additional network services. PIVX, which uses staking (first layer) and masternodes (second layer), utilizes masternodes for instant transactions and voting purposes on PIVX DAO, the network’s Decentralized Autonomous Organization. While anyone can submit a proposal, only masternodes can vote, playing a direct hand in the network’s future. To start a PIVX masternode, one needs to stake 10,000PIV (approx. USD1,900). While capital is higher than regular staking, rewards are also higher. A masternode earns 3 PIV while staking returns 2 PIV per block.

Becoming a Staker without a Staking Operation

Luckily, individual players can still benefit from their staked assets without having the technical knowhow of setting up a staking operation. Numerous platforms aim to cater to the non-technical crowd by providing a seamless experience that can be accessed with just a wallet or exchange account. 

Staking-as-a-Service Platforms (SaaS)

SaaS is a form of staking wherein an intermediary handles the hardware and software requirements of staking. Third parties handle the node operations on behalf of the stakers for a fee.  No more thinking about buying computer parts, having a great internet connection, and watching for network updates. A staker locks up his or her desired cryptocurrency, chooses a validator, and receives block rewards. There’s a caveat, however. While a staker maintains control of his or her staked crypto by possessing the withdrawal keys, the validator keys are handed over to the third party to perform the validation process. SaaS does carry some risks. If the third party does not maintain the node properly, your funds could be penalized. Under a SaaS service, different cryptocurrencies may require a minimum staked amount. For Ethereum it’s 32 ETH (USD50,000) while for Polkadot it’s 120 DOT (USD 450). Other cryptocurrencies do not require a minimum.    

Stakefish Offerings

  Established in 2018, Stakefish remains one of the most trusted and popular SaaS platforms, with over 758 thousand ETH staked throughout its history. Its user-friendly dashboard allows stakers to manage their validators, and its consistent uptime ensures users of maximum rewards.

Staking Pools

Some users may choose to combine their funds with other interested people through pooled staking. Many staking pools do not require a minimum staked crypto amount, making staking accessible to virtually anyone.  An operator or administrator manages the pool and maintains the validator node. Meanwhile, rewards are handed out based on the amount and duration staked within the pool. Smart contracts run the pool in a trustless and automated environment.  From a non-custodial wallet such as Metamask, a staker will deposit funds into the smart contract and, in return, will receive returns and the locked tokens when the staking period ends.  

Lido’s Staking Platform

  With no minimum placement and a 10% charge on staking fees, Lido Finance operates the largest Ethereum staking pool, with over 30% of the Ethereum supply locked on the platform. Important to note that staking pools and exchanges also offer what is known as liquid staking. A holder deposits their tokens, such as ETH and receives a liquid staking token (LST) of equivalent value in return. In the case of Lido, you deposit ETH and receive the liquid token stETH which can be used in trading and decentralized finance applications.  

Centralized Exchange

Many centralized exchanges such as Kraken, Coinbase, and Binance have also created staking services for their customers. Similar to staking pools, users can place much smaller amounts versus the regular 32ETH placement, and stakers don’t need to worry about all the hardware and software required. The difference lies in the custodial aspect of exchanges. An exchange customer makes an account and deposits cryptocurrency into the platform. The individuals and organization behind the exchange then manage the staked ETH. If anything happens to the account or the exchange itself, a user may lose access to the cryptocurrency.

Binance ETH Staking

Binance offers Ethereum staking on its platform with no minimum placement. Similar to Lido, a liquid staking token called BETH is returned for the staked amount. This can be traded in the spot market.

Wrapping Up: Time to Stake

Earning and staking crypto doesn’t have to be too complex. Even without large capital or your own hardware, you can earn passive income from your crypto through various platforms and methods, such as pooled staking and centralized platforms. Make sure to perform your due diligence before committing any assets. Happy Staking!  

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