Hey everyone :) Hope you've all been well and the world has been a kind place since last we met. How crazy has the crypto world been of late? BTC going bullish, alts suffering because of it. Even ten years on we are still well and truly in the wild west. So in this article I'm going to cover staking, a method of earning crypto simply by holding it in a wallet. First off here's a very basic explanation of what staking actually is:
Staking is the process of confirming transactions, just like mining, using coins already owned, unlike mining. So what happens is your wallet is processing transactions, checking to make sure the person who is shuffling coins around actually owns those coins and in fact has the right to shuffle (everybody's shuffling...) those coins to begin with. When enough wallets agree that all this shuffling is legit a brand new block is added to the chain. This method of consensus has a few advantages over prove of work, otherwise known as mining. For starters you don't have to invest a lot of money in equipment, you aren't using GPU's or other specialised equipment. One GPU can quite easily cost in excess of $1000.00 and seriously, it will never pay itself off. The there's the electricity that it takes to run a mining rig. I ran a small 6 GPU rig for a 3 months and the power cost came to around $500.00, double what it cost to run the rest of my house. Most people can't make money from mining, it is also an absolute disaster for the environment. It estimated that the current global power consumption of bitcoin mining is almost the same as the entire power consumption of Ireland*. That's just bitcoin. There are literally thousands of other coins being mined as we speak.
By contrast staking will cost you the initial investment in coins, this will vary greatly depending on the coin. You can start staking with a good return from as little $100.00, you can also spend over $300,000 to stake the most expensive of coins. You won't be using anywhere near as much power either.
Let's use my mining rig as an example, it's just a 3 card rig, currently using 435 watts at the wall, the investment for the cards alone came to around $600. At the current price of the coin I'm mining I'm generating about $3.00 a week. I'm losing money, I enjoy mining as a hobby and as a way to mine coins that aren't yet on exchanges, if it wasn't for the enjoyment it brings me I wouldn't be doing it. So to mine at a very basic level you will need to spend, including the computer capable of running everything, at leat $1200.00AUD. Then the recurring electricity charges of around $100AUD per month.
Using the same computer for staking: I wouldn't need three GPU's, just one, and that's only so I can see what's happening on my screen, there's $400 saved so far. As most staking wallets need to be open I would have the power costs of running the computer. My PC uses 135 watts to run, so far cheaper and much more environmentally responsible than the 485 watts I was using while mining. And the return? This again will vary greatly in how much you put in to begin with and which coin you decide to stake. I've decided for this article I would set myself a budget of $600, the same I paid for my three second hand GPU's. Any cheap PC or laptop can do this, as long is it can run the wallet then it can stake. You can do this on a $50.00 laptop, or on your existing computer, just remember though that most staking wallets need to be turned on to earn any coin, I strongly recommend if you are going to do this then have a dedicated machine.
OK, for my $600 I'm able to buy 50,000 of the particular coin I've decided to use, $518.70 to be exact. It's current annual ROI (return on investment) is 170%, this is based on the 177 days it has been in operation. So if I had invested my $518.70c 177 days ago I would have made my money back and be in profit. The same 177 days spent mining with the same initial investment, remember GPU's only, I would be deeply in loss
There are other factors to keep in mind of course, coin appreciation/depreciation, the volume of the coin being traded and how quickly the coin uptake is. Your 170% return can, and if the coin is successful will, turn into 20% and lower. If the coin is unsuccessful you could lose everything. Make sure you do your research though, if you do then the chances of losing money are quite low, so on the risk vs reward scale staking is a damn good investment. Sure, 20% is possible in other areas but you won't be getting the very low entry costs as you do with crypto. So as far as building our future wealth and providing us with a passive income is concerned staking is definitely in! Next article I'll be looking at what I consider the 3 best projects for staking that are also affordable to enter and easy to setup. Till then don't forget to subscribe and tip :)
*https://www.economist.com/the-economist-explains/2018/07/09/why-bitcoin-uses-so-much-energy
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