One great form of capital intensive passive income has got to be staking rewards. For anyone involved in the cryptocurrency space, this is our modern day stock dividend. Just like stocks, the currency you choose to stake will provide a different yield from the next. On top of this, where you choose to stake will also matter…let’s dig in!
We’ll look at Cosmos (Atom), Tezos (XTZ) and Algorand (Algo) in this example. Prior to selecting where to store your coin(s), we need to determine which we want as part of our portfolio. To do this, it is important to look well beyond what each coin is paying out in staking rewards as tempting as this might be. We should be examining its purpose and use case(s) in the blockchain ecosystem, the developers and investors behind the project, the maturity and future-proofing of the coin, what exchanges and wallets support the coin, it’s market cap and operating history. We could go deeper, but this will give you a more comprehensive view than just the APR.
With this out of the way, we can now look to the APR of the coin and if there is any lock-up period. The latter may be an important consideration if you need to get out of a coin quickly due to negative news and the possibility of a price correction which can quickly gobble up your rewards.
Let us now compare three exchanges. If we are to look at Cosmos on Coinbase, Binance.US and Exodus we see a huge discrepancy in APR’s. On Coinbase, Cosmos coins are giving a 5% APR with no lock-up, on Binance.US it varies from 6–9% with no lock-up and on Exodus it is 9.65% APY (which is 9.25% APR) with a 21 day lock-up period. Given this, which would you choose? Many would chase yield and go with Exodus, especially if you plan to HODL and don’t mind price fluctuations. There are others however, that may choose Binance.US as we have seen Cosmos range from $5-$40 this year alone. I might use a dual strategy of Exodus at the start of a bull run but switch to Binance.US near the end of the run. I would want to jump out quickly into a stable coin before the crypto winter strikes to preserve value and jump back in near the next low to grow my portfolio.
Tezos APR is 4.63% on Coinbase, 6%-7% on Binance.US and 5.52% on Exodus. Algorand APR is 4% on Coinbase, 8%-10% on Binance.US and 4.76% on Exodus. It is evident that interest offerings vary widely from exchange to exchange and with each comes certain benefits and restrictions.
Choosing which to go with is a very personal decision based on your strategy, goals and country restrictions. I hope you are now armed with just a little more information and insight to grow your portfolio faster and preserve your wealth when the market contracts.
p.s. This is for educational purposes only and does not constitute investment advice. Do your own research.
