Cryptocurrency is a technology that not only could change your life financially but could change the world forever. Most people who come to the crypto market are hoping for the first option. They dream of a future where retiring could be a realistic scenario, or where they could live off passive income earned from crypto.
Unfortunately for most people, this is a scenario that will never come true. To win the game, you must know how the game actually works. Many are shocked to find out that it is actually rigged against them, and that they purposely aren’t taught the financial literacy skills they need in order to succeed.
The harsh truth is that you will never get ahead by simply saving cash and putting it in the bank. As the years go by, inflation weakens the spending power of your cash. Suddenly, your $20,000 that would have been enough to buy a house 50 years ago likely wouldn’t even be enough for a down payment in today’s world. If the inflation rate is 5–10%, but your earned interest is less than that, by keeping your money in the bank. Then you are slowly becoming poorer as time goes on.
Cryptocurrency offers a solution to this that is called staking. You are paid a reward by locking up your coins to earn interest as a reward. While this sounds similar to earning interest for keeping cash in the bank. It is different in two key areas.
The first is that staking rates are usually higher than what banks offer. By staking Ethereum, you can regularly earn somewhere between 4%-7%. Other blockchains like Polkadot offer even higher rates near 10%.
The second key trait that sets it apart from keeping cash in the bank is that blue-chip cryptocurrencies are likely an asset whose value will appreciate over time. While the spending power of your dollars decreases each year. Your Ethereum is worth roughly $2,400 per coin today, and could be worth $10,000 two years from now. Not only is the value of your asset increasing, but that also means the interest being earned in terms of dollars is increasing as well. A double-whammy. All of a sudden, that small staking reward has become something much more substantial.
If cryptocurrency sticks around for the long term and goes mainstream, it is likely that this could be how most people strive to retire. By constantly earning an income by staking, even while sleeping.
As always, when it comes to investing in crypto, there is extreme risk. No one knows how this industry will play out, and the market could disappear someday. While staking interest in terms of dollars increases during bullish days, it also decreases during bearish days. Those who strive to build a crypto portfolio with a strong focus on staking are betting that prices will not only continue to rise. But also that their project will survive in the long term.
Personally, I have devoted a significant portion of my crypto portfolio toward Ethereum and a few other staking projects. It’s my hope that this will provide me with an excellent source of passive income in the future.
How about you? Which cryptocurrencies do you stake?
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