Staking and Baking a Passive Income
My life in crypto started back in 2014. I got excited about this new technology called Bitcoin and blockchain. I never mined it but I did invest a very small amount at the time. I realised it was extremely high risk and I was very cautious as at the time I was on a low income. Obviously today I kind of wished I'd put more into it, but I have learned so much since that I'm just happy to have started my crypto adventure back then. I also made other small investments in some new crypto at that time that I got excited about, I remember buying some Black coin, Dark Coin (now Dash), Quark coin, and a memorably bad investment called Pure Vidz! My experiences with crypto has taught me some invaluable lessons which I believe have helped me make better decisions today, although I am still making mistakes and bad investments!
I work full time. I hate my day job, but like most people, I obviously have to work to live. I'm reaching a point in my life now where I'm thinking about when I would like to retire. There is no way I want to wait until I'm too old, immobile and grumpy to enjoy the good things in life. I want to be able to do the things I like doing whilst I am still young enough to do them. Today I feel like crypto could give me the chance to do this if I invest wisely and figure out how best to use my crypto investments to make a passive income which I could live off. I also have a dream to be a bit of a crypto philanthropist if I were ever in the fortunate position to be able to do that, but that's possibly a story for another time!
I've been lucky recently I have been able to invest a little money each month in crypto. The pandemic has also given me the time to learn more about this exciting technology and all the constant innovations happening within the crypto space, focusing mainly on my aim to make passive income.
I am going to list a few projects that I am personally investing in and explain what my passive income is from them at the moment. I might chart this over the coming months. I want to reach a stage where I can confidently say, I can retire and live off this income. That would be a big life decision and for cautious little me, not necessarily an easy one!
So some of what I am investing in at the moment is...
Staking Polkadot (DOT)
Got to admit, I am a big fan of this cryptocurrency. I don't hold a huge amount, but what I do hold generates me a decent passive income each month. This month for example I estimate that staking my DOT will bring me an extra 1.5 DOT in the month. At today's prices that's around $60. I have been adding to my DOT holdings for the past 6 months since you could buy it on exchanges, so the staking rewards are increasing and these rewards compound if you do not withdraw them. I am using Kraken to stake which gives me around 12% APY. I do have concerns about keeping all my DOT on Kraken, as it is an exchange, and whilst it is a reputable one, we all know that a few exchanges have been hacked in the past. It's all about risk, but I feel like I am reaching the point where I will need to move some of this off to a Polkadot wallet which I am in full control of and from which I can stake, but I need to properly investigate this further to see how easy it is to do. My Kraken experience so far has been good, the staking process is simple, and you can unstake at any time I believe without any penalty.
I have high hopes for Polkadot, but nothing is a guarantee in this brave new crypto world. I do know that sometime later this year there will be the Polkadot parachain auctions which should have a positive effect on Polkadot. There are a number of promising projects who want to bid for a parachain slot and this opens up other possibilities for using (lending) my DOT to these projects to enable them to do this and receive rewards for doing so.
So that's where I am with DOT. $60 a month at current prices. I intend to invest a little more over the next 3 months to build up my capital investment and increase the staking rewards I receive each month.
Baking Tezos (XTZ)
I invested in the Tezos ICO back in 2017. Tezos had a few initial legal problems (which I understand are now resolved), but the blockchain technology was always very promising. It is a very active blockchain project with lots going on. I sold a little of my initial investment, but am now trying to keep my capital and bake it to earn regular rewards. Tezos uses the term 'bake' but it is very similar to staking. You delegate your Tezos holding to a baker and then receive a proportion of the rewards they earn for helping to maintain the blockchain. I use the Galleon wallet to do this, but there are other options. I did use Tezbox in the past, but I don't think that's being maintained any longer so I moved to Galleon. I am delegating to Stakefish and receive around 1.6XTZ each month, which compounds. At today's prices that's around $9 - $10. I'm happy with that as I'm hoping the Tezos price will continue to rise and the value of these rewards will increase. I do not intend to increase my capital at the moment because I want to focus my monthly investments into other projects at the moment.
Staking Cardano (ADA)
I have recently started staking my small Cardano (ADA) investment. I only started this last month so not sure what it will earn me each month yet, but I know it will be less than Polkadot and Tezos at the moment. I am using the YOROI wallet chrome extension to keep and stake my ADA and I have also selected Stakefish as the group to delegate to. Cardano has lots of big plans and is popular with many, but I see it as a little behind others (at the moment) that are trying to do similar things in terms of development. If it develops what it hopes to achieve then this will be a top crypto project, so for me it is one to hold on to.
Staking The Graph (GRT)
I have held some GRT for a few months, thinking about staking it through their network. It's a little more complicated than the others. You have to use Metamask to do this and the high ETH gas fees recently put me off given the relatively small amount of GRT I held, it just didn't seem worth the cost. I bought a little more GRT though and took the plunge yesterday. It still cost me $27 in gas fees (ouch!), but hopefully I can make that back fairly quickly. You also lose 0.5% of the GRT you delegate (eek!) so I am going to see how quick I make that back too. I won't be documenting any passive income from this until I get these initial staking costs back in GRT. This one I see as a bit of an experiment. I like the project, not sure how valuable the staking will be on the small investment I made, but as I had no intention of selling that investment it kind of made sense to see if I could earn a passive income from it (or at least increase my investment).
Low Cap Opportunities for staking on AscendEX (formerly Bitmax)
So, perhaps like you all, I am always looking to find those low cap "gems", those crypto projects which have yet to explode into life in terms of their value. Even better then if I can make a small investment whilst they are cheap to buy and then stake to increase my holding further. There are lots of these, and with blockchain being such a massive area now for development, I expect there will be lots more. I'm not expecting everything I speculatively invest in to moonshot, but I am hoping one or two will and that will put me well on my way to reaching my early retirement goals. I signed up to the exchange AscendEX (formerly Bitmax), not really one I knew much about, but my research showed me that there are some good opportunities to buy low cap crypto projects on the platform and stake them to increase the holding. I invested approximately $50-$100 in a number of these as follows:
- PlotX (PLOT) - estimated staking APR of 40% as of today - developing DEFI prediction markets - team from Nexus Mutual - PlotX website
- Geeq (GEEQ) - estimated staking APR of 36% as of today - building a safe, flexible and cheap multi-blockchain platform secured by a novel protocol with a patent pending - Geeq website
- Stafi (FIS) - estimated staking APR of 17.82% as of today - creating a decentralized protocol providing liquidity of deposit assets - Stafi website
- Terra Virtua (TVK) - estimated staking APR of 18% as of today - developing an immersive collectible platform - Terra Virtua website
- Dafi Protocol (DAFI) - estimated staking APR of 20% as of today - Dafi "creates synthetics to reward networks, for long term users" - Dafi protocol website
- Kira Network (KEX) - estimated staking APR of 30% as of today - developing a decentralized network enabling market access to digital assets in the interchain ecosystem - Kira Network website
- LTO Network (LTO) - estimated staking APR of 6.7% as of today - an active hybrid blockchain designed for easy integration of business applications - LTO Network website
- e-money (NGM)- estimated staking APR of 13.31% as of today - a European-based blockchain (Denmark) being developed for global payments - e-money website
- Nord Finance (NORD) - estimated staking APR of 54% as of today - creating an advanced decentralized finance ecosystem - Nord Finance website
Have to keep on eye on those APRs which can change at any time and staking periods can also end. Unstaking usually involves a cooling off period unless you're prepared to pay a hefty fee. This doesn't bother me as I see these as long term investments. I have a couple of favourites here which I hope will do well if they reach their development goals. Average monthly staking income from them so far is about $10 on the small investments I have made - this is compounded and added to the initial investment to be staked. If their value increases so will my monthly income. I haven't tried to withdraw yet from AscendEX as I have had no reason to.
What do you guys think? Is this a risky strategy staking on a smaller exchange like this? It avoids ETH fees, but you never know in crypto if your funds are safe when you don't hold the keys. I am a little anxious and might look to move at least some of these off of the exchange at some point.
Atomic Wallet staking
Last but not least, Atomic Wallet, something that has been heavily promoted on here. Useful for staking some crypto. I use it to stake a small amount of Band Protocol and Neo, but the amounts I receive are negligible at the moment and this is more about waiting for these crypto to become more valuable. What are you experiences of using Atomic Wallet for staking?
I realise there are many more cryptocurrencies I could stake and continue to check out the possibilities. I am also experimenting with some DEFI apps for further passive income, and earning 'interest' on Bitcoin and Ethereum using Blockfi , Nexo and Blockchain. It's all part of my goal to retire earlier than I would have done. As early as I can in fact! It would be good to hear any thoughts, ideas, and any strategies you might be using that I could look into.
This post obviously isn't financial advice in any way, I am no expert and, like many of you, just a financial novice learning about crypto as I find it interesting and exciting to be invested in. What I write here are just my own thoughts, observations and opinions. Always do your own research (DYOR!!) on anything crypto-related. You might come to different conclusions once you have researched these same projects. Whether you do or not, it is definitely best practice in the wild west of crypto to fully fact check and research projects you are thinking of investing in, I always look to learn about the teams involved in them for example. Unfortunately we know that there are some bad actors out there who just want to make off with your hard earned cash. The only way you can try to mitigate the risk of that happening is by thoroughly researching the projects and their teams before investing.
Thanks for reading and good luck all!