Earn Interest and Dividends
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Introduction
In fiat finance, there are several options to earn by depositing your money through low risk methods, such as bonds and savings accounts. The crypto equivalent is called staking, where you “lend” your crypto and you receive a certain percentage of what you lend. Usually, annual percent yield (APY) is used to compare the ROI when you stake your crypto. So, use this to determine your ROI. In this article, I’ll go over staking through the Exodus wallet and how they pay out is similar to certificate of deposit (CD), savings account and dividends.
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What happens when staking?
Before we get into the details of what to expect when staking, let’s talk about how you’re able to get rewards for staking. Just like any other type of financial contract where you lend your assets to someone else, you receive some fees. This type of staking is part of Decentralized Finance (DeFi). In this field, there are many reasons for borrowing as part of DeFi. Some exchanges need to borrow crypto for margin, options, and futures trading. Essentially, the exchanges obtain fees for offering these services to their customers. As you stake your crypto, you get a portion of those fees.
In other cases, you can stake your crypto as an operator of the blockchain network. For instance, proof of stake (PoS) as an alternative to proof of work (PoW), your stake is used to validate transactions on the network. This usually requires you to run a node and your stake is used as collateral that you are not malicious. If the network finds that you are unreliable, lying or something else, you can lose your stake. For some utility crypto, such as Presearch or Flux, you stake your crypto to run a search node that returns search results or a flux node that provides compute respectively.
Staking on Exodus
On the Exodus wallet, you can stake Solana, Cosmos, Tezos and others. Exodus uses a third party staking service called Everstake to stake your crypto on your behalf. You can access the staking on the top right of the wallet UI. The list of the wallet shows the yearly APY next to the crypto name as a percentage if you can stake using Exodus. Once you are in the wallet for a crypto, you can click on the rewards icon on the top right to see the staking feature. You can either stake all or some of your crypto and each crypto has different rules in terms of yearly APY, time to your first pay out, how rewards are redeemed and how unstaking work.
For Solana, it takes about 4 days for you to start earning rewards once you stake SOLs. The rewards accumulate until you unstake. Therefore, this is similar to a certificate of deposit (CD) where you deposit some money for a certain amount of time and you receive your interest when you get your money back after the originally agreed time has passed. There’s 2–4 days for your unstaked SOLs to be available in your wallet. Hence, this is a CD with 2–4 days to withdraw but it is open ended in that it can be deposited for an indefinite amount of time. Note that there are other staking services where you can stake for some set of months, just like a CD. In the Exodus wallet, your rewards accumulate hourly or less. You can check your wallet and your reward will change by a small amount.
When you stake Tezos through Exodus wallet, it takes 35 days before your staked Tezos start earning rewards. The rewards are added to your staked Tezos every 3 days for the balance 35 days ago. This means that your Tezos is compounding every 3 days with a 35 day delay. Therefore, Tezos staking is like a savings account where you earn interest on your balance every 3 days. No documentation on how long it takes to access your Tezos after you unstake. However, you’ll be receiving rewards for 35 days after you unstake to pay you for that 35 day waiting period in the beginning.
Exodus wallet can also stake Cosmos. You start earning rewards right away. Your rewards accumulate at less than hourly rate. You can claim your rewards at any time and it’ll be deposited into your Cosmos wallet. If you want to add your rewards to your staked Cosmos, you have to do this manually. Note that there are network fees for claiming rewards and staking more Cosmos. You’ll have to do some ROI calculation to find the best frequency to compound your staked Cosmos. Unstaking Cosmos takes 21 days.
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Conclusions
As the crypto industry matures, financial opportunities, such as staking, are opening up. Due to its decentralized nature, crypto can offer the traditional fiat finance through DeFi and new opportunities in earning by contributing to the well being of the blockchain network. Unlike fiat finance, crypto staking is available 24/7, 365 days a year. Many wallets and exchanges are offering them to their customers, making it more accessible. No one will know exactly what we’ll have in 2, 5, or 10 years, but one thing is certain. The growth of the industry will continue as new ways of using crypto are tried. Some will fail but others will succeed. And the ticket to get on this wild ride is pretty cheap and easy to get.
