The concept of decentralization opens the door to the active and democratic participation of thousands of people around the world, who can benefit from the rewards that come from the consensus mechanisms of cryptocurrencies. The Proof of Stake (Pos) allows an initial investment to generate additional income, and in the opinion of many enthusiasts, beats the traditional Proof of Work (PoW). Discover our selection of the best 5 cryptocurrencies to ‘stake’ in 2020.
How to ensure that your ‘staking’ strategy will be profitable?
Before turning to the topic of the best cryptocurrencies for staking, it is important to take into account some factors that increase the chances for you to earn rewards. We list them below:
- Compatibility: Firstly, the user must ensure that the platform chosen to invest is compatible with the staking service for the chosen cryptocurrency. Some exchanges like Coinbase and Binance do it automatically for some cryptocurrencies.
- If the selected exchange does not allow you to stake the cryptocurrency, you may need to move the funds to a compatible wallet. Generally, the information can be found on the official websites of cryptocurrencies.
- The rewards are usually obtained directly for the cryptocurrency in question. Consequently, it is important to evaluate the technical profile of the asset by carrying out a relevant technical analysis. If the profile is neutral, staking could be profitable. If the outlook is bullish, then the strategy could be even more profitable, as you will earn passive income that will also have a good chance of appreciating in value.
- By staking a cryptocurrency, you make a decision similar to making a fixed-term deposit, blocking funds for a specified period of time to earn interest.
NEO: up to 3% ROI
NEO has already achieved a strategic place in the industry. Commonly known as the “Chinese Ethereum” and previously called Antshares, it is one of the most common cryptocurrencies for staking. NEO is a high-profile ecosystem that has gained traction in China due to the government’s recent interest in promoting blockchain developments.
Thus, the NEO blockchain has been used by highly relevant companies such as Microsoft China and Alibaba.
Binance allows NEO staking with an expectation of 1-3% annual interest, while staking portfolios like Neon could be a bit more profitable. The NEO to GAS calculator gives you an idea of the annual return on investment. As of the date of this article, it is between 1.6 to 1.8% per year.
Tezos: 6% per annum
One of the most robust options for staking in the last two years has been Tezos. Its delegated — or liquid — participation test allows coin holders to start staking Tezos without needing large amounts of staked coins, delegating the task to other validating nodes on the network. In fact, exchanges like Coinbase allow you to start with very small amounts, quickly generating passive income.
You can ‘bake’ your XTZs very simply, which is an extremely lucrative opportunity considering the recent evolution in the price of Tezos. This has grown by more than 140% since January 1, 2020. With an investment return of around 6%, the return on this investment would be very attractive if the uptrend continues.
- Practical assumption: An investment of 1000 Tezos (approx. $ 1,400) exactly one year ago would have generated about 60 XTZ in passive income. The final balance of 1060 XTZ is not so impressive, but if we consider an increase of more than 120% in the price, we speak of a final capital of approx. $ 3410 (+140%). This far exceeds the interest rate for savings accounts in countries such as the United States or Spain, where it is between 0.01% –0.05%.
Dash: 5% ROI
This cryptocurrency focuses on decentralization from another point of view and gives greater responsibility to masternodes, specialized nodes with more demanding requirements.
Dash is an excellent option for staking, but only if the user has the resources to become a Masternode. Its consensus mechanism is called “proof of service”, ensuring that the control and management of the network is executed by Masternodes, and that these are kept synchronized online.
As of the publishing date of this article, the annual theoretical return on investment is 5.7%. To become a Masternode and help verify transcations, the user must have a portfolio with at least 1,000 DASH (close to $100,000) and have the minimum CPU, RAM, and bandwidth resources specified by the Dash documentation.
Loom: A more complex procedure, but more profitable?
Staking LOOM is a bit more complex, but it could be more profitable if the cryptocurrency has a bullish profile. Its network enables Solidity-based decentralized applications to run on side-blockchains. The Loom Network uses a delegated proof of stake that allows staking; however, its price has moved little recently.
To stake LOOM, compatible hardware wallets such as TREZOR or Ledger must be used, but also, users must deposit a small amount of ethers to cover network expenses.
This is more effort and complexity. However, those with more technological expertise, and who are comfortable following the steps, could earn significant passive income with this cryptocurrency.
According to the data consulted in Staking Rewards in August 2020, the annual interest rate is 17%, a significant leap from other competitors on this list.
PIVX: investing in the controversial niche of anonymous cryptocurrencies
Another anonymous cryptocurrency sneaks onto the list. PIVX supports instant and private transactions and the good news is that it uses a PoS mechanism to secure the network.
In January 2020 they released a new feature, known as cold staking, which allows staking to be delegated without having to connect the wallet to the Internet. This increases security and allows those who store PIVX in cold storage wallets to stack their PIVx and receive rewards without connecting them to an online wallet.
Despite a steep drop, 2020 has seen a remarkable recovery in the price of PIVX, which has gained more than 110% so far this year. Likewise, it presents us with one of the best perspectives in return on investment (ROI) per staking, with an annual theoretical value of almost 9%.