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Crypto staking can be a very fruitful way to increase your crypto returns and earn passive income on the cryptos you don’t want to sell.

The very best way to earn passive income on your cryptocurrency is to explain what staking is and why so many people do it. Then, ways to earn income on your cryptos. What coins support staking. And the best strategies to get the most income and returns overall, including the best services you can use.

So firstly, let’s come to staking and what it actually is;

There are different ways to earn income on your crypto, but staking specifically refers to the process of putting your coins up as collateral in a proof of stake blockchain.

It’s really important to know how proof of stake works, why you’re putting your coins up for staking and what happens when you do. Proof of stake is a modern evolution of how blockchains work. Cryptos like Bitcoin are built on proof of work blockchains, which means that the computers that keep the network running use powerful computer systems and huge amounts of energy.

To work out the answer to a complex question. If a computer works out the answer first, they get rewarded with Bitcoin. This is known as mining. The problem here is that the only people who can gain rewards are the miners. Us investors are left out.

Proof of stake is different, more modern and more inclusive. The computer power needed for the complex calculations in proof of work is, in reality, totally pointless. The only reason they exist is to keep the network in so-called good order.

With proof of stake, this isn’t necessary. There are many different versions of proof of stake, but in essence, nodes in the blockchain are given the task of keeping the network in good order. Instead of doing work, they put up coins as collateral.

If they don’t keep the network in good order, their coins will be slashed, which is a financial penalty.

If they do their job properly, they’ll be in the running to receive a portion of the fees spent on the network.

Investors like you and me can’t just start up a node of a blockchain and start earning loads of money. Mainly because investment minimums are high; luckily, though, we can participate in a staking pool where we can pool our investment with other small investors and give them over to a service provider who can stake them for us. Giving us our rewards whilst taking a small cut for the service provided.

Crypto staking isn’t available on all cryptocurrencies but only those built on proof of stake blockchains. Coins build on proof of work blockchains like Bitcoin can’t be staked to earn rewards. But if you own Bitcoin, you can still earn some income on your holdings by using other financing methods.

So with our passive income strategy, we can use three main methods to earn income;

1- Staking

we can stake various coins built on proof of stake blockchains like Cardano and Polkadot.

A quick look at Binance earns all you need to see how much you can make from these staked coins. A variety of coins support staking, but for me, coins that are higher value are the ones I’d be looking to stake. Coins like Cardano ADA and Polkadot are prime examples.

When you state coins, you don’t have access to them during the staking period. However, because they’re being used as collateral, so it’s important to consider what the price of that crypto will do during the staking period.

You can hold both my DOT and ADA positions and stake for 30 60, or even 90 days. I can predict 99% that I wouldn’t be selling those anyway. Something like Polkadot is giving an annual yield of 15%; try getting that in a bank.

2. Lend out your coins market

Participants and traders often need to borrow coins to settle trades and for various other reasons. Instead of buying Bitcoin, it may be cheaper to borrow Bitcoin and pay a small fee. For example, you can use a service that pulls your Bitcoin with others and loans it out to traders for a fee, and in return, you’ll get payment for the use of your Bitcoin.

3. Place them into a liquidity pool

Classic examples of this are Uniswap and Binance Liquidswaps. With swaps, you put up your coins into a pool so that other people can trade them, and you’ll earn a fee for doing so. Liquidity pools, in my opinion, are incredibly difficult to navigate and can potentially cost you money overall. Rather than just holding your coins. I prefer something like Binance liquid pools over Uniswap right now. Because of the astronomical gas fees on the Ethereum network.

Services that you can use to earn the best income on your cryptocurrencies.

The first two services that I want to highlight right now are BlockFi and also celsius. So two brands actually do the same thing, and depending on where you live, you might have to choose one over the other.

BlockFi, at the moment, serves North American markets, and celsius do serve the UK and European markets. However, I have heard that BlockFi will expand their product offering soon to more countries.

Both BlockFi and celsius do the same thing. They are lending systems where you can lend your cryptocurrencies out and earn an income based on how much you lend.

With Blockfi, you can provide liquidity in many different cryptocurrencies

Including Bitcoin Ethereum Litecoin and us dollar Tether. You can earn around an 8.6% return on your holdings on various cryptocurrencies on BlockFi.

You can choose the cryptocurrency that you want to lend out and then put how much you have, how long you want to lend it out for, and tell you how much interest you will earn over the period.

If you, like many people, want to buy and hold Bitcoin and come back in 15 or 20 years to see how the price has hopefully gone up. Then you may want to consider lending it out. This will be much better than just holding the Bitcoin in your account and not earning any interest or yield on it whatsoever.

There’s absolutely no way that you’re going to get an 8.6% return on cash in a bank. And if you’re going to hold your Bitcoin anyway, then 8.6% is a mighty yield to get on that asset.

There are risks to this, of course; firstly, the price of Bitcoin can fluctuate. However, that would be happening even if you didn’t have it in this lending platform. Another risk is default risk, which is the risk that the people you lend to won’t pay back the Bitcoin. BlockFi, though, does have policies in place, including insurance to prevent losses.

Celsius is more or less the same thing, so you can borrow cash if you have cryptocurrencies, and you can also earn rewards based on lending out the cryptos in your account.

AAVE

AAVE is a decentralized lending protocol. Services like BlockFire and celsius are centralized. They’re essentially profit-making companies. Other though is just a decentralized protocol.

This means that you can interact with borrowers and lenders in a completely decentralized, open and freeway. It’s a totally free and open market with no commercial entities in the middle. Borrowers do pay a fee, and lenders will share that fee. Based on how much they’re lending. But

Because other is built on top of Ethereum.

The list of supported coins is a lot lower than some other platforms. However, there is some support here for us dollar Tether, Coinbases, stable coin USDC, DAI, and a couple of other stable coins and Gemini dollar.

Using AAVE is that you cannot lend out Bitcoin because it is on the Ethereum network. So if you wanted to do that, you’d have to go and convert your Bitcoin into wrapped Bitcoin, which is on the Ethereum network.

Rates here are not the best compared to some other platforms. However, as other is decentralized, it does take a learning curve, and you need to know what you’re doing and take control of your assets and then plug in your wallet to use it.

UNISWAP

The same goes for Uniswap, which is another way to earn some income on your holdings. Uniswap is a decentralized trading protocol that allows for decentralized swaps of Ethereum based tokens. But, unfortunately, you can’t earn any income on Bitcoin holdings once more because you need erc20 tokens to swap on this platform.

You can then put over your erc20 tokens into a liquidity pool and then allow others to trade them. Of course, those traders will pay you a 0.3% fee for the trouble, so that is the money you’ll be making if you put your coins over to the liquidity pools in Uniswap.

Liquidity pools are really quite complex, and there’s no guarantee that you’ll actually be making money. Overall compared to having them in a normal exchange. So you have to make sure you do your calculations correct if you want to use one of these.

Also, with the current gas fees on the Ethereum network right now. It makes trading in and out of these pools extremely expensive and probably not a good deal overall, which is the main reason why I don’t consider using unit swap for my investments. But you’re different from me, so you’re welcome to have a look.

BINANCE

We can also move on to Binance, which has a really robust system for investments called Binance earn .there are many different ways to earn income on your products. For example, you can use flexible savings, which have lower returns. But are considered less risky, and then you have some higher returns based on staking and fixed savings.

Also, you can use DeFi products and Binance, which have much higher returns which will be similar to the returns that you can get on something like AAVE, which is also a decentralized finance lending and borrowing platform.

That’s essentially what Binance is doing here, although they use various investment methods to give you these returns at the lowest risk.

You can also gain an income via the liquidity swap pools on Binance, which is more or less the same thing as Uniswap does with their liquidity pools. And again, you can see the average yields here if you were to put some of these pairs of tokens into the liquidity pools.

CRYPTO.COM

Next, we have crypto.com with a few different services, and like BlockFi, you can lend out your tokens to earn interest. Right now, on most cryptocurrencies, you’ll be earning 6.5% per cent as an annualized yield. And if you have any stable coins, you can earn up to 12 per cent.

You do have to have some CRO on account to increase the amount you receive.

CRO is a cryptocom coin, and you can buy that with them on their exchange and hold it in your account.

Crypto.com has excellent coin support with supported coins, as you can see here Bitcoin, Ethereum, Litecoin, cosmos, chainlink, and many more and a good list of stable coin support.

Interest is calculated daily and not in a compound way like it’s done on BlockFi if you want an all-in-one service though crypto.com is for you because there is an exchange.

There is also an app, a payments method and even a credit card that gives you cashback on purchases.

What’s the best strategy for earning passive income on your crypto holdings

This will, of course, depend on your investment outcomes and risk profile. For high-value stackable coins like ADA and Polkadot, you may want to look into taking them directly on a staking pool.

Staking returns are clearly set out for you before entering the staking agreement with the pull provider.

Binance has a fantastic staking product with Binance earned that allows you to hold your coins and stake them easily with good returns.

 It offers a good range of coins for staking and certainly more than Coinbase and Kraken.

also offers savings and Defi products that offer higher returns for coins like Bitcoin and us dollar Tether. Currently, Defi returns and Binance are seven and a half per cent for Bitcoin. Compared to eight point six per cent on BlockFi. Owning eight point six per cent is significant on BlockFi, and those lending platforms usually have a short redemption period if you need to access your coins.

A decentralized service like AAVE is more niche with a smaller amount of supported coins. But potentially higher returns than centralized lending companies like BlockFi. For example, you can get an 11% return on us dollar Tether.

On AAVE, and that compares to 12.5% on finance for Defi lending.

With decentralization, though, you are on your own when it comes to making your investments. And making sure you’re doing everything correctly.

One other thing to note is that risk levels are almost impossible to identify in the crypto space. This is because there are no rating agencies for cryptocurrencies, and you really cannot work out what your risk-adjusted returns are that you’re making. But in general, staking has the lowest risk as you are just participating in blockchain rewards.

Lending coins is riskier as you introduce default risk. And Defi will be the riskiest as there isn’t a company in the middle with regulations governing them or any insurance.