What are Staking Rewards?
Staking rewards refer to the rewards generated by cryptocurrency holders that stake their coins. This process involves locking up your crypto digital assets to help validate transactions and secure a blockchain network.
In exchange for providing stability and security to the network, stakers earn rewards in the form of newly minted tokens and/or a share of transaction fees. In some cases, the more coins you stake, the greater your chances of receiving rewards.
Staking Rewards vs Yield in Crypto
Staking rewards are often compared to yield farming in decentralized finance (DeFi). However, there is an important difference between these activities.
With staking, users retain ownership of their coins and earn protocol rewards for securing the network. By helping validate transactions, stakers both secure the network and provide the infrastructure for the blockchain to operate. In exchange, they earn rewards on their assets.
Yield farming involves locking tokens into DeFi protocols to provide liquidity in return for a share of trading fees. Users add tokens to liquidity pools that facilitate trading different asset pairs on decentralized exchanges. In return for providing this liquidity, they receive trading fees as yield as their capital helps enable the swapping functionality.
The key difference comes down to stakers maintaining ownership of their coins to secure validation while liquidity providers temporarily give up control of assets to supply exchanges with tradable tokens. While only staking allows users to maintain ownership, both methods allow crypto users to put their holdings to productive use.
In short: staking rewards come from participating in consensus while yield comes from supplying liquidity for crypto trading platforms.
How are Staking Rewards Calculated?
There are a few key variables that influence staking rewards calculations:
Protocol Specifics
Deciding which protocol you stake on is important as each has different reward mechanics, rates, and tokenomics. For example, Ethereum pays rewards in ETH to validators from a combination of block rewards and transaction fees. Other chains may have different incentive structures.
Staking Duration
The longer timeframe you stake for, the more compounding can boost your cumulative rewards. Staking for one year accumulates more rewards than staking for one week.
Extending the staking duration as long as comfortably possible is wise to optimize rewards-earning potential. Just an extra few months can make a substantial difference over a couple of years.
Current Staking Rewards Rate
This metric measures the annual rewards rate for staking on a protocol. Rates vary across chains, which will impact potential earnings. View Figment’s supported protocols and their staking rewards rate here.
Accurately estimating staking rewards involves accounting for all of these factors. Figment’s staking calculator leverages transparent rewards data to simplify projections. By understanding reward calculations, you can make informed decisions to optimize staking rewards.
What is a Crypto Staking Calculator?
A staking calculator is a tool that estimates the potential staking rewards you can earn based on factors like:
- Amount of coins staked
- Duration of staking
- Current staking rewards rates
By inputting assumptions into the calculator, you can quantify expected staking returns across different networks. Figment’s Rewards Calculator is an automated tool to help inform token holders’ staking decisions through data-driven insights.
Advantages of Crypto Staking
Staking your crypto assets offers several compelling benefits, such as the combination of staking rewards and potential price upside growth, that make it an attractive option to optimize holdings.
Receiving Staking Rewards
The primary advantage of staking is earning rewards on your crypto assets. Staking rewards are generated from the underlying protocol and paid out to those who are helping secure the network.
In some cases, the more tokens you stake, the greater your chances of receiving rewards when you are selected to validate transactions and propose blocks. Top staking platforms like Figment optimize your chances to earn higher rewards.
Supporting the Blockchain Network
By staking crypto, you help decentralize and protect blockchain networks that you likely utilize and believe in. The more validators actively staking on a network, the more secure and resistant to attack it becomes.
Staked tokens serve a purpose to these networks, helping to stabilize and strengthen said network, helping the core team build and continue to invest resources into its development and maintenance.
Doesn’t Require Active Involvement
Once your crypto is staked with a service like Figment, there is no need for continual active management. You can earn rewards on assets you intend to hold long-term anyway. Staking returns the effort of validating transactions and signing blocks, allowing you to generate rewards on holdings you keep for portfolio growth or belief in the project.
Platforms like Figment handle the infrastructure required to participate in staking to ensure your validators maintain high uptime and optimize chances to earn rewards.
What to Look For in a Crypto Staking Platform
When researching staking services, here are the key things to evaluate:
Accessibility & Ease of Use
Intuitive platforms that limit complexity and make staking accessible for both beginners and experts are ideal for staking digital assets. An optimal staking provider needs to offer an intuitive interface for users of all backgrounds. Leading platforms provide easy onboarding, clear guidelines, and step-by-step tutorials to start staking instantly.
Robust features like support from a single dashboard, seamless wallet connectivity, and guided flows to manage validators make participation simple. Reporting and notifications provide transparency without complexity.
The most user-friendly platforms require no coding or infrastructure expertise to start earning rewards.
Protections Against Slashing
In addition to minimizing infrastructure risks, robust staking services provide protections that help mitigate losses from slashing penalties. For example, Figment offers industry-leading slashing coverage that combines technology, protocol expertise, and access to exclusive slashing insurance options with Nexus Mutual and InsurAce, offering security and peace of mind to our users.
Supporting Experts
The right partner has specialized knowledge from extensive real-world experience. This expertise translates to ideal staking configurations and optimizing the rewards you can earn through proactive optimizations.
Learn more about the Figment team here, and read recent articles here.
Reporting & Insights
To understand performance, accessible analytics on your validator status, staking rewards, and total portfolio growth are essential. Tools should help you visualize key metrics.
Figment provides accurate reporting on your staked assets, as well as easy dashboard tracking of rewards and portfolio performance to provide transparency into your staking positions.
Solutions Throughout the Staking Journey
Premier platforms offer multiple pathways to participate with the right solutions for any customer.
The ideal Staking-as-a-Service provider will excel across all these dimensions while giving users flexibility and control. By optimizing the user experience, leading platforms like Figment help you optimize rewards securely and easily.
Optimize Your Staking Rewards with Figment
Figment offers the most compelling Staking-as-a-Service solution that combines rewards optimization and the best user experience.
With Figment you’ll experience:
- An intuitive and easy-to-use platform requiring no technical expertise
- Industry-leading infrastructure
- Dedicated support from staking experts before, during, and after staking
- Powerful reporting and insights into your portfolio and staking performance
- The ability to track rewards from any Ethereum wallet address
- Seamless API integrations with existing systems
- Non-custodial staking so you always retain control of your assets
To learn more about how Figment’s Staking-as-a-Service can benefit yourself or your organization, meet with us. Figment’s staking experts are ready to answer any questions and explain how our solutions can help you optimize staking rewards on your digital assets.
Ready to start earning staking rewards now? Get started with Figment today.
