What is Staking?
Staking involves locking up your cryptocurrency or digital asset holdings to participate in transaction validation and block creation on a blockchain network. It serves as an alternative consensus mechanism to energy-intensive crypto mining.
This process is a key component of the Proof-of-Stake (PoS) consensus mechanism, which is an alternative to the Proof-of-Work (PoW) mechanism used by networks like Bitcoin.
In a PoS system, instead of miners expending energy to solve complex mathematical puzzles as in PoW, validators are selected to create new blocks and validate transactions based on the amount of cryptocurrency they hold and have “staked” or committed as collateral. The more tokens a validator stakes, the higher their chances of being chosen to validate new transactions and add them to the blockchain.
By staking coins, you can help secure a blockchain network while earning staking rewards. The more tokens you stake, the greater your chances of receiving block rewards.
Mining vs Liquidity Farming vs Staking
While often compared, mining, liquidity farming, and staking refer to distinct activities:
- Mining applies work and compute power to solve cryptographic puzzles and add new blocks to a blockchain. Miners earn block rewards and transaction fees.
- Liquidity Farming involves locking cryptocurrencies into protocols to provide liquidity and earn fees on trades. This is a popular DeFi activity.
- Staking secures crypto or digital asset holdings to validate transactions and propose blocks based on token ownership. Stakers earn a percentage of transaction fees and inflationary block rewards.
What is a Staking Calculator?
Calculating protocol staking rewards accurately is important, but typically challenging and laborious. Figment’s Rewards Calculator is an automated tool to help inform token holders’ staking decisions.
Our Rewards Calculator allows users to quantify staking opportunities by estimating potential annual income based on the amount of ETH they plan to stake.
Key Features of our calculator:
- Leverages Figment’s Rewards Rate API for accurate, up-to-date staking rewards rates.
- Users can calculate ETH staking income for single networks or combined across multiple networks.
- Currently supports ETH, SOL, DOT – more networks coming soon.
Staking Calculator for Ethereum
Ethereum staking involves locking up increments of 32 ETH to activate a validator that stores data, processes transactions, and adds new blocks to the Ethereum blockchain.
Requiring validators to secure and operate with staked tokens by design disincentivizes malicious behavior that could harm the network. As decentralization on a network increases and more validators join the active set, networks become more resistant to attacks. Learn more about how staking improves network security.
In exchange for securing the network, Ethereum validators earn staking rewards in the form of freshly minted ETH coins and a portion of network fees. This Proof-of-Stake model aligns incentives between token holders, validators, and the Ethereum protocol itself – all working together to strengthen the network.
The Figment Rewards Calculator is a powerful and user-friendly tool designed for cryptocurrency enthusiasts and investors looking to delve into the world of Ethereum staking.
With Ethereum’s transition to a Proof-of-Stake (PoS) consensus mechanism, staking has become a popular method for participants to earn rewards while contributing to the network’s security and efficiency. The Figment Rewards Calculator simplifies the process of estimating these rewards, making it easier for individuals to make informed decisions about their staking investments.
Staking Calculator for Solana
Solana is a high-speed blockchain focused on scalability and throughput. It uses a Proof-of-History consensus model where SOL holders can stake tokens to help validate transactions.
Proof of History is a unique feature of the Solana blockchain, primarily focused on solving the time problem in distributed networks. In traditional blockchain systems, determining the order of transactions can be challenging and time-consuming, as it requires substantial communication and consensus among nodes.
Proof of History provides a way to cryptographically prove the passage of time and where events fall in that timeline. This consensus mechanism is used in tandem with another conventional algorithm like Proof-of-Stake (PoS). Proof-of-History makes Proof-of-Stake more efficient and resilient in Solana.
Staking SOL involves delegating tokens to validators who run infrastructure to process blocks. In exchange, stakers earn inflationary token rewards proportional to their stake.
Solana aims to make staking accessible, with no minimum staking amount required. Rewards are estimated around 6-7% currently.
The Figment Rewards Calculator emerges as a valuable tool for those interested in staking Solana. With the increasing interest in Solana’s staking opportunities, accurately calculating potential staking rewards has become crucial. The Figment Rewards Calculator simplifies this process, making it accessible and straightforward for both novice and experienced stakers.
Staking Calculator for Polkadot
Polkadot is a sharded multi-chain network focused on cross-chain interoperability. It allows customized blockchains to seamlessly share data and transactions.
At the core of Polkadot’s consensus mechanism is the Nominated-Proof-of-Stake (NPoS). This system is a variation of the traditional Proof-of-Stake (PoS) model, designed to optimize network security and efficiency.
In NPoS, there are two key roles: Validators and Nominators. Validators are responsible for validating transactions and creating new blocks. Nominators, on the other hand, participate by selecting trustworthy validators and staking their DOT tokens on them.
DOT is Polkadot’s native token used for staking. DOT holders can stake tokens to secure the network as validators or nominators. Rewards for stakers come from transaction fees and minted DOT.
Polkadot staking involves bonding DOT for up to 28 days. Current DOT staking rewards are approximately 13%. There’s also the option to stake DOT for parachain auctions.
The Figment Rewards Calculator offers an efficient and user-friendly way to estimate staking rewards for Polkadot (DOT), a significant blockchain platform known for its interoperability and scalability. As more users are drawn to the benefits of staking in the Polkadot ecosystem, having an accurate and easy-to-use tool to calculate potential rewards becomes essential. The Figment Rewards Calculator is designed to meet this need, providing a straightforward solution for both novice and experienced stakers.
How do you calculate staking rewards?
Knowing how to estimate your potential staking rewards is key to making informed decisions. Calculating projected rewards requires accounting for a few key variables.
Digital Asset Type
The crypto asset you are staking – such as ETH, SOL or DOT – determines the base rewards rate. Each network has its own staking rewards dynamics.
Ethereum, Solana, and Polkadot each present distinct staking dynamics within their Proof-of-Stake mechanisms. Ethereum’s transition to PoS comes with a high entry threshold, requiring validators to stake 32 ETH, and involves a significant lock-up period, emphasizing its focus on decentralization. In contrast, Solana offers a lower entry barrier and greater liquidity, allowing users to easily delegate their stake, and bases its rewards partly on inflation, aligning with its high-speed and efficient network ethos. Polkadot stands out with its Nominated-Proof-of-Stake system, where stakers nominate validators, adding a strategic layer to staking. Its reward distribution is proportional yet considers multiple factors, reflecting its commitment to interoperability and scalability within its multi-chain architecture.
These differences highlight the varying technical and philosophical approaches of each platform, offering diverse staking experiences to users based on their investment strategies and preferences.
Investment Amount
The amount of tokens you stake is directly proportional to the rewards you can earn. Staking more tokens equals higher potential returns.
Staking Duration
The length of time you are staking for impacts your cumulative rewards. Longer staking periods lead to compounding gains over time.
Staking Rewards Rate
The estimated Staking Rewards Rate (SRR) for staking on that network. Rates vary across crypto assets based on factors like inflation schedules, fees, and number of stakers.
Accurately calculating staking rewards requires up-to-date rewards rate data. Figment’s Rewards Calculator leverages our Rewards API to source real-time SRR for networks like ETH, SOL, and DOT. This powers transparentstaking income projections.
How to Use a Staking Calculator
As networks expand functionality, Figment will continue improving the calculator to account for additional reward components. Here’s how to get starting using it today:
First, navigate over to: https://figment.io/staking/rewards-calculator/
Select the Protocol
Select your desired protocol. In this case, we are looking at Ethereum rewards projections.
Enter the Amount Tokens
Enter the amount of tokens that you wish to project earnings from. This should be the amount of tokens that you are planning on staking.
Enter the Staking Duration
In this field, enter the amount of time that you plan on staking tokens.
Confirm the Price
The price field automatically updates based on the current price of the protocol. Feel free to edit this field to project what the staking rewards would be at a different price.
Confirm the Staking Rewards Rate
The Staking Rewards Rate (SRR) field automatically updates based on the current SRR of the protocol. Feel free to edit this field to project what the staking rewards would be at a different SRR.
What to Know Before Staking
When exploring staking options, it helps to understand some key considerations upfront.
Types of Crypto Staking
The main forms of staking include solo staking, staking services, staking pools, and exchange staking. Each offers different benefits and trade-offs.
Solo Staking
This involves running your own validator infrastructure directly through running your own hardware and software. Solo staking gives you full control over the staking process, but requires technical expertise.
Staking-as-a-Service
Staking providers like Figment handle the infrastructure for you, allowing users to stake tokens like ETH through an easy-to-use platform.
This removes the operational complexity of solo staking while still allowing users to retain control of their digital assets. Figment also provides portfolio tracking, insights, and robust security for over 30 protocols.
Pooled Staking
By pooling funds together with other users, pooled staking contracts let you stake with little barrier to entry. The pool operator takes custody of the tokens, runs the infrastructure and rewards are shared proportionally.
Centralized Exchanges
Some exchanges like Coinbase offer staking services directly, taking custody of your tokens and distributing a percentage of rewards.
Each method has trade-offs between control, convenience, and decentralization.
Staking Platform Options
From exchanges to dedicated staking services, there are many platforms available for accessing staking rewards. Compare security, features, and ease of use. The ideal staking approach depends on your specific priorities and needs.
For most individuals and institutions, using a trusted Staking-as-a-Service provider like Figment offers an ideal blend of security, rewards optimization, and a seamless user experience.
By relying on a robust professional infrastructure, you avoid the risks and complexities of operating validators yourself. Staking-as-a-Service enables you to tap into staking rewards and support blockchain networks with just a few clicks.
Reward Payout Timing
Staking rewards are distributed on different schedules depending on the blockchain.
Crypto Staking Misconceptions
While staking offers many benefits, there are also some common misconceptions worth clarifying.
Misconception #1: Staking is Risky
Staking is often perceived as risky because validators are penalized for downtime and double-signing. In reality, risks like impermanent loss and slashing can be mitigated through robust platforms and education.
Robust staking providers like Figment help protect against slashing risks providing slashing coverage to help mitigate slashing risks, learn more about our slashing coverage here.
Misconception #2: Rewards are “Yield”
Staking rewards are sometimes confused with lending “yield” or interest. But staking rewards come from securing the network, not from lending assets. This difference changes the risk profile.
Misconception #3: All Crypto Staking is the Same
In fact there are many varieties of staking, like pooled staking and solo staking, with different tradeoffs. Evaluating the differences is key to finding the optimal approach.
Misconception #4: You Need to be a Crypto Expert to Stake
User-friendly staking services abstract away complexity so beginners can participate. While knowledge helps maximize rewards, it’s not a prerequisite for earning basic staking income.
Use the Best Staking Calculator to Determine Your Rewards
Staking may seem complex, however tools like Figment’s staking calculator provide data-driven insights to quantify potential earnings. This empowers even beginners to stake crypto simply and securely.
With robust staking services that handle infrastructure, anyone can earn passive crypto income while supporting blockchain networks. Don’t let misconceptions deter you from exploring staking.
