What is Staking?
Staking has emerged as one of the most popular ways for cryptocurrency holders to earn rewards on their digital assets. By participating in staking, you can earn rewards on your crypto without having to trade or take on significant risk.
Staking involves locking up your cryptocurrency 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.
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.
What is Staking-as-a-Service?
Staking-as-a-Service (StaaS) represents a category of business where institutions or users stake by delegating infrastructure operations to a third-party provider.
StaaS allows users to stake tokens without managing their own infrastructure. By leveraging specialized providers like Figment, users can participate in staking without needing to develop technical expertise.
Figment’s StaaS offers features like easy integrations, portfolio rewards tracking, an audited infrastructure, and slashing protection for a smooth staking experience. This enables users to earn staking rewards without sacrificing security or control.
Non-custodial Staking vs Custodial Staking
When staking digital assets or cryptocurrencies, one of the biggest considerations is whether to use a custodial or non-custodial staking service. The distinction comes down to asset custody and control. Here are the main differences between the two:
- You maintain full control and custody of your assets when staking.
- Your coins remain in your wallet address at all times.
- The provider handles the validator operations without taking custody.
- More secure for users but can be more operationally complex.
- The staking provider takes custody of your assets when you stake.
- Your coins are transferred to the provider’s wallet address.
- Staking is handled on your behalf for an agreed-upon portion of the rewards.
- Simple for users but risks exist regarding provider custody.
Custodial staking offers a straightforward user experience similar to centralized exchanges. However, users must trust the provider to securely hold assets and distribute rewards.
Non-custodial staking enables users to stake while retaining control of their private keys. Leading non-custodial providers like Figment offer robust infrastructure without taking custody.
When evaluating staking solutions, assessing the custodial model is key to understanding risks and aligning with your priorities. Both options provide advantages that users can weigh based on their specific needs.
Benefits of Staking with a Service Provider
Staking with a provider service offers important advantages:
Staking services lower barriers to entry by handling technical complexity. Users can stake any tokens without the need to run validators. This opens staking to a wider audience.
Figment operates best in class staking infrastructure, including a SOC 2 Type I and ISO 27001 certified environment. To further protect its customers, Figment also offers slashing and missed rewards coverage.
Specialized providers optimize infrastructure and develop strategies to earn MEV which can help to collect more rewards for users. Ultimately their expertise results in higher rewards for their users.
Reporting & Insights
Staking services can provide portfolio tracking, performance analytics, tax documentation, and CSV rewards exports. Users gain insights to inform staking strategies.
Although solo staking can align with decentralization values, staking services make the process simple and accessible for individual users and institutions. By leveraging provider experience, knowledge, and infrastructure, stakers can maximize risk-adjusted rewards while minimizing risks.
Risks of Staking
While staking offers significant rewards, there are also potential downsides to consider:
Staked assets are locked up for a period of time, limiting liquidity. Funds cannot be freely traded or transferred while being staked.
Some staking requires minimum amounts of tokens, such as Ethereum where you need a minimum of 32 ETH to participate in staking. This creates a barrier to entry for holders with fewer tokens.
Validators face slashing penalties, including the potential loss of staked funds for offenses like downtime and double signing. Robust infrastructure and staking services help mitigate slashing risks.
Staking providers like Figment help protect against risks by providing slashing coverage to help mitigate slashing risks, learn more about our solutions here.
Staking can still seem technical, especially for solo stakers. User-friendly platforms take away complexity, but some risks still remain.
Alternatives to Staking with a Service
There are several methods token holders can use to stake and earn rewards, including:
This involves running your own validator infrastructure with your own hardware and software. Solo staking gives you full control over the staking process, but requires technical expertise.
By pooling funds together with other users, pooled staking contracts let you stake with little barrier to entry. The pool operator runs the infrastructure and rewards are shared proportionally.
While pooled staking contracts lower barriers to entry by allowing users to stake any amount of funds, there are risks to consider with this approach. Since the pool operator runs all the infrastructure, users must trust them to properly manage validators, distribute rewards accurately, and provide transparency. Pool users give up direct control and oversight over the staking process. There is also counterparty risk if the pool operator suffers a security breach or fails to operate infrastructure reliably, which could lead to loss of rewards.
Exchanges like Coinbase and Kraken offer staking services directly by taking custody of your tokens and distributing a percentage of rewards.
Each method has trade-offs between control, convenience, and decentralization.
Use the Best Staking-as-a-Service Provider
Staking-as-a-Service allows cryptocurrency holders to earn staking rewards without needing to become staking experts or take on the operational burdens. By leveraging a trusted provider like Figment, institutions and users alike can access enterprise-grade staking infrastructure to maximize rewards on tokens like ETH, SOL, MATIC, and more.
Staking with Figment offers unparalleled benefits:
- Non-custodial staking maintains user control
- Robust security and infrastructure uptime
- Portfolio-level rewards tracking and reporting
- Proactive slashing protections to prevent losses
- Seamless API integrations with core systems
- Dedicated support and staking expertise
The combination of technology, infrastructure, and team makes Figment the ideal staking partner.
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 maximize staking rewards on your digital assets.