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.
But staking isn’t just one single method – there are actually many different types of staking available. Understanding the nuances between protocol staking, pooled staking, liquid staking, and others is key to finding the ideal approach for your needs.
In this comprehensive guide, we’ll break down everything you need to know about the different forms of crypto staking including:
- What is Staking
- What is Proof-of-Stake
- Different Types of Staking
- Where Users Can Stake
- What Cryptocurrencies Users Can Stake
- Which Type of Staking is Best for Different Users
Let’s dive in and uncover all the categories of staking so you can start earning rewards on your crypto today!
What is Staking?
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.
Mining vs Liquidity Farming vs Staking
While often compared, staking, mining, and farming refer to distinct activities in cryptocurrency:
- 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. Popular in DeFi.
- Staking secures crypto holdings to validate transactions and propose blocks based on token ownership. Stakers earn a percentage of transaction fees and inflationary block rewards.
Now that we’ve covered the basics of what staking is, let’s explore the different types of staking protocols and options available.
What is Proof-of-Stake?
Proof-of-Stake (PoS) is a consensus mechanism that powers blockchain networks like Ethereum, Polkadot, Cardano, and others. It allows token holders to validate transactions and create blocks based on how many coins they hold.
Here’s how it works at a high level:
- Token holders lock up or stake crypto coins to become network validators.
- Validators are randomly selected to propose and validate new blocks of transactions.
- The more tokens staked, the greater chance of being selected and earning staking rewards.
PoS offers advantages over Proof-of-Work (PoW) including energy efficiency, lower barriers to entry, and built-in governance participation. Learn more about how staking improves network security here.
Types of Proof-of-Stake
There are a few different types of Proof-of-Stake systems used across blockchains:
- Proof-of-Stake (PoS) – Token holders validate transactions based on the amount they’ve staked. Used by Ethereum, Cardano, and others.
- Delegated PoS (DPoS) – Token holders vote for delegates who validate transactions and propose blocks. Used by EOS and Tron.
Now let’s explore the various types of staking mechanisms built on top of these PoS models.
Different Types of Staking
Methods of Staking Ethereum
There are several methods ETH holders can use to stake and earn rewards:
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 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.
What Can You Stake?
There are hundreds of Proof-of-Stake networks out there. Some of the most popular PoS networks include:
- Ethereum (ETH)
- Solana (SOL)
- Polygon (MATIC)
- Cardano (ADA)
- Polkadot (DOT)
- Avalanche (AVAX)
- Cosmos (ATOM)
- Aptos (APT)
- Sui (SUI)
Learn more about Figment’s supported protocols here.
Which Type of Staking is Best?
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. Platforms like Figment provide access to valuable portfolio tracking, insights, and reporting to maximize rewards.
Staking-as-a-service enables you to tap into staking rewards and support blockchain networks with just a few clicks.
Stake Your Crypto with Figment
After reviewing the different forms of staking, delegated staking through a provider like Figment emerges as the ideal solution for most cryptocurrency holders.
You get the rewards of staking without the need to run infrastructure personally. Figment’s user-friendly platform makes staking easy while providing institutional-grade security, transparency, and risk management.
