From an early age, our parents teach us the value and importance of saving money.
Even if you don’t come from the most affluent family, you’ve likely been taught that it’s a good idea to have a “rainy day fund” for when life inevitably goes into “hard mode” settings somewhere down the line.
So what do we do? We open a Savings Account, of course.
What else would we do? Isn’t that how you’re supposed to save?
The main problems with today’s savings accounts is is that… Well, they suck.
They barely pay you any interest, and that the measly interest you do get paid (usually lower than 1%) doesn’t keep up with inflation.
So what happens in reality? If you take the U.S for example, 2021 saw an inflation rate of 4.7%. If your savings account paid you 0.5% in interest, you pretty much lost a good chunck of your money’s worth by keeping it in a savings account.
If we get more into the nitty-gritty, yields on savings accounts as reviewed by NerdWallet are generally around 0.5% APY. The average interest for U.S. savings accounts is 0.06% APY, according to the Federal Deposit Insurance Corp.
What about crypto staking then?
Could it be this generation’s modern, more profitable alternative to a traditional savings accounts?
Here are 5 reasons we think that it just as well might.
Table Of Contents
- 5 You’re On The Cutting Edge Of Financial Technology
- 4 You’re More Liquid With Crypto Staking vs Savings Account
- 3 You’re Contributing To An Important Cause
- 2 The Value Of Your Stake Appreciates Over Time
- 1 Crypto Staking Pays More Interest Than A Savings Account
- Final Thoughts On Crypto Staking vs Savings Account
5 You’re On The Cutting Edge Of Financial Technology
One of the coolest perks when comparing staking vs savings account is that, well… staking is cool. You’re literally participating in the advancement of humanity into a new era of decentralization and taking back power from mega-corporations. And you do that by helping secure the blockchain’s complicated operations using your internet magic money tokens. You’re essentially part of the evolution of finance and of the internet.
How can you compare some boring ‘ol bank’s savings account to the swag of being a crypto staker?
All jokes aside though, staking is a highly technical space that keeps growing and progressing at light speed. If you believe in Web3, crypto and decentralization, that’s where you want to position yourself. For that reason, the new generation may see the “cool factor” in crypto staking and choose to allocate more of their assets into it rather than their savings account.
4 You’re More Liquid With Crypto Staking vs Savings Account
When you put your money in a savings account, you’re usually presented with a lockup period. The longer you choose to lock up your funds for, the more the bank will reward you in terms of interest. Sure, we’re talking about minuscule increments, but many people still choose periods of several months, and sometimes even years. If you break your contract, you forfeit some if not all of your interest.
That’s not the case with staking.
Yes, you have an un-freeze (or “unstake”) period in practically all but some crypto assets, but that period is usually 24-72 hours at most (pre-Merge Ethereum aside). Sometimes much shorter. And you don’t give up any staking rewards when you unstake. You simply collect whatever you’ve managed to earn for the duration of your stake, and move on.
And then there’s the whole liquid staking space, where you get native tokens from your staking platform, and you can essentially stay 100% liquid and do whatever you want with your assets, while you’re staking and collecting interest.
That’s why in the debate of staking vs savings account, staking takes the cake.
3 You’re Contributing To An Important Cause
When you stake your assets, you’re helping the ethos of decentralization, going Bankless, and taking back power. The more people decide to become crypto stakers, the healthier the PoS blockchain becomes.
And depending on where and how you stake your crypto, you may also be helping a new protocol grow and get more liquid.
When you put your money in a savings account, there’s none of that. You’re just helping the bank, a centralized entity who’s only goal is profit and growing the bottom line.
Sure, this is more of an idealistic ‘pro’, but it’s important nonetheless. And for some people, even more important than the next 2 items on our list.
2 The Value Of Your Stake Appreciates Over Time
The main benefit of holding crypto before DeFi was the fact that it’s always trending upwards. Even when you take bear markets into account, the crypto space offers unprecedented returns to those who manage to hold through tough times (diamond hands!).
So while staking pays out sweet staking rewards, unless you’re staking stablecoins, the value of your coin usually appreciates against fiat currency, leaving you with higher absolute returns.
Yes, bear markets, especially prolonged ones (looking at you, 2018) can be pretty bad, but if we look at overall performance, the “blue chip” crypto assets are still superior to almost all other asset classes, stocks, bonds and commodities included.
When you compare crypto staking vs savings accounts, there’s really no competition. One has potential for incredible growth, while the other, well, just sits there.
1 Crypto Staking Pays More Interest Than A Savings Account
This is probably the main reason (although some would argue that the previous reason is more important) for why staking might replace the traditional savings account in the future.
Staking simple pays more.
Some stablecoins pay almost 20% in interest (for example, staking UST on Anchor Protocol).
Others can pay anywhere from 4% to 20% in staking rewards.
The debate for what the best staking crypto assets are is an ongoing one, and the answers seem to change on a yearly basis, but one thing is clear – the interest rates are MUCH higher than a traditional savings account. There’s simply no comparison.
Final Thoughts On Crypto Staking vs Savings Account
It’s true that all the great ‘pros’ and benefits we listed are appealing, but there’s an elephant in the room.
And that elephant is called risk.
At the end of the day, banks have existed for generations, and staking is a new technology (albeit one that’s proving itself more and more every day).
If you’re willing to take on some of the risks involved in crypto staking, such as protocols being compromised and asset volatility (if you’re staking anything other than stablecoins), then you have a fantastic opportunity to enjoy the benefits we listed on this page.
Will banks end up moving to a crypto-based systems and offer staking services themselves? Maybe. There’s a good chance of that happening. Some are already testing it out.
But until then, it’s all a question of your risk vs. reward tolerance.
This article is for educational purposes only. Not financial advice.
Please make sure to read our Disclaimer before making any financial decisions.