You’ve been reading up on crypto staking and you’re starting to see the appeal.
It doesn’t seem as complicated as they say, the idea behind it pretty much makes sense, and the potential staking profits are looking pretty good from where you’re sitting.
You’re now wondering how much to stake, what you could potentially earn from your investment and whether you should use an exchange, some non-custodial service or maybe something else?
These questions are some of the most popular ones that pretty much everyone who gets into staking asks themselves at first.
In this article, we’ll share some best practices for crypto staking beginners in order to help you make the best decisions for your specific situation.
6 Best Practices For Crypto Staking Beginners
There are many important decisions and best practices for staking crypto in a safe and profitable way. In order to not create overwhelm, we decided to go with the 6 most important ones in our opinion as stakers.
6 Only Stake Coins That You Feel Confident Holding For The Long Term (At Least 1 Year)
There’s really little point in staking a coin that you’re going to panic-sell the moment the market slumps. If you don’t have confidence in the crypto asset you’re holding, you probably shouldn’t make it illiquid by staking it. You’ll likely end up spending more on fees than you’ll earn from rewards.
That’s why you should first do your research, learn everything there is about the coin, the community, the roadmap, and what the future outlook is like, before committing to staking it.
A good practice would be to ask yourself whether you’d be comfortable staking if you couldn’t sell your position for a whole year. If the answer is no, you should probably think twice before committing.
5 If You’re Going To Stake A Significant (To You) Amount Of Crypto, You Want To Avoid Exchanges
Yes, we know, it’s a hassle, and clicking that ‘Stake’ button on your favorite exchange seems to be so fast and simple. And you also avoid transfer fees.
Why not just do it?!
Well, if you’re staking a small amount of crypto, that might be totally fine. But.. If you’re staking a significant amount of crypto and imagining losing it gives you heart palpitations, then you must know that there are downsides in staking crypto on exchanges, and that comfort doesn’t come without risk.
First off, you’re adding to centralization by giving more power to the staking wallet owned by the exchange, but if that’s not something you care about too much – there’s also the matter of “not your keys, not your crypto”, hacks, and the exchange taking usually around 10%-25% of your crypto staking profits for themselves.
When you’re staking a small amount, that might not be significant, but with larger sums, you really don’t want to risk not being in charge of your keys and paying almost a quarter of your profits out to someone else.
Spend an extra couple hours and learn how to stake with a non-custodial service (or you could even go solo!). Not only will you be contributing to the decentralization of your favorite coin, but you’ll also enjoy more profits in the long haul. Rocket Pool is a great choice for ETH. Lido is awesome too for additional networks.
4 Keep Your Keys Safe By Using A Ledger Or Trezor To Facilitate The Stake
Now that you’ve committed to holding and taken control of your crypto staking by avoiding exchanges, the next step is to secure your keys. And the best way to secure your keys was, and still remains – a cold storage device like Ledger or Trezor. While there are other competitors in the market, these two are still the best solution for keeping your staking keys safe.
Using a cold storage device will allow you to store your staking keys offline, which will significantly reduce the chances of someone being able to gain access to them.
Remember that your device does not hold your coins when you stake, it only holds your keys, which allow you to access and withdraw your stake when you decide to do so.
3 Avoid Chasing Extreme Staking Rewards & APYs
You’re probably going to come across protocols that promise you very high yields, some even offer upwards of 1000% APY. It’s important to remember that those are very high-risk bets and the chance of getting burned and losing your investment is very real. Read more about this in our article about high yield staking. All in all though, you should never invest anything in those high-yield offers that you’re not willing to completely lose, whether in a rug-pull type of scam, or in a pump and dump.
Another thing to be careful of is losing your liquid crypto staking tokens. If you use a liquid staking service that gives you pegged tokens you can use in DeFi – The advice shared above still applies. Don’t go throwing those tokens into crazy high risk protocols where you can end up losing them, and thus losing your original staking assets.
We know more than 1 person that thought that they re-invented the wheel by staking their ETH on a liquid staking service such as Lido, and then bet-away all of their tokens trying to chase high returns in DeFi on top of their ETH staking profits. Be careful with this. If you experiment in DeFi, make sure to do some serious due diligence, and don’t dump all your tokens all at once.
2 Dive Deeper And Understand Crypto Staking And DeFi On A Higher Level
Crypto staking beginners should take this chance to truly understand how staking works from a technological standpoint, and to the best of your ability. Not only will you better understand what is actually happening with the coins that you’ve locked up, and how the entire process works behind the scenes, but you’ll also gain knowledge that you’ll be able to use later on in order to educate others who might ask you how to they can also get into staking.
Understanding the tech side of staking could act as a gateway for you to expand your horizons by learning other parts of crypto as well. Yield farming, NFTs, Layer 2 protocols, zkRollups, there’s a whole lot to learn in the crypto space.
The best place to learn in our opinion is YouTube. Simply search for whatever topic you want to learn about, and dive into a well-crafted explainer video that introduces you to the basics of the topic. There’s some really fantastic content out there, and it really isn’t as scary as it seems.
You will need to do refresh your memory every now and again if you’re not actively involved though, even on topics that you’ve already learned and feel like you have a solid grasp on, and that’s totally fine.
1 Become Part Of The Crypto Staking And DeFi Community
This is one of the best parts of becoming a crypto staker in our opinion – the community.
When you stake crypto, you become part of something greater. You become part of the advancement of technology and finance towards a more decentralized future, where people have more control of their funds, and governance is more democratized than ever.
That’s why one of the best things you can do as a new crypto staker is to familiarizing yourself with other stakers, whether through social media, chats, online communities, newsletters, or simply following updates from a few of your favorite staking-related websites (hey!).
There’s also great podcasts centered around DeFi or popular assets like Ethereum. The Daily Gwei and Bankless come to mind.
This article is for educational purposes only. Not financial advice.
Please make sure to read our Disclaimer before making any financial decisions.