Crypto.com Staking

On-chain Staking rewards are typically expressed in annual percentage rate (APR) terms. For example, a 5% APR means you would, in theory, receive $5 annually for every $100 worth of crypto you stake on-chain.

Different blockchain protocols have different APRs, and there is typically no limit to how much you stake on-chain for any cryptocurrency.  Your rewards may vary due to price fluctuations of the underlying cryptocurrency, changes in the number of validators, changes to the protocol, and many other factors.

On-chain staking is an integral part of a Proof of Stake (PoS) blockchain, which is designed to securely verify transactions. By participating, you are ultimately contributing to a process critical to its security and operation.

In PoS blockchains, transactions are verified by validators who must stake an amount of a blockchain’s token to participate in the verification process. In return, validators are rewarded with more tokens. If they engage in malicious behaviour or fail to validate (e.g., by going offline), a portion of their stakes could be taken away.

PoS is just one of the many consensus mechanisms that blockchains employ to verify transactions before they are added to the blockchain.

Some blockchains, such as Ethereum, which transitioned to PoS in 2022 (called ‘The Merge’), require validators to stake a large amount of native tokens. In Ethereum’s case, the current minimum requirement is 32 ETH. However, there are other ways to participate in on-chain staking even without the required number of tokens.

As with all investments, there are some considerations and risks to take into account before on-chain staking or locking up your crypto:

Price movements and total return:

While on-chain staking lets you receive yield, an important consideration is the concept of total return — a combination of capital appreciation (or loss) and the yield received.

Crypto prices can be volatile, so keep an eye on potential capital gains or losses along with your staking rewards.

Bonding period:

Some tokens have minimum  bonding periods where users cannot withdraw their tokens. Furthermore, when withdrawing tokens from a staking pool, there could be a specific waiting time for each blockchain before the tokens are received. So if you want to use your virtual assets for other purposes (such as trading) during a particular time, you may not want to stake your virtual assets.

Validator penalties:

There is always a risk that the validator fails to perform their tasks properly or engages in malicious behaviour. These improper validator actions may be penalized by having their rewards cut or the staked amount taken away, potentially affecting other users in the pool as well.

Fees:

Staking pools and crypto exchanges may also charge fees or commissions.

Hacks:

Always be cautious of potential hacks or vulnerabilities that could jeopardize your locked-up funds.

In summary, on-chain staking passively generates rewards on your cryptocurrency holdings. However, there are risks and downsides to consider, including validator penalties, market price movements that could affect the total return, hacks, fees, and the minimum staking period.

Do your research, exercise due diligence, and make informed decisions about whether on-chain staking aligns with your financial goals!