Cryptocurrency staking is not just a buzzword; it’s a multi-billion-dollar industry that enables investors to participate in crypto wealth creation. To put this into perspective, consider this: the value of staked Ethereum (ETH) is currently around a whopping $36 billion, generating returns exceeding 6%. These are significantly larger returns than most, if not all, traditional financial products without the counterparty risk inherent to most of those products.
Even better, staking also paves the way for broader crypto integration into the financial mainstream. Today, major centralized exchanges like Coinbase and Binance, which have existing partnerships with traditional banks for fiat on-ramps and off-ramps, are now offering staking services. This provides their users with a new avenue for earning returns and further integrates cryptocurrency into conventional financial systems.
Investors can support network operations while earning staking rewards by participating in a proof-of-stake (PoS) blockchain. This is particularly lucrative for larger investors, who can leverage their substantial holdings to generate returns at scale.
In this article, we will delve into why big investors should care about crypto staking. We’ll explore the pros and cons, highlight some successful examples of institutions already involved, explain what staking is in general, and touch on the legal aspects. Read on!
What is Staking?
In a PoS blockchain, staking is the process of actively participating in transaction validation. When you stake your tokens, you lock them up for a certain period to help maintain the network’s security and operations. The more tokens you stake, the higher the chances of being selected as a validator for the next block. In return, you are rewarded with additional tokens.
This reward scheme can provide a steady income stream, separate from the potential capital gains from the price appreciation of the staked assets.
It’s important to note that staking is only possible on proof-of-stake (PoS) blockchains, such as Ethereum, Cardano, Cosmos, etc. Unlike proof-of-work (PoW) blockchains, which require miners to solve complex mathematical problems to validate transactions, PoS blockchains select validators based on the number of coins they are willing to ‘stake’ or lock up.
Benefits of Staking for Big Investors
Passive Income
Staking provides a way to earn passive income from your cryptocurrency holdings. The staking rewards, often in the form of additional tokens, can be significant, especially for large-scale investors. For example, at Everstake, we generate from 1% to 33% annual percentage yield (APY) for staking, depending on the asset. Learn more about the rewards here.
Protect & drive growth in your investment
Staking is fundamental to the long-term stability and viability of proof-of-stake blockchains. By staking their tokens, large investors contribute to the security and efficiency of the blockchain, making it more resistant to attacks and improving its transaction processing capabilities. This increases the likelihood that the network will gain adoption and thus better ensures the success of their investment and overall ROI.
As more coins are staked, the network becomes increasingly decentralized, fortifying its defenses against potential threats. This heightened security not only boosts the credibility of the blockchain but also enhances its overall value. Over time, a robust and trusted network can catalyze the appreciation of its native tokens, offering stakers potential financial gains.
However, the benefits of staking extend beyond security. On most PoS blockchains, stakers are granted the privilege to participate in network governance actively. This means they can wield influence by voting on key proposals related to network upgrades, transaction fee structures, or other pivotal aspects.
Such participation fosters a sense of ownership among stakers, allowing them to play a direct role in shaping the blockchain’s future trajectory. Essentially, staking offers investors a protective shield and a voice in the blockchain’s evolution.
How can big investors get involved with staking
Many cryptocurrency exchanges and wallets now support staking, making it easy for investors to get started. While numerous platforms offer staking services, choosing a platform that combines ease of use, security, and profitability is crucial.
Everstake is one platform that caters to these needs, offering various staking options for cryptocurrencies.
Direct Staking on the Network
Investors can directly stake their cryptocurrencies on the network of their choice. For instance, if an investor holds Ethereum (ETH), they can stake their holdings directly on the Ethereum network. This method requires a good understanding of the staking process and the network’s staking requirements.
Pros
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Gives investors full control over their staking activities.
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Ideal for those with a deep understanding of the staking process and the specific network’s requirements.
Cons
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Requires significant technical knowledge and understanding of the network’s staking protocols.
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The responsibility of managing and securing the staked assets lies solely with the investor.
Staking via Crypto Exchanges
If you prefer a more straightforward approach, many cryptocurrency exchanges offer staking services to their users. The exchange handles all the technical aspects, making it a convenient option for investors who want to avoid the complexities of staking.
Pros
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A straightforward approach where exchanges handle all the technical aspects of staking.
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Convenient for those who prefer simplicity.
Cons
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Investors are entrusting their assets to a third party, which may carry additional security and counterparty risks.
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The exchange’s staking policies may not always align with the investor’s preferences.
Staking Via Cold Wallet or Qualified Custody Platform
Cold staking through a hardware wallet or a qualified custody platform is an attractive choice for those concerned about security. This method involves staking your crypto in a wallet not connected to the internet, like a ‘cold wallet.’ It adds an extra layer of protection, making it appealing to big investors who prioritize safeguarding their assets.
Pros
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Provides an extra layer of security by staking crypto in a wallet that’s not connected to the internet, and in the case of custody platforms, the guidance needed to safeguard your assets and even execute the stake safely on your behalf
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Appealing to investors who prioritize safeguarding their assets.
Cons
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In the case of cold wallets, it may be less convenient or involve learning as it requires the use of hardware or other offline storage methods.
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The process of setting up and maintaining a cold wallet can be complex.
Liquid Staking
Liquid staking allows investors to stake their cryptocurrencies and receive a token in return that represents their staked assets. This token can be traded or used in other DeFi protocols, providing liquidity to the staked assets.
Pros
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Allows investors to stake their cryptocurrencies and receive a token in return that represents their staked assets.
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The token can be traded or used in other DeFi protocols, providing liquidity to the staked assets.
Cons
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Using derivative tokens in liquid staking might lead to more significant price fluctuations, especially if these tokens are sold on other markets.
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Liquid staking systems can have complex fee setups, including costs for multiple transactions, charges for creating and cashing out synthetic tokens, and more.
Navigating the world of staking can be complex, but there are platforms like Everstake that simplify the process. Trusted by over 625,000 users, Everstake offers a comprehensive suite of staking services that cater to various staking methods.
No matter what you’re looking to achieve or your preferences around approach, Everstake can provide a wide range of solutions tailored for you or guidance and expertise to direct you to the best opportunities and tools to match what you’re looking for. With a wide range of staking options across various networks, Everstake is the best place to understand and navigate the many opportunities and embark on your staking objectives.
The Easiest Way for Big Investors to Start Staking
For institutional investors looking to delve into cryptocurrency staking without getting entangled in its technical intricacies, Staking-as-a-Service emerges as the optimal solution. Platforms like Everstake specialize in offering this service, ensuring that large-scale investors can effortlessly stake their cryptocurrencies.
Everstake, tailored for institutional investors, streamlines the entire staking process. They shoulder the responsibility of managing the technical and performance aspects of staking, allowing investors to focus solely on their investment strategies.
Key Advantages
Expert Management: Everstake takes on technical challenges, ensuring that staking operations run smoothly and efficiently.
Tailored for the Uninitiated: It’s the perfect avenue for investors who might not have the technical know-how or the bandwidth to manage staking operations themselves.
For institutional investors aiming to capitalize on staking rewards without the associated complexities, Everstake’s Staking-as-a-Service is the ideal gateway.
How Big Investors are currently responding to staking opportunities
In The State of Staking report, researchers sought to gain valuable insights from 999 PoS crypto investors. The survey aimed to understand what attracts investors to staking, how they engage in it, their concerns regarding staking, and why some choose not to participate.
Let’s explore the findings of the report, which provide valuable information about how investors are responding to the burgeoning field of crypto staking and its potential impact on the financial landscape.
Higher Returns Could Encourage More Staking
Investors who haven’t staked their crypto indicated that higher returns could persuade them to do so. They also expressed a desire for a lower minimum staking amount and clearer tax regulations around staking.
Over Half Plan to Stake in the Next Year
56% of the surveyed investors plan to stake in the next year, including those who haven’t staked before. Most of them plan on staking 20% to 30% of their portfolio.
Lock-Up Periods Deter Some Investors
The mandatory lock-up period (relevant to some chains) is the main reason some investors haven’t staked their crypto. They prefer to have their assets readily available for investment in DeFi and other opportunities. Some investors with a higher risk appetite also find higher returns in DeFi than in staking.
Staking Services & Individual Nodes Are the Top Prefered Methods
The predominant methods for staking were found to be the establishment of an individual validator node, participating through exchanges and leveraging staking-as-a-service providers.
Successful Examples of Large Investments in Staking
Many top-tier companies are making notable strides in the staking landscape. While highlighting major investment milestones in staking, we choose to keep specific company names under wraps, respecting their privacy and preserving the confidentiality of our sources. That said, these case studies are proof of the ever-increasing role and potential of staking in our digitalized world.
A renowned fund invests $50M in staking
Setting a benchmark in the Web3 domain, one of the largest funds in Web 3.0, is charting a confident path. They’ve adeptly spread their staking across multiple avenues, and the fund’s partnership with Anchorage Digital is a testament to their forward-thinking approach. Leveraging a combination of tools and partnerships of this kind, together with due diligence and a firm understanding of the revenue opportunity staking presents, has led to them staking assets worth over $50M.
Everstake’s Superior B2B ETH Staking Solution
We’re proud to announce that another big investor has recognized the value of our bespoke Ethereum B2B solution. Regarding ETH staking, Everstake is leading the charge with our secure and user-friendly platform. What sets us apart? A lifetime ETH APR that is a formidable 20% higher than many other top providers. Choose Everstake, choose excellence.
Top Investment Platforms Turn to Staking to Boost Clients’ Returns
One of the leading investment platforms is taking steps to increase their clients’ investments through staking. They’ve strategically staked a diverse set of assets on their behalf. To ensure safety and reliability in this process, they’re working with several trusted custody providers, and BitGo stands out as a notable partner in this endeavor.
Everstake Broadens the Staking Horizon
Everstake is actively expanding its partnerships within the Web3 ecosystem. We’re collaborating with a diverse group of stakeholders, including Venture Capitalists (VCs), High Net Worth Individuals (HNWIs), and various exchanges. Our objective is to strengthen these relationships and explore and capitalize on the potential of staking a wide variety of assets. This diversified approach positions Everstake at the forefront of staking innovations and provides our partners with a robust, flexible, and optimized staking experience.
The Takeaway
In conclusion, big investors should care about crypto staking because it offers a promising way to earn passive income, enhance network security, and participate in network governance. By staying informed, assessing the risks, and exploring new industry innovations, big investors can make informed decisions to capitalize on the potential of crypto staking and play a vital role in shaping the future of the digital asset ecosystem.
At Everstake, we highly recommend our top-notch validator services to meet all your staking needs. With a solid track record since 2018, our team of skilled engineers has earned the trust of over 625,000 users across more than 70 blockchain networks.
As a self-financed and profitable entity, we boast an extensive network of over 8,000 nodes, supporting a wide range of blockchain protocols, including bridges and oracles. Our dedicated team of over 125 professionals is fully committed to providing high-quality staking services while ensuring the utmost security and reliability.
Selecting a reliable validator like Everstake is crucial, as it directly impacts the staking rewards you’ll receive. Rest assured, our team is always here to assist you with any inquiries or support you may need. Feel free to contact [email protected] or book a time here to set up a conversation. We aim to ensure you have the best staking experience possible with us.
