Want to jump straight to the answer? You can stake Polkadot on Crypto.com!
The rise in popularity of crypto staking is a response to the increasing energy demands of proof-of-work (PoW) protocols like Bitcoin (BTC) and Ethereum (ETH). Ethereum has even begun the process of abandoning its proof-of-work mechanism in favor of more environmentally friendly proof-of-stake (PoS) for its Ethereum 2.0 release. This means that a “traditional” crypto asset might work differently in the future.
Proof-of-work protocols are energy intensive because they need to solve complex mathematical problems to validate network transactions. Proof-of-stake blockchains don’t need to solve intricate puzzles to validate transactions and therefore use less energy. In a proof-of-stake consensus mechanism, participants earn the network’s trust to validate transactions when they put up their tokens as collateral.
There are many other things to consider like transaction fees that other financial institutions might not charge. So, since your crypto is sitting in a digital wallet, what’s the best thing to do?
Staking your digital assets is the process of locking your digital assets on the network to earn profits. Your staked tokens help validate transactions on the platform. You get reimbursed because you also become a primary factor in maintaining the network’s security. The interest rate you earn via staking varies from 1 blockchain to the next. The more digital assets you stake, the higher the share of the rewards pool you make. Staking is processed on-chain, and dividends are distributed to your crypto wallet automatically.
What Is Polkadot?
Polkadot is a layer-1, scalable, secure blockchain protocol bridging various blockchains into a single network. Founded by former Ethereum developer Gavin Wood, Polkadot helps support the decentralization of the web and facilitate the rise of Web 3.0. The interoperability of the Polkadot protocol simplifies the development of decentralized apps (dapps). It allows developers to build their dapps to be compatible with all network blockchains.
These amalgamated blockchains running in parallel on the network are called “parachains.” The relay chain that facilitates Polkadot’s interoperability was built using the blockchain framework Substrate. Gaining access to Polkadot’s proof-of-stake consensus mechanism and security is advantageous for blockchains connecting to Polkadot as a parachain.
Polkadot’s native currency, DOT, is a significant player and performs critical functions on the platform. The DOT token facilitates network governance, staking and payments. The unique code built inside the token nables DOT holders to participate in governance. In terms of staking, DOT facilitates the function of the consensus mechanism, allowing valid transactions on the network. If network participants want to perform transaction validations, they must use their DOT as collateral via staking. This process acts as a disincentive for malicious participation in the network. In addition, DOT must be used as the payment vehicle when adding new parachains to the network. The DOT will be locked while the blockchain is connected to Polkadot and returned once the parachain disengages.
How Does Staking Work?
Staking works almost identically to a traditional savings account where you deposit funds and earn interest. On Polkadot, when crypto traders deposit or stake your tokens, they earn DOT for helping secure the network and validate transactions. To start the process, make sure the network does use a proof-of-stake consensus mechanism before purchasing your tokens. Then follow the developers’ procedure for the exact steps to start staking in your wallet. In most instances, the staking instructions are simple to follow.
Staking directly on an exchange in a staking pool has become increasingly popular because it makes staking more convenient for beginners. A staking pool helps increase all parties’ gains by increasing the number of tokens staked at an instance. Generally, the higher the number of staked assets, the higher the number of transactions a node will be allowed to validate. As a result, the nodes that contain the most significant number of tokens receive the highest compensation.
In the staking process, the information contained in the block gets validated by the users’ staked tokens. Digital assets inherently carry specific information from the blockchain used to validate transactions. That is how staked tokens are used to validate transactions and earn rewards.
How to Stake Polkadot
You can play the role of a validator or a nominator when you decide to stake your DOT tokens. As a validator, you help secure the network by participating in consensus. There is a high entry barrier to becoming a Polkadot validator because it requires a high degree of technical skill and an investment in a master node.
Alternatively, as a nominator, anyone can stake Polkadot devoid of any technical knowledge or significant investment in equipment. You can do this by staking your tokens on an exchange or in your wallet. The best trading platforms to stake your DOT on are Kraken, Crypto.com and Binance. Using an exchange for staking is as simple as buying DOT tokens, depositing them into your Polkadot wallet and pressing the stake button.
Although it’s not technically “staking,” you can earn passive income from your DOT tokens by transferring them to lending platforms like Celsius or Crypto.com and making interest.
Stake Polkadot From Your Ledger Wallet
The Ledger hardware wallet now supports the Polkadot network and the DOT token. The Ledger is not only the place to secure your assets, but you can also stake your DOT in your wallet. Polkadot JS is the interface that facilitates the interaction between the Polkadot network and the security of your Ledger. To start staking in your Ledger, you need to set up your Ledger device and import your Ledger account into Polkadot JS. Prior to starting you also need to make sure to have the Ledger Live App installed and that your Ledger device runs the latest firmware.
Where to Buy Polkadot
You can buy DOT on Kraken, Crypto.com, Coinbase and eToro exchanges. Crypto.com supports electronic, bank-to-bank money transfers through the ACH (Automated Clearing House), making it the most accessible place to buy Polkadot. However, Kraken provides the best staking rewards for DOT (up to 12%), and there’s no minimum amount needed to stake. For the best of both worlds, you could buy your DOT on Crypto.com and transfer them into your Kraken account.
Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts.
Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Earn Interest on Other Cryptocurrency With BlockFi
The 2 most prominent projects in crypto, Bitcoin (BTC) and Ethereum (ETH), are proof-of-work and don’t support staking. However, BlockFi offers annual percentage yield (APY) interest accounts, where users deposit their digital assets and make a profit. The interest they earn is paid out monthly and compounds, increasing the annual yield for users. BlockFi also supports APY accounts for Litecoin (LTC), Basic Attention Token (BAT) and several stablecoins. Interest rates fluctuate depending on the amount of crypto you deposit.
Yes, the Ledger hardware wallet allows onboard DOT staking.
Kraken offers the highest rate of return of 12% in September 2021 out of all crypto exchanges. However, you can earn about 14% when staking from your Ledger hardware wallet
Is Staking Polkadot Worth it?
Staking provides returns that are higher than the interest rates offered by any traditional bank. Most of the leading proof-of-stake protocols offer anywhere between a 5% to 7% return, although other blockchains offer a higher rate. Currently, Polkadot is one of the highest value and most secure PoS platforms. Polkadot offers an estimated 13.87% interest rate per year, has a market cap of over $7.6 billion and can be staked on major exchanges like Kraken, Crypto.com and Binance. Polkadot is poised to expand its network as more projects compete for a parachain spot. The continued growth of the project should result in increased demand which could reward token holders.
Frequently Asked Questions
How much Polkadot do you need to stake on ledger?
To stake on ledger you need a minimum of 10 polkadot.
- Exclusive Crypto Airdrops
- Altcoin of the Week
- Insider Interviews
- News & Show Highlights
- Completely FREE
About Tyran Christian
His expertise is in blockchain technology and cryptocurrencies.