How to Stake Crypto in Canada

The maturity and innovation witnessed in the cryptocurrency industry in the last few years have been remarkable.

Despite hiccups along the way, the revolution unfolding before our eyes cannot be missed. A lot is happening right now, whether it is the continued progress in the advancement of decentralized finance (DeFi) technology or the transition from Proof-of-Work to Proof-of-Stake.

For crypto investors, what does this really mean?

Well, one of the most notable developments in 2022 has been the rise of crypto staking.

Indeed, staking has quickly become the backbone of the advancement of the new generation of cryptocurrency.

But what does staking even mean? Let's find out!

Crypto Staking: A Primer

Crypto staking is a method of earning rewards for locking in your assets for a period of time to help support the operation of a blockchain, secure the network, and verify transactions. In exchange for staking your crypto, be it Ethereum or Polygon, you will receive interest. You can stake as much or as little as you want for any length.

The process is comparable to depositing your money in a savings account.

Many crypto enthusiasts might be wondering what the primary objective is in staking.

For the user, the network rewards the stakers, who then generate a passive income. For the industry, it is about powering the Proof-of-Stake (PoS) mechanism. This is a cryptocurrency consensus mechanism for executing transactions and producing new blocks in a blockchain. This system validates entries into a distributed public ledger that can help ensure the database is safe and secure.

The cryptocurrency sector is all abuzz over PoS rather than the old ways of PoW, which requires hardware, computing power, and perpetual resources.

PoS maintains plenty of advantages aside from generating passive income, particularly on two fronts. The first is that it is less energy-intensive, so it will not imbibe a chunk of the electric grid and consume more power than the typical computer. The second is that, unlike crypto mining, which needs special hardware and enormous computational power, no special equipment is required to become a validator on a PoS system.

How to Stake Crypto in Canada

The first step in the staking process is to own digital currencies that can be staked. Right now, the number of cryptocurrencies you can stake is limited, but it is continually growing as many transition to PoS.

Here is a list of PoS digital tokens that you can stake:

·   Ethereum (ETH) - Now available!

·   Polygon (MATIC) - Now available!

·   Solana (SOL) - Now available!

·   Cardano (ADA) - Coming soon

·   Polkadot (DOT) - Coming soon

·   Avalanche (AVAX) - Coming soon

Next, you must choose a cryptocurrency exchange that offers in-house staking opportunities on its platform. Many of the more extensive crypto exchanges in Canada, such as Bitbuy, offer these staking features, which can be a convenient way to participate in this income-generating strategy.

It should be noted that you can also become a validator and manage your own staking pool. However, it is more challenging than simply staking your holdings. Instead, you need more expertise, time, and funds from delegate stakers to run a staking pool successfully.

Speaking of staking pools, when determining which one to select, it is crucial to assess its reliability, the fees (anywhere from two to five per cent is reasonable), and the size.

And that is all you need to do.

In terms of payment schedules, it will depend on the crypto exchange you choose or if you are refraining from picking a third-party platform. So, for example, if you are a client on Bitbuy, you will receive your rewards every two to three days.

The benefits of staking have been outlined, but what would be some of the risks?

Here is a brief list of what you need to monitor:

·   Cryptocurrency prices can be highly volatile, so a drop in valuation could easily erase any potential gains from staking.

·   Some PoS cryptocurrencies might require a minimum amount of time for staking coins, which means that you will be unable to access your funds

·   Once you unstake your crypto, there could be a chance that the unstaking period will last seven days.

·   Smaller crypto projects might offer excessive rates to attract investors. This is perhaps the enormous red flag since it might be covering up the fact that prices could end up cratering.

Will All Cryptocurrencies Start Staking?

The industry is in the middle of a debate: What consensus mechanism is the most effective and secure? As a result, only some cryptocurrencies will make that transition from PoW and PoS and start offering staking opportunities.

So, while you wish you could stake your Bitcoin or Dogecoin holdings, you will need to wait until the broader sector makes that giant leap into Proof-of-Stake.

Until then, you can always stake your Ethereum or Polygon and earn staking rewards that way.

Put your crypto to work and benefit from the security & quality of Bitbuy's staking solution. Learn more on how you can effortlessly start earning staking rewards here.