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Ask CryptoVantage: What’s the Difference Between Staking and Crypto Earn?
The ability to get a high interest return on cryptocurrency is one of its biggest draws as people decide to journey into the world of digital assets.
There are many ways to do this with decentralized financial services becoming more prevalent and accessible, and then there is staking, which is an entirely different way to earn interest on your crypto. But what is the difference between staking and something like Crypto Earn from Crypto.com, or other earning services? That is what we will be looking at in this edition of Ask CryptoVantage.
What is Staking?
Staking is available for proof of stake cryptocurrencies such as Polkadot (DOT), Cardano (ADA), Tezos (XTZ), Ethereum (ETH), Cosmos (ATOM) and Polygon (MATIC). When you stake with a crypto asset it is put to work in securing and validating transactions on the blockchain, and as a result you are rewarded with a payout in that asset proportional to your stake. Depending on the asset there may be period when you receive no payout, and some also have locking periods where you cannot access your stake for a certain amount of time as it is being used on the blockchain network, such as Cosmos which has a 21-day period before you get access to it again.
Generally, you delegate your stake to a validator. The process can be complex depending on the platform, but something like DOT and XTZ can be easily staked through the Ledger Live app, and ADA provides an easy process through its Daedalus desktop wallet. When you delegate your stake to a validator you are not giving up your crypto, but simply giving them the power to use it to do things such as vote on proposals or validate transactions.
You can also stake through an exchange, some of them offering the service if you simply hold the asset on the exchange, while others require you to deposit it into their contract. The former is called soft staking, because you generally just have to hold over a certain threshold in order to be eligible, with no lock up of any sort. The latter is called hard staking because it usually means that there is a lock up period where you can not access your asset until the term is complete. Exchanges such as Crypto.com then offer something called Crypto Earn which works like hard staking but with more of a focus on long-term earning.
What is Crypto Earn?
Crypto Earn is a service offered by Crypto.com, but there are similar services available through other platforms. With Crypto Earn you get rewards for depositing your assets into a contract that has a payout that is dependent on a few factors: the length of the term, your Crypto.com Coin (CRO) stake, and the asset itself.
There are three terms lengths with Crypto Earn: flexible, one month, and three month, with the interest you earn going up the longer you are willing to lock up your assets. The difference between locking your crypto into a lending program like Earn and staking is that when you put it into a lending program, they use your funds like a bank does in order to generate more revenue, and then they reward you a portion just like a bank does with interest.
CRO is the native token of the Crypto.com Exchange, App, and their native blockchain. Depending on your CRO stake you can get a higher interest rate, and the higher stake would also give you access to more of the features of the Visa Debit card such as you Netflix subscription being reimbursed. The difference in interest rates can be more than 2%.
The amount of interest you get with Crypto Earn is totally dependent on the asset, with stablecoins like Tether (USDT) offering higher interest rates than Bitcoin or altcoins do, but even with the low tier CRO stake you can get a 3% APR for a one-month term on Bitcoin, which is certainly better than most traditional banks are going to give you.
The Differences Between Earning and Staking
The main difference between staking and Crypto Earn is that you can earn interest on assets that are otherwise stagnant because they are not proof of stake assets. This is true of something like Bitcoin, which is proof of work and therefore offers no staking options for users. Crypto Earn gives users the chance to earn interest on a variety of assets that they may not be able to earn interest on otherwise.
Crypto.com is hardly the only crypto company to offer earn and, in fact, crypto lending institutions like Celsius Network, Nexo and BlockFi are all centered around offering crypto earn to their customers. You should note the terminology varies from platform to platform. Crypto.com is all about “earn” but some of the other platforms refer to it as a “crypto savings account”.
Earn Interest on Your Bitcoin on Crypto.com
- One-stop shop for crypto with built-in exchange, app, lending platform, debit card and more
- Native CRO token gives users a huge variety of perks and can be staked for over 10% APY
- Potential for earning high amount of interest when storing digital assets on Crypto.com
- A long-term goal of building cryptocurrency adoption on whole
Questions About Staking and Earning Crypto
You can stake your crypto as long as you want but it generally takes a period of time to un-stake it.
Some cryptocurrencies only take minutes, others take days while others take weeks. It all depends on the coin.
It all depends on how much you put into your earn account.
If you put $100,000 worth of USDC into an account with 6% APY then you’d earn $6,000 worth of USDC every year.
Most Earn platforms payout either monthly or weekly so in the aforementioned case you’d earn $500 a month or $16 a day.
Of course $100,000 is a huge amount of money and most people won’t be investing anywhere near that amount.
In addition most cryptocurrencies are notoriously volatile so you don’t know exactly how much your crypto will be worth at the end of it all.
Crypto earn is legit but you should know there is risk involved.
It’s similar to how banks will use the money you put into a savings account into other investments. This is called fractional banking.
The Crypto earning platforms have, for the most part, been remarkly reliable thus far, but there is a chance there will be an incident that could lead to losing some or all of your crypto.
Proceed with caution and don’t risk what you couldn’t afford to lose.
You can lose money staking but it’s unusual.
Most stakers will be staking their coins with larger validators. Those validators are sometimes hit with penalties if they are unable to validate a block. The penalties generally affect your staking rewards, not your principal.
One very big positive factor for staking is that you never give up your private keys, which means you always have control of crypto, even if a validator goes down.
Of course, thanks to the volatile nature of crypto, your cryptocurrency could be worth less (even factoring staking rewards) when you eventually withdraw it.
No.
When you use a crypto earn product you are lending out your crypto to a third-party to earn a yield.
When you stake cryptocurrency you are helping secure a crypto network (while retaining your private keys).
