- You can earn a 0.25% APY on your BTC holdings on Kraken by staking
- Staking BTC on Kraken is an example of off-chain staking
- Our step-by-step guide will help you earn passive income on Kraken by staking BTC
Staking your funds on cryptocurrency exchanges is a way to put your assets to work and earn some passive income instead of having them sitting idle in your account. Kraken supports staking for a wide range of both crypto and fiat exchanges. If you live in an eligible country, you can Bitcoin (BTC) on Kraken and earn an APY of 0.25% – while it’s not a lot, it’s a way to slightly grow you idle BTC holdings passively and with minimal risk.
What is Kraken?
The San Francisco-based Kraken has been around since 2011, and is considered as one of the most secure and reliable places to trade cryptocurrencies. Kraken has been rated many times as the best and most secure Bitcoin exchange by independent media. Due to its reputation, Kraken is used by both regular crypto traders and sophisticated institutional investors.
Currently, Kraken is the world’s largest Bitcoin exchange in terms of euro volume. It offers trading for over 50 cryptocurrencies and accepts payments in 7 different national currencies – EUR, USD, CAD, GBP, JPY, CHF and AUD.
What do I need to start staking BTC on Kraken?
In order to start staking on Kraken, you will first need to create an account with the exchange.
- After you create your account, you will need to pass an identity verification process. Kraken has to verify the identity of its customers in order to comply with the relevant regulations. All cryptocurrency exchanges that handle fiat currencies like USD and EUR have similar requirements.
- Next, you will have to deposit or buy the assets that you want to stake. In our example, you might want to exchange some of your fiat cryptocurrency for BTC, or directly deposit BTC to Kraken.
- After that’s done, you’ll be able to start staking and earning rewards. If you have any questions about getting started on Kraken, you can check out our guide on how to use Kraken.
Here are the assets that Kraken supports for staking:
1. After your Kraken account is ready, head over to the Earn section of the website. Then, you can select which asset you would like to stake. In our example, we’ll be choosing Bitcoin (BTC).
2. After selecting the asset, you can enter the amount of funds you wish to stake.
3. Enter the Two-Factor Authentication code. You’ll need to confirm the transfer by entering your 2-factor authentication code. Setting up 2-factor authentication is highly recommended, as it will help you protect your account against unauthorized log-ins.
4. Staking is confirmed! A pop-up will appear confirming your staking and you’ll be able to see it in the Staked assets section.
Now, let’s address some of the most common questions you might have about staking on Kraken.
Where can I check my staking balance?
To check your staking balance, click on Staking in the header menu. Your total balance will appear along with the number of staked assets.
Can I stake additional assets?
To start staking additional assets, simply repeat the process and select the asset you’d like to stake.
If you’d like to add additional assets to the amount you’ve already staked, and click the three dots next to the staked amount and select “Add assets”.
How long does staking last? When can I unstake the assets?
You can unstake at any time by going to the Staked assets page and clicking the three dots next to the staked amount and selecting Unstake. You won’t be eligible for the last staking period rewards and your funds will appear in your main account shortly after.
Do I need to pay taxes on staking rewards?
This will depend on the country you live in. In most cases, staking rewards are taxable – make sure to check your local tax rules.
What are the risks of staking, can I lose money by staking?
Kraken is not regulated as a bank or depository institution, which means that the funds you stake with Kraken don’t have the same protections as the funds you have in your bank. The off-chain staking programs offered by Kraken also aren’t regulated by any securities regulators.
In addition, if the price of the staked asset drops more than the value of the reward you receive, then you’ll end up with less value than you started with. This is what is called market risk.
The logic is a bit different for staking fiat currencies, though not completely. If you’re staking your national currency, you’re unaffected by the market risk and you’ll pocket the rewards, and you can’t end up with less than what you started with (unless something goes very wrong with Kraken).
Another risk associated with staking on Kraken is a risk that affects all centralized cryptocurrency exchange users. If your Kraken account gets compromised, the funds that you have on the exchange could get stolen. You can mitigate this risk by using 2-factor authentication wherever possible, and being on the lookout for phishing attacks. Always check that you’re actually using the real Kraken website and not a malicious website that’s impersonating Kraken.
On-chain vs off-chain staking on Kraken
Kraken offers two types of staking – you can stake cryptocurrencies through on-chain staking, or stake fiat currencies through off-chain staking.
On-chain staking refers to cryptocurrency networks that are secured through a Proof-of-Stake (PoS) consensus mechanism.
In such networks, users can temporarily lock their coins and participate in the process of adding new blocks to the blockchain. If they are acting according to the protocol’s rules, they earn staking rewards in the process. If they are found to be breaking the rules, their stake can be “slashed”. In blockchains with a Delegated Proof-of-Stake (DpoS) consensus model, regular users typically don’t participate in the consensus process themselves, but delegate their stake to a validator of their choice.
Depending on the specific cryptocurrency, setting up a profitable staking operation can have some pretty steep technical requirements. With their expertise and technical infrastructure, Kraken is offering users the option to stake coins on their behalf. If you decide to stake your coins through Kraken, the exchange will take a small cut of the staking rewards generated by your coins, while you get the rest of the rewards.
Kraken uses the term “off-chain staking” to describe its staking products that involve fiat currencies, or cryptocurrencies like Bitcoin that don’t have a staking feature built into them. BTC staking on Kraken is an example off-chain staking.
When you’re off-chain staking with Kraken, you’re essentially making your BTC available to Kraken in exchange for rewards. You can request to have your funds unstaked at any time.
Off-chain staking is not available to all Kraken users. To see if your country is on the list of the countries that aren’t supported for off-chain staking, click here.
Staking is not risk-free. We discuss some of the risks associated with staking on Kraken in a separate section of this article.
If you’re a Kraken user, staking is a good way of getting some extra value out of your assets without having to do any heavy lifting. While staking is not risk-free, it is much less risky than active cryptocurrency trading. This is especially true if you’re staking fiat currencies, which tend not to display big price fluctuations in short periods of time. Hopefully, this guide helped you get started with staking BTC on Kraken!
Source link: https://coincodex.com/article/13819/how-to-stake-bitcoin-on-kraken-earn-rewards-on-your-idle-btc-balance/