Due to the scalability limitations of Proof-of-Work (PoW) cryptocurrencies, Proof-of-Stake (PoS) consensus mechanisms are becoming increasingly popular in the cryptocurrency and blockchain industry.
In Proof-of-Work cryptocurrencies like Bitcoin, miners deploy computer hardware to solve computationally-intensive mathematical problems and validate transactions. The first miner to find the right solution gets to add the next block to the blockchain, and earns a block reward in return. In Proof-of-Stake, users stake their cryptocurrency to serve as a validator and have the chance of adding the next block to the blockchain. If a staker is found to be breaking the rules, a portion of their stake is removed. Honest stakers earn rewards in return for their participation.
One of the best parts of PoS cryptocurrencies is that you don’t need a large upfront capital investment to start contributing to the consensus process and earn rewards. If you’re trying to mine a PoW cryptocurrency, you have to purchase expensive hardware and ensure that it’s maintained properly. To get involved with PoS coins, all you need is to own some cryptocurrency that you want to stake. The minimum staking amounts are usually low, so staking is typically accessible to almost everyone.
You can stake Cardano (ADA) on Binance to earn rewards
In most cases, you can stake cryptocurrency directly through your wallet, but the staking process varies between different PoS coins. If the coin you want to stake has a more complex staking process, it’s worth considering staking through cryptocurrency exchanges. Many exchanges offer a service where they will stake your coins on your behalf, in exchange for a fee.
One of the best cryptocurrency exchanges for staking is Binance. It supports staking for more than 50 different cryptocurrencies, including Cardano. Here are the most important facts you need to know about staking Cardano on Binance:
- Duration: 30 days, 60 days, 90 days
- Min/Max Amount: 1 ADA – 500,000 ADA
- Estimated APY: up to 7.54% (at the time of the writing)
- Interest Period: 1 day
- Redemption Period: 1 day
The exchange offers a variety of staking and savings programs that will let you earn rewards passively. Here’s a few of the cryptocurrencies that you can stake on Binance:
How to stake Cardano on Binance?
Cardano is a Proof-of-Stake cryptocurrency that you can stake on Binance to earn ADA rewards. We’ll be showing you a step-by-step guide on how to stake Cardano on Binance. If you’re not a Binance user already, you’ll need to register an account on Binance.
Binance is introducing mandatory identity verification for all its users. In order to continue using Binance’s services, you will have to pass a know your customer (KYC) process on the exchange.
How and why should you do KYC on Binance?
1. Fund your Binance account with ADA
After you’ve created your Binance account, you will need to fund it with some ADA. You can do this either by depositing ADA from your Cardano wallet or another exchange, or buy some ADA on Binance.
How to buy Cardano (ADA) on Binance?
Once you have some ADA in your Binance account, you’re ready to start staking. The minimum amount required to start staking ADA on Binance is 1 ADA, so you don’t need to purchase a large amount to get started.
2. Find the ADA staking program that’s the best for you
At the top of the Binance user interface, select the “Binance Earn” option under the “Finance” menu.
Now that you’re in the Binance Earn section, you can search for the cryptocurrency you’re interested in staking. In our example, we’ll be searching for ADA.
In this case, we can choose between 3 different options for ADA on Binance on Earn. We’re only interested in staking for the purposes of this guide, so we’ll ignore the “Flexible Savings” option for now. When you’re staking ADA on Binance, you’re using the exchange’s Locked Staking product.
We see that we have two different staking options available at the moment. One is for 30 days, and the other is for 60 days. Since the 60-day option means you’ll be committing your ADA for a longer period, you’ll get better returns on it (APY of 7.79% vs an APY of 5.09% for the 30-day option).
Please note that the APYs you can get for staking coins on Binance will be changing over time. If you try to stake ADA, you’ll probably get different APYs than what you see in our screenshot. This is because the staking returns themselves on blockchains like Cardano change over time.
3. Select your staking parameters and confirm
In our example, we’ll be choosing the 60-day ADA staking option. Here, you can enter the amount of ADA that you wish to stake. The platform will provide you with an estimate of how much ADA you will earn after the 60-day period. This is just an estimate, so the actual rewards you earn will not match exactly.
TIP: Here, you can also see the “Redemption Date”, which is when you will be getting your ADA coins back. It’s possible to unstake your ADA before that, but you won’t get paid any interest if you choose to unstake from a Locked Staking position before your staking period ends.
After you entered how many coins you want to stake and the staking period, you can confirm by clicking on “Confirm Purchase”.
4. Check your Locked Staking positions
You will be able to see your locked staking position in the Wallet section of your Binance account. Go to the “Earn” subsection of your “Wallet” and select “Locked Staking”.
If you want to unlock your coins before your staking period ends, you can select the “Redeem Earlier” option. If you choose to do this, however, you will not get paid any of the interest that was generated during your stake. Depending on the cryptocurrency you are staking, it could take between 24 and 72 days before you’re able to access your coins.
What are the pros and cons of staking ADA on Binance?
Staking ADA on Binance is a convenient option to passively earn some extra coins. By staking ADA on Binance, you can earn ADA without having to worry about managing your private keys and keeping your Cardano wallet software up-to-date with the latest releases.
However, there are also downsides that come with staking cryptocurrency through exchanges. The most important risk here is counterparty risk. When you deposit ADA to Binance, you essentially hand over control of your coins to the exchange. You have to trust that they will store it securely and honor your withdrawal requests. When staking, you also have to trust that Binance will perform its staking duties properly and not incur any penalties on the blockchain itself.
If you place a lot of emphasis on decentralization, it’s probably better for you to stake on your own instead of using exchanges. Since exchanges pool together deposits from many different users, they hold massive amounts of cryptocurrency – this gives exchanges a lot of power to influence Proof-of-Stake networks. Most exchanges have adopted a neutral stance and are not actively exerting their influence through staking, but this could change in the future.
The bottom line
If you hold a Proof-of-Stake cryptocurrency, it’s a good idea to check out the different options for how you can stake your coins. Whether you stake by yourself through your wallet or use an exchange, you’ll be earning coins that you wouldn’t be getting if your coins were just sitting idle in your wallet or exchange account. Hopefully, this guide helped you get started with staking your ADA on Binance!
Source link: https://coincodex.com/article/12871/how-to-stake-cardano-on-binance-earn-ada-passively-with-staking/