Staking
Staking is the process of blocking funds on a cryptocurrency wallet for a certain period of time in order to receive a reward. Cryptocurrency staking participants receive for keeping the blockchain running.
Principles of work
Staking, in its essence, is similar to depositing money in a bank with a certain annual interest rate. That is, just like in the world of fiat money (most of the world's currencies issued by governments), in the world of crypto, you can earn additional coins for depositing your crypto-assets.
Staking is part of the way blockchains operate using the Proof of Stake (PoS) consensus mechanism, which networks use to create and validate new blocks. PoS is based on how much native currency network members have invested in the system – the greater the amount added, the greater the chance of being selected by the next block validator.
For most participants in the process, there is no need for complex mining equipment — participants invest money directly in cryptocurrency. Thus, it is possible to add coins to staking on an exchange: the owner of coins sends money (in the case of the centralized exchange (CEX) — from his account on a particular exchange, in the case of the decentralized exchange (DEX) — from his personal cryptocurrency wallet) and presses a button to start staking — the exchange takes care of the rest of the work. At the same time, the income received on the exchange may be a little less than when using your own PC for staking.
Staking Pool
Coin owners can also pool their resources and thus increase the probability of getting the right to validate a block — this is how staking pools are formed. In this case, the reward for staking is divided proportionally to the contributions of participants to the pool.
Cold Staking
Cold-staking is staking using a «Cold Wallet» (a wallet without Internet access). This method keeps your coins safe, as they are not at risk of hacking or cyber threats. At the same time, you still receive a fee for maintaining the network.
Reward
The reward for staking is calculated differently by each blockchain, based on the terms of the platform or service. Some networks use a fixed percentage, while other networks may use a predictable reward percentage.
For example, Liquid Staking platforms allow cryptocurrency of any volume to be staked without locking up funds. Instead, the staker receives tokens that can be used in financial decentralized applications (DeFi). In the Tonstakers pool, for example, the annual reward is up to 4.53% per annum. On the Bemo platform ~5.24% per annum. In the Hipo service ~5.12% per annum. In the Stakee app (working inside Telegram) — up to 5%.
The size of the rewards can be influenced by:
- time in staking;
- the number of coins added to the staking;
- total amount of cryptocurrency allocated to the staking and so on.
Risks
Apart from the obvious pros of staking (passive income, low threshold of entry, participation in blockchain governance and so on), there are cons related to risks and complexities.
The main risks include:
- errors when blocking funds;
- impossibility of quick withdrawal of funds;
- volatility of cryptocurrencies (if a cryptocurrency falls in value, no one will compensate for losses).
Volatility is how much the price of cryptocurrencies changes in short periods of time. If the price goes up and down a lot in a short period of time, we can talk about high volatility. If the price changes slowly and gradually, it is low volatility. High volatility makes a cryptocurrency more risky to invest in because its price can change dramatically.
Staking in TON
TON, as a network based on the Proof-of-Stake algorithm, supports staking. By becoming a validator (checker) and participating in maintaining the network, it is possible to receive TON as a reward. But it is also possible to participate in the network with a small amount of TON by joining Pools of Nominators (users who delegate their coins) or by staking on exchanges.
Pool List:
An open source project, it is an official partner of TON Developers. After sending TON to the staking, the participant receives tsTON tokens, with the possibility to exchange them back at any time. Min. amount: 1 TON, APY up to 4.53%.
The first Liquid Staking protocol on the TON Blockchain. After sending assets to bemo, the user receives stTON tokens in return (which enable them to use the DeFi ecosystem), while keeping the original staking fee. There are no restrictions on the number of tokens or withdrawals. APY up to 5.24%.
Liquid staking bot with instant withdrawal of funds directly to Telegram. After sending TON to the staking bot, the participant receives STAKED tokens with the ability to exchange them back at any time. Min. amount: 1 TON, APY up to 5%.
Open source Liquid Staking with real-time rewards. After sending TON to the staking, the participant receives hTON tokens that enable them to use the DeFi ecosystem and earn rewards. Min. amount: 1 TON, APY up to 5.12%.
TON Whales The first decentralized open source TON staking. TON Whales provide smart contract code, DAO for commission management and 24/7 monitoring. Minimum participation amount: 50 TON, APY up to 5.12%.
Wallet Pools:
- Tonkeeper — using Tonstakers;
- Tonhub — using TON Whales;
- MyTonWallet — the first wallet to provide staking on the official TON Nominator smart contract.
Exchanges
As of September 2023, the decentralized exchange STON.fi allows STON coins (a service token of TON Blockchain) to be sent to a staking participant for a period of 3 to 24 months. The participant of the staking receives ARKENSTON [[Soulbound_Token_(SBT)|Soulbound tokens], which give the right to participate in DAO voting (DAO owns 50% of STON token issue and decisive votes in STON.fi protocol development), and a reward in the form of an eyedrop of GEMSTON and STON tokens, proportional to the number of coins sent to the staking. After the end of the staking, ARKENSTON can be burned and STON coins can be returned in full. At the same time, the period of staking affects the voting power of the participant and the subsequent voting results.
The BYBIT exchange provides TON staking opportunities for flexible term with an APR of ~1.5%. Under Bybit x TON joint projects, APR can go up to 60% and include an SBT reward.
On the OKX exchange, TON staking is available through the Tonstakers service. APR for flexible term is ~4%.
Since April 10, 2024, the centralized exchange MEXC also launched TON staking with an reward of up to 10% APR. The staking is available for 30, 60 and 120 days with an estimated APR of 5%, 7.5% and 10% respectively.
Staking may also appear in the DeWallet wallet in the near future.