Earning passive rewards on your money in traditional finance is, well, not so rewarding these days.
But, crypto offers participants a novel opportunity to receive rewards through a process known as staking. As participation in Proof-of-Stake networks grows and users continue to accumulate crypto rewards, few have stopped to consider the associated risks.
Kraken Intelligence’s latest report, Crypto Rewards: Staking, explains which networks offer double-digit rewards, why the space is taking off and, most importantly, how to properly manage risks to your portfolio.
Staking involves committing one’s assets to a network to validate transactions and vote on proposed changes to the protocol. Users can do so through cryptocurrency exchanges (like Kraken), indirectly through the network with certain crypto wallets, or via staking-as-a-service (SaaS) providers to earn potential rewards.
Rewards vary by network and are not guaranteed to the staking entity. The more crypto an individual stakes, the greater their odds of receiving a reward.
Participating in the staking process is not a risk-free endeavor. Individuals should be aware that centralized custodial services could be vulnerable to hacks, a payment could default, or an event known as slashing can be triggered by malicious actions or technical errors, resulting in a loss of staked funds and subsequent rewards.
Understanding these risks before staking your crypto can help you determine if the risk/reward ratio is in your favor and keep your assets safe.
Download our full report to understand how staking services provide yet another alternative for people to earn cryptocurrency.