What is Staking? Understanding the Basic Principles of Exchange Staking
As cryptocurrencies gradually integrate into the mainstream financial world, many people are curious: can cryptocurrencies also generate interest income in the account like a bank deposit?
The answer is yes!
In the world of blockchain, by staking the user’s cryptocurrency on the blockchain network through a process called “Staking”, one can earn rewards by supporting the network operation.
In blockchain technology, the concept of staking is usually associated with the Proof of Stake (PoS) mechanism. Users lock assets in the network to support transaction verification, block production, and network security maintenance on the blockchain.
After the upgrade of Ethereum 2.0 to improve the scalability, efficiency, and sustainability of the blockchain network, the consensus mechanism has been upgraded from Proof of Work (PoW) to Proof of Stake (PoS), significantly reducing the energy consumption of running the blockchain.
This type of “interest” model is not only more suitable for conservative investors but also further enhances the utility value of cryptocurrencies.
What are the returns of exchange staking? Can it bring stable returns?
Compared to setting up a node staking directly, staking through an exchange is simpler. Users can participate in staking and receive rewards by depositing assets into the exchange.
The staking returns provided by exchanges are usually expressed in terms of Annual Percentage Yield (APY), and the specific numbers vary depending on the selected currency and the underlying economic model of the blockchain network.
For example, Ethereum may provide an annual return of 3% to 5%, while some emerging currencies may offer higher returns, even reaching double-digit APY.
In addition, exchange staking also has the advantages of liquidity and convenience. For example, some exchanges offer “flexible staking” products that allow users to withdraw funds at any time, while “locked staking” requires locking assets for a certain period, usually with higher returns.
What are the risks of exchange staking? How to avoid pitfalls?
Although exchange staking provides a convenient and relatively stable way of earning returns, there are still potential risks.
Firstly, there is the risk of the exchange itself. If the exchange is hacked or funds are misappropriated, users’ staked assets may face losses. Therefore, choosing a large exchange with a good reputation and comprehensive security mechanisms is particularly important.
In addition, users’ staked assets usually require a lock-up period during which funds cannot be withdrawn. If the coin price fluctuates significantly during the lock-up period, users may not be able to withdraw funds for trading in a timely manner, potentially facing potential loss of value.
How to stake through an exchange?
After purchasing cryptocurrencies, the cryptocurrencies will be deposited into the exchange account. If there are no plans to make other transactions in the short term, users can check the exchange app to see if there is a staking function available to earn some small profits.
Currently, mainstream cryptocurrency exchanges in Taiwan, including BitoPro, MaiCoin, MAX, XREX, and HOYA BIT, provide similar services.
The following are examples of operations using MAX, XREX, and HOYA BIT exchanges.
MAX Staking
MAX Exchange offers a “Chain Locking Service” based on the PoS mechanism to earn profits. The exchange charges 15% of the profits, but if users choose to receive the profits in the platform token MAX Token, they can avoid fees.
In addition, both locking and unlocking require a few working days. If there is an urgent need for funds, remember to unlock the service early.
XREX Club
XREX Exchange offers a USDT staking service, but what is special is that users must first join the so-called “Club” before using it. The more transactions and staking the club participates in, the higher the rewards (annual interest rate) users can receive, while also saving on fees.
If you don’t have many friends, you can directly join an existing club in the XREX Telegram group.
HOYA BIT Daily Coin
Currently, HOYA BIT offers a “Daily Coin” feature, providing two options for USDT staking: “60 days with an annual return of 10%” or “120 days with an annual return of 12%”.
However, it is important to note that there is a 20% fee on the accumulated profits, meaning the real expected return for 60 days is approximately 8%, and for 120 days, it should be around 9.6%.
