Relatively new to the crypto space and doing your homework? Good for you. You’ve come to the right place to learn a little more. Today, we’ll be talking about interesting crypto currencies you can stake with. Undoubtedly, one of the first concepts you’ll run into in the ecosystem is the idea of cryptocurrency mining. And then mining leads you down the rabbit hole toward more technical concepts, like the ideas of Proof-of-Work (PoW) and Proof-of-Stake (PoS).
It can all seem quite dense at first, but it’s actually pretty straightforward when it comes to how easy it is to get a functional literacy of the concepts in question.
PoS is particularly interesting because a growing portion of the cryptocurrency arena is trending toward it presently. Even Bitcoin’s impending Lightning Network upgrade seems to forebode a PoS-like system, even though the main Bitcoin chain will continue to rely on PoW.
So, first let’s briefly walk through what exactly Proof-of-Stake is before turning to discuss what some of the most promising PoS projects are to date.
PoW Versus PoS
The Proof-of-Work concept as applied to cryptocurrencies was developed by early innovators in the space like Hal Finney and Adam Back.
To translate in layman’s terms, PoW is a way to achieve consensus among the distributed parties of the Bitcoin network. The viability of the nework is guaranteed, then, by the Bitcoin miners who lend large amounts of computing power (and electricity, in extension) to solve difficult cryptographic puzzles.
Proof-of-Stake is a much newer proposed methodology for achieving distributed consensus. The viability of network’s relying on PoS are not achieved by mining but rather by staking. Staking, simply put, is just when users hold their PoS-compatibile cryptocurrencies in a specialized staking wallet.
Staking achieves the same effect of mining (distributed consensus) without the need for expending exorbitant amounts of computing power and energy.
And if you “stake” your coins, you’ll be rewarded with crypto payouts on a rolling basis just as if you were a mining “winning” a block.
PoS avoids having hash power centralized in the hands of a few mega-mining conglomerates, to the extent that anyone would be allowed to “stake” their crypto coins in theory by staking X amount of coins or by lending whatever you’d like to a larger staking pool.
Top 100 cryptocurrencies (by market cap) that currently rely on PoS include:
- I/O Coin
- NAV Coin
- Stellar Lumens
Stakers can expect between one percent and five percent returns over a period several months, say annually, on their staked coins.
Let’s dig a little deeper into some of the most interesting PoS or soon-to-be PoS projects.
Ethereum (Can Stake Soon)
Ethereum’s worth mentioning first because, even though it’s still a PoW project for now, it’ll be imminently switching to PoS, which will be a major milestone for the ecosystem considering how ETH is currently the number two cryptocurrency according to market cap.
Alas, if the number two crypto is using PoS, more will follow. Many more in fact. Many projects are already moving toward PoS, even though it’s a distributed consensus methodology that still hasn’t been widely tested at present.
If Ethereum’s shift to Proof-of-Stake goes off without a hitch and proves successful, the dynamic of PoS coins having a small overall sliver of the top 100 cryptocurrencies by market cap in contrast to PoW coins should forever change, to the extent that that “sliver” should become something larger.
ETH’s so-called “Casper” update is what will initiate the crypto’s evolution to PoS. Once this is completed, ETH holders will be able to stake their funds for recurring “dividends” of ether.
Right now, it’s definitely not set in stone how many ether will be required to stake. Indeed, there has been several numbers casually thrown around the community in recent weeks, but to be clear: nothing’s official yet.
Some of these numbers have been as high as needing 1,000 ETH to stake. Some projections are as low as 10 ETH. Another number you hear a lot is 32.
But don’t worry if you’re not an ether whale. Eventually you should be able to pitch in even small amounts of ether into staking pools to partake in the new model.
NEO is interersting because it uses something called a delegated Byzantine Fault Tolerance (dBFT). Disregard how confusing that might sound at first glance, and just think of dBFT as kind of like an optimized Proof-of-Stake system.
And, as opposed to Ethereum, the NEO project already has this staking system in place.
Perhaps the most interesting aspect of the NEO staking system, though, is that you receive a different cryptocurrency altogether as your reward for your service to the network. Specifically, you win “GAS.”
At press time, GAS is the 63rd largest crypto by market cap and is worth ~$18.50. Not bad!
Like NEO, Lisk uses a different kind of PoS. Lisk’s distributed consensus methodology is called delegated Proof-of-Stake, or DPoS for short.
This means that while staking is possible with Lisk, it’s only possible for the top 101 “delegates,” with these delegates being voted on and agreed to on a rolling basis by the community.
So, not everyone can stake with Lisk. You’ll need to crack the top 101 delegates for that. But the project still uses an incredibly interesting PoS model.
As the Stratis team declared triumphantly at the time:
“This is the first documented and tested instance of a Proof-of-Stake blockchain block mined in C#. Now the developers will combine the full node with the wallet layer developed for Breeze, our full node with PoS will then be ready for a test release in approximately a week from now.”
PIVX is a project that forked off of the DASH blockchain last year and has, unlike DASH, fully transition to the PoS distributed consensus system.
PIVX holders have the perk of not having any minimum or maximum cap for staking, too, so you can stake any amount of coins you would like to. To this end, they take the opposite approach to Lisk: anyone and everyone can stake.
Stakers get an annual return of around ~4.8 percent with PIVX.
OKCash is an older cryptocurrency project, having been started back in 2014. They’re one of the “OGs” of PoS, as it were, and the project is orientated toward being a micro-transactions throughway.
They’ve got a pretty impressive annual staking return of around ~10 percent. That’s among the best annual returns you’ll find among any PoS coin right now.
All you’d need to do is move your requisite OKCash into a specialized staking wallet.
There’s a lot of other neat PoS projects on the horizon, so we’ll all have to keep our eyes peeled.