Cryptocurrencies don’t differ from traditional money ecosystems, so they also come with plenty of passive income opportunities for asset holders. Individuals and institutional investors can put their assets into staking pools and enjoy a steady flow of crypto rewards similar to interest rates on bank deposits. 

Yet, is crypto staking as flawless and predictable as it seems? Here is an extensive guide to all the nuances you should keep in mind when planning your passive income from staking. 

What Does Staking Mean? 

Crypto staking is the first idea that comes to everyone’s mind when thinking about passive income from crypto assets. The logic of earning crypto rewards from staking pools is generally the same as with bank deposits. You choose a staking pool on the crypto exchange, send your assets to it, and earn either a fixed or a flexible APR as long as your funds stay there to provide liquidity. 

How Does Crypto Staking Work? 

The algorithm for earning crypto from staking is as follows: 

• A user buys crypto on the exchange platform. 
• Afterward, they choose a staking pool with suitable APY/APR terms and duration. 
• They send the coins to that staking pool and receive crypto rewards at the end of the staking period or at predetermined intervals. 
• At the end of the staking period, a user can choose either to reinvest the coins plus the earned interest in the staking pool again or to withdraw the funds from the pool. 

Earning Crypto Rewards and Passive Income 

Everyone interested in how to earn interest on crypto should consider staking as their first option. There are many reasons to resort to crypto staking, as this variant is less risky and more predictable compared to other passive income variants. 

• You can always find a pool with fixed terms and predictable, regular crypto rewards.  
• You are sure to get higher returns from crypto investments compared to usual bank deposits. 

This way, by means of choosing cryptocurrencies for staking wisely and by staking funds in safe, low-risk pools, you can reap many benefits from this form of passive income while avoiding the hazards of volatility typical for the crypto market. 

Risks of Crypto Staking 

We’ve mentioned the risks of crypto staking several times, but what are they in particular? Here are the main sources of risk you should consider when earning crypto from staking operations. 

• Volatility risks. 
• Slashing. 
• Lockup periods. 
• Platform-specific risks. 
• High-risk crypto derivatives. 

The good news is that you can avoid the majority of these risks by choosing reputable staking platforms and double-checking the validator’s reputation in case of delegated staking.

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Crypto Liquidity Pools: A Different Way to Earn Rewards 

If you’re looking for alternative sources of crypto rewards, you may consider sending your assets to liquidity pools. This option for earning passive income is available on decentralized exchanges (DEXs) that need extra resources to provide satisfactory liquidity on their platforms. Uniswap, PancakeSwap, and Curve Finance, among others, use liquidity pools to enable seamless P2P exchanges without the order books traditional for CEXs. 

Here’s how you can join crypto liquidity pools and earn on them: 

• You should register as a liquidity provider (LP) on a DEX. 
• Deposit a pair of tokens into the pool’s smart contract. 
• As users trade the assets from your deposited cryptocurrency pair, you earn a portion of trading fees from each transaction. 
• Some DEXs also add yield farming rewards to the trading fee commissions to incentivize LPs. 

This way, liquidity pools act as a sustainable alternative to staking. They often come with a higher APY, but the risk of impermanent loss is also more considerable in this investment variant. 

Crypto Derivatives, Futures, and Staking: What’s the Difference? 

Users with a high appetite for profits may also consider various crypto derivatives as financial instruments for maximizing gains. These include: 

• Crypto futures contracts.
• Options contracts. 
• Perpetual swaps. 

As you can see, derivatives are a sort of contracts, or agreements, for the sale or purchase. They don’t represent real deals with assets and may be likened to bets between the contract issuers and buyers. 

Thus, if you are thinking, “Can you short Bitcoin?” then you’re probably considering a crypto futures contract for this trade. The mechanism of shorting crypto works this way, as you can’t sell the assets you don’t have; you need to sell a contract for its price reduction. 

Regardless of your trading strategy and plans for earning income on crypto, you should keep in mind that derivatives are very risky. The amount of risk is incomparable to crypto staking – a more predictable and stable option for securing modest profits. 

How to Get Started with Crypto Staking 

Interested in earning crypto with staking? The process of joining a crypto staking pool is generally simple and manageable, even for crypto newbies. Here are the starting steps to take: 

• Register on a crypto exchange of your choice. 
• Deposit fiat money to buy cryptocurrency or send the crypto assets you already own to the exchange’s wallet. 
• Transfer the funds to the Earn wallet, from which you can send money directly to the staking pools you like. 
• Go through the available staking pools and choose the one with the most suitable terms. 
• Send your money to the pool and confirm the transfer. 

Depending on the pool’s terms, you can start earning crypto rewards immediately. Some promotional pools issue profits every hour or every 24 hours to help users maximize their profits.

You may also consider our WeFi platform with a unique feature of yield farming – a healthy alternative to traditional staking. We offer a unique chance to farm WFI tokens to all ITO node owners, thus giving early adopters access to high-value utility tokens and an opportunity to unlock numerous exclusive features and privileges on the platform. Participation is easy and intuitive, with the only step involving the purchase and activation of ITO nodes.

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