Want the best returns when staking your coins and tokens? Give these best staking coins a shot to maximize your rate of passive income.

Interested in investing in cryptocurrencies? There are a myriad of factors that you should take into account. When you invest in coins that are based on a 

 blockchain network, you can engage in staking, which helps PoS networks operate more securely and efficiently. The only requirement for staking is that you keep coins in your cryptocurrency wallet over an extended period of time, which allows you to earn staking rewards. Staked coins are similar to interest-bearing savings accounts, since with both options you earn interest on your initial investment. Keen on giving this passive income strategy a go? Read on as we cover some of the best staking coins you can invest in if you want to earn passive income while taking advantage of the high yield.

 is a process that involves placing funds into a digital wallet and keeping them there to support validating transactions for PoS blockchains. By participating in transaction validation, participants earn extra cryptocurrency.

The main benefits associated with staking crypto include the following:

There are some notable differences between mining and staking. In general, while mining only occurs with 

 systems, you’re able to get a return on both PoW and PoS coins on staking platforms.

Both PoW and PoS as consensus mechanisms are able to confirm blockchain transactions without needing a third party, such as a bank or other financial institution. The main difference between the two mechanisms is in their energy consumption.

If you’d like to get started with the staking process, you first need to obtain PoS coins. Once you’ve selected the coins you want to use, you’ll decide how much of your top staking coins you’d like to stake. This process can be done on any major cryptocurrency exchange.

Keep in mind that it’s also possible to earn additional income through

. Although somewhat more complicated than staking, yield farming involves earning coins by lending your current crypto assets to various 

 platforms. With yield farming, you can contribute crypto assets for anywhere from a couple of days to several months. Higher lending amounts invariably lead to higher rewards.

Despite the benefits of crypto staking for earning passive income, there are several risks to be aware of. The primary ones are as follows:

The following is a comprehensive look at 19 of the best staking coins you can purchase in order to start obtaining staking rewards. The tokens’ symbols are listed after each crypto platform.

With big-name backers like Peter Thiel and Pantera Capital, investors can be confident in 

 being one of the next big exchange tokens. As one of the world’s largest decentralized autonomous organizations (DAOs), 

 seeks to nurture the DeFi space in achieving its vision of open finance and a decentralized, tokenized economy. BIT token holders can shape the future of BitDAO through voting on governance proposals, such as updates to core protocols and token swaps.

. After signing up on Bybit and completing Level 1 KYC, simply transfer BIT into your 

 account and begin the staking process. With a prize pool of 1,500,000 BIT tokens and an average annual return of 14.77%, you’ll certainly be hard pressed to find similar staking coins with comparable growth potential and staking rewards.

If you’re wary of your staked tokens and coins depreciating in value, try staking a 

 instead. While deciding which stablecoin is the best staking coin comes down to personal preference, we’re recommending 

 (USDT) thanks to its massive trading volume. This can do wonders for liquidity as the high daily USDT volume lets you effortlessly swap out USDT for more lucrative tokens.

Keen on giving USDT staking a go? Take advantage of 

 and enjoy average annual rates up to 3.5%. Thanks to the stability of USDT’s overall value, we certainly consider it as one of the best staking coins for beginners getting into staking and want to use a platform that offers instant withdrawals and little hassle.

, or Eth2, is the second-most popular cryptocurrency provider in the world behind Bitcoin, and is one of the best staking coins available. If you want to stake this particular crypto, you’ll need to start with at least 32 ETH. Ethereum previously used a PoW consensus algorithm. However, it has recently switched over to PoS, with more than $12 billion in ETH having been staked.

Before you start staking Ethereum 2.0, keep in mind that it’s in an early access phase, which means that the platform is still being tested before it officially launches. Until the 2.0 launch occurs, the coins you stake will remain in the network. It’s estimated that the Eth2 will launch in the first few months of 2022. With 

 flexible staking rates, you can expect to earn a steady 2.5% APY so why not earn some passive returns while you’re HODLing the coin with one of the best smart contract networks.

? You’re not alone. Just like Tether, USD Coin (USDC) is also a stablecoin that’s backed by fiat money and is commonly used for transferring of funds because of its stable value and high liquidity. Fortunately, unlike Tether, USDC is properly audited by Grant Thornton, LLP on a monthly basis. This allows for maximum transparency as the reports are posted online for all to view, thus proving its claim that it’s backed mostly by cash and cash equivalents.

Start staking USDC and earn attractive rates thanks to 

 flexible staking offerings. With average returns up to 8.88%, there’s no better choice when it comes to the best staking coins that offer a stable value and full transparency of how the stablecoin is pegged to the dollar. This passive investment strategy is made even better thanks to our flexible staking mechanism where you can freely unstake at any time should you need the capital.

 is among the best crypto staking coins because investing in their LUNA coins is easy. Terra facilitates the creation of a stablecoin backed by cryptocurrency, referred to as TerraUSD (UST). To invest in this highly recommended coin, you can exchange a single UST for one dollar’s equivalent of LUNA.

In the event that the UST price ever drops below one USD, it’s possible to swap affordable UST for $1 of LUNA, which allows you to obtain a profit and earn passive income. The annual staking reward for LUNA is around 12.10%, a substantial return which makes this one of the best cryptos to stake. When you’re ready to purchase LUNA and start staking, you can find it at crypto exchanges such as Binance.

 provides one of the best staking coins because it uses scalable, multi-chain technology created by Ethereum cofounder Gavin Wood.The minimum stake to start earning rewards is currently 40 DOT, or around $1,600 at the time of writing. (However, if you want to create a 

 with Polkadot, your contribution will have to be substantially larger at 350 DOT.)

Polkadot is among the best staking coins because it comes with an average annual return of 14%, which is great for earning passive income. You can stake DOT at exchanges including Binance, Kraken and Fearless Wallet. As for future prospects, DOT is among the best cryptos to stake because of its top 10 

, which will likely grow in the coming years.

 featuring optional delegation. Tezos uses the XTZ cryptocurrency, which is created by a “baking” process. If you become a “baker” with Tezos, you’ll receive substantial rewards when you stake your XTZ coins because you’ll be helping new blocks of transactions to be validated.

You can start staking with Tezos even if you only have one XTZ in your wallet. Your initial reward payments will be credited to you after a period of 35–40 days,, but subsequent payments are awarded every three days. Tezos rewards are largely consistent, which is why XTZ is considered to be one of the best crypto staking coins. Your average annual reward can be anywhere from 6.75–10.60%.

 is a unique staking coin that was created in an attempt to scale Ethereum. The purpose of Polygon is to ensure compatibility by connecting every Ethereum-based DApp (decentralized application). Polygon transactions are wholly secured by network validators. This is among the best staking coins to select from, because it’s able to validate up to 65,000 

 (TPS), which allows Ethereum networks to complete transactions efficiently.

Another reason Polygon is one of the best staking cryptos is that delegators are only required to stake a single coin before they can take part in the network, while staking itself requires at least two coins. You can begin staking by connecting your MetaMask wallet to your

. The expected annual staking reward for Polygon depends on how many coins you stake. The maximum APY for this coin is just over 14%.

 is the most popular crypto exchange platform in the world, and BNB is one of the world’s top staking coins, due to the manner in which it’s delegated. There’s currently no minimum stake for delegating the BNB coin to validators, and the “unstaking” process takes just seven days. 

The average annual return for the BNB coin is between 6–9%. However, it’s possible to earn returns that are as high as 30%. The rate of return can be highly volatile because it depends on transaction fees. You can stake this coin directly on the Binance platform, which offers a level of convenience that isn’t possible with most of the top staking coins on this list.

 is among the more unique staking coins on this list because of how it combines deflationary and inflationary mechanics. With this methodology, it’s possible for Hydra to burn nearly 100% of its transaction fees while maintaining inflationary block rewards. The end result is that users are protected against price degradation.

If you’re interested in staking with HYDRA, it’s important to understand that any user can become a node in the Hydra ecosystem. You need at least 10 HYDRA coins in your wallet if you want to start staking. Hydra has become one of the best PoS coins because all early stakers will receive a huge rate of return at 60%. This will eventually wean down to 20% over time. The staking rewards you receive are derived from transaction fees, and any new HYDRA coins are issued directly by its blockchain.

 is a powerful platform that provides effective scalability through validator nodes and instant transactions. ALGO is among the best staking coins because stakers only need to have a single ALGO coin to become validators. Having such a low staking minimum does have its pros and cons. While there are typically more validators than most other networks have, it’s also possible that some validators don’t participate as much as they should because of the minimum staking requirement.

With ALGO, you can begin the staking process using a Ledger wallet, Algorand wallet or Coinbase. Your total returns depend on the staking platform you decide to use. In general, you can expect annual returns that range from 5–10% of your total investment.

Interested in the best staking coin with a novelty? 

 is a fun and popular staking platform that provides users with the ability to stake any CAKE coins they accrue. When you stake your CAKE coins, you can choose to earn additional CAKE or other types of coins. At the moment, PancakeSwap is the most popular platform on

, which is just one reason why CAKE is considered to be among the best staking cryptos.

To stake CAKE, you’ll first need to connect your wallet to the PancakeSwap platform. Supported wallets include MetaMask, Trust Wallet, MathWallet, TokenPocket and Binance Chain Wallet. In comparison to platforms like Ethereum, transaction fees are considerably lower with Binance Smart Chain. Once you’ve obtained rewards on PancakeSwap, you can either claim them or reinvest them into the platform. The annual returns for the CAKE coin range from 31–42%, which makes this one of the best crypto staking coins on the market.

 is an efficient blockchain that was designed with scalability in mind. This scalability is achieved via Solana’s low fees and quick transactions. When it comes to crypto market caps, Solana ranks #7. SOL is one of the best staking coins because of the speed of transactions and the low cost for completing them. Most transactions are finished in a few seconds. While you can’t manage your own node when staking on the Solana network, there are more than 640 validators with whom you can stake your coins.

When you delegate your stake to validators on Solana, you’ll be able to participate in the rewards that these individuals receive. SOL coins have performed extremely well over the past few months, reaching an 

 of $210 per coin. When you stake your coins with Solana, you can expect to receive annual returns ranging from 7–11%. You can stake SOL with Ledger, MathWallet, Atomic Wallet and Exodus.

 is similar to platforms like Cosmos and Polkadot. However, AVAX is one of the best staking coins because its platform is able to scale to millions of different validators. You can start staking with the AVAX platform once you have at least 25 AVAX coins.

To become a validator, you’ll need to stake at least 2,000 coins. Once you stake your assets, you’ll need to do so for at least two weeks before you claim your rewards. AVAX has proven to be among the best cryptos to stake, with an annual return on investment from 8–14%. You can stake your AVAX coins with a number of different wallets, the primary ones being Ledger, MetaMask and Avalanche Wallet.

 Finance is a popular platform that provides users with the ability to stake the BANANA coins they earn. Thanks to its meme status that capitalizes on the bullish retail investor movement, BANANA has become one of the best PoS coins. Once you’ve purchased BANANA coins, you can stake them along with other digital assets in various pools.

After you’ve staked your BANANA holdings, you can choose to earn more of the BANANA coin or other cryptocurrencies. Some of the pools you can stake your coins with include BFTl, Banana, JDI and Ontology. All you need to do to begin staking your tokens is to click the ”Add” button. Over time, you’ll earn staking rewards that can be harvested after the mandatory timelock. With an average annual return of 75% on ApeSwap that will fall over time, there’s no better time to get to yield farming than the present.

 is a great platform that offers both staking and yielding. However, many investors choose to stake their SUSHI coins because of the high annual returns. You can obtain SUSHI coins on popular exchanges like Binance, Huobi and OKEx. Once you decide to stake SUSHI coins, you can do so with wallets such as MetaMask and Atomic Wallet.

If you decide to stake SUSHI coins, the returns you generate can be used for voting rights, or as a token that allows you to interact with other platforms. The returns generated from SushiSwap staking investments are largely consistent, typically ranging from 7–10%.

 is a highly popular NFT and cryptocurrency marketplace that provides users with the opportunity to stake their coins for voting and governance rights as well as staking rewards. XNL is considered to be one of the best staking coins because it has a very high annual return of 67%.

Keep in mind, however, that this high APR isn’t unlimited. The soft cap for a single user is set at 50 coins while the hard cap is 100,000 coins.Users can claim rewards every three days. Chronicle supports the most popular wallets, primarily MetaMask.

 is a powerful PoS network that’s commonly compared to Ethereum. The main advantage of using the Cardano network is that it can process several hundred transactions per second. Cardano earned its spot on this list as one of the best staking coins because users can pull out any of their staked assets whenever they like. If you’re new to the staking process, this is a highly accessible platform.

Of particular note with Cardano is that staking rewards become less valuable over time if too many individuals place their assets in a single pool. As such, diversification is essential toward maximizing your returns. Cardano has two official wallets, 

. The average annual return for ADA is 5–9%.

 is a decentralized open-source cloud network that’s known for being low-cost, quick and efficient. 

 is the primary wallet supported by the Akash platform. Staking with Akash is simple and straightforward. Once you’ve purchased some AKT on BitMart or a similar exchange, all you need to do is choose the validator you’d like to stake your assets with.

You can then decide the amount of AKT you want to delegate. The AKT APY is currently set at 34.20%, which is among the highest around. However, the staking rewards don’t automatically compound. As such, it’s highly recommended that you manually withdraw your rewards and stake more coins on a regular basis if you want to take advantage of the high APY.

Staking your coins on a PoS blockchain network is a great way to earn passive income and generate high returns. These investments come with very little risk, and can pay dividends if you withdraw your rewards at the right time. With this guide in hand, you should have everything you need to begin the staking process.

Beginner

Best Staking Coins With Most Potential for Maximum Passive Income

19 Best Staking Coins for Maximum Passive Income

Are you an NFT enthusiast? If so, there's plenty to explore on LooksRare, a decentralized NFT marketplace that offers rewards on your transactions.

, or non-fungible tokens, amassed over $24 billion collectively from sales in 2021. NFT collections such as

 (BAYC) went viral, and many crypto enthusiasts bought NFT art aligned with their digital identities.

, which recorded an all-time high trading volume of nearly $5 billion in January 2022. Although OpenSea currently dominates the NFT space, a platform called LooksRare has gained tremendous hype on social media platforms and is positioning itself to be quite the competitor with attractive features for users and a daily volume

 is a decentralized, community-first NFT marketplace that actively rewards traders, token stakers, creators and collectors for participating on the platform.

Two unidentified founders going by the pseudonyms “Zodd” and “Guts” launched the platform in January 2022, with a team of 11 members tending to the project’s development. The aim of LooksRare was to dethrone OpenSea from its number one spot in the NFT market.

LOOKS is the native token that powers the LooksRare marketplace. It has a

 and stands at a price point of $1.02 at the time of this writing.

LOOKS is used for the following purposes.

LooksRare users can stake their LOOKS tokens on the platform to receive over 700%

 (wrapped Ether) and LOOKS. The APR will decrease over time with an increase in onboarding and number of stakers.

Most token stakers are active stakers, whose LOOKS tokens are fully unlocked.

For passive stakers, their LOOKS tokens are locked for trading but unlocked for staking — e.g., treasury, team and strategic sale tokens. Passive stakers don’t earn extra tokens when they stake LOOKS.

Daily LooksRare rewards are calculated at the end of each previous period, and split between active and passive stakers before being dispersed.

 rewards to be distributed among active stakers in each 6,500 block period are

The total WETH rewards acquired are calculated by comparing each user’s staked LOOKS at each block to the total quantity of LOOKS staked at each block during the 6,500 block period.

The LOOKS token is a medium for giving back to active participants, like users and creators, in the following manner:

Users who buy and sell NFTs from selected collections earn LOOKS tokens as rewards.

Users can earn LOOKS rewards simply by trading qualifying NFTs.

Both the buyer and the seller of an item earn incentives for their trade volume (other than for private sales). Trading rewards are computed daily and distributed two hours after the end of the day. They’re calculated according to each user’s trade volume in eligible collections, as a proportion of the total platform transaction volume for qualifying collections.

Claiming is halted for two hours each day, between 00:00AM and 2:00AM UTC, while processing trading rewards. These rewards can be claimed at 2:00AM UTC every day.

Only collections that reach a trading volume of 1,000 ETH will be automatically added to the list of eligible collections earning rewards. When a collection hits a trading volume of 1,000 ETH, rewards will be processed from the sales completed after 00:00AM UTC the following day.

Users who stake LOOKS tokens are rewarded with 100% trading fees.

The platform’s users can stake LOOKS and earn extra LOOKS rewards over and above the WETH trading fee incentives. In addition, the staked LOOKS tokens are compounded automatically for those who want to leave their LOOKS tokens staked.

Users must manually stake their pending rewards in order to maximize their portion of staked tokens. However, since this wastes gas fees and opportunity costs, LooksRare has facilitated auto-compounding for all LOOKS users. 

LOOKS rewards obtained from the staked LOOKS balance are now re-staked (or compounded) into the pool immediately to increase the number of LOOKS staked. When users unstake their LOOKS, both the initial staked amount and the compounded rewards are withdrawn to the user’s wallet.

 blockchain and allows participants to trade Ethereum NFTs available on OpenSea. The platform charges a 2% sales fee (in WETH) on all NFT sales, excluding private sales.

All WETH fees accumulated from sales are combined at the end of every 6,500 ETH block period (approximately 24 hours) and distributed to LOOKS token stakers per block during the next 6,500 block span.

Users can claim their WETH rewards as often as they want, but have to pay gas fees on each withdrawal. If they forget to claim their WETH, or prefer to wait until gas fees are lower, their WETH will continue to accumulate as long as their LOOKS tokens remain staked.

As a community-first project, 100% of the revenue generated is distributed to stakers of LOOKS tokens. The team does not gain revenue directly from the project, and is rewarded only if the project does well.

The following are the key features of the LooksRare platform.

LooksRare puts its users first by distributing rewards, a feature which OpenSea doesn’t offer. Below is a chart showing the jump in trading volume from January 10–16, 2022.

“Vampire attack” is a common crypto term to describe how a project tries to capture a similar project’s user base by offering better rewards. LooksRare launched a vampire attack on OpenSea to lure users to its platform. As a result of airdrops launched by the LooksRare platform, the price of a LOOKS token rose to nearly $7 just ten days after its release.

Users must first check their eligibility for claiming LOOKS by connecting their wallet to LooksRare. Eligible users will then see a message that invites them to list an NFT. After the user has listed their ERC-721 or ERC-1155 NFT, they can claim LOOKS via the banner on the platform’s official homepage.

LooksRare’s community has developed a reward system to attract users to its platform from staking to trading. The platform’s users are rewarded with WETH and LOOKS tokens simultaneously, with staking rewards exceeding 700% APR.

Royalty payments are paid instantly to creators once a sale is made, eliminating any delay in settlement.

The platform promises to distribute 100% of the platform fees as rewards to LOOKS token stakers.

Since LooksRare’s smart contracts are built on a modular system, new features can be implemented efficiently over time. The platform can do so without compromising security, thanks to standardized signatures which outline the execution plan in a transparent manner.

Some new features that LooksRare plans to implement in the near future include:

 Users can make an offer that includes all NFTs in a selected collection.

 Users can buy any NFT with a specific trait in a collection.

 Users can cancel multiple open orders in a single transaction. When multiple open orders are canceled separately, gas fees tend to be quite high, which is where LooksRare’s multi-cancellation feature helps.

The LooksRare team has designed the technical framework — front end, search function, contracts, database and API — from scratch, in order to optimize security, speed and scalability. LooksRare has also maintained compatibility for future deployment with ETH scaling solutions.

LooksRare is different from OpenSea in a few key aspects:

As mentioned earlier, the LOOKS token hit nearly $7 in the initial days after its launch. Its strength has also multiplied since the platform launched a vampire attack on OpenSea and successfully enticed its users with

. LooksRare surpassed an NFT trading volume of $100 million in ETH within two days after its launch.

At the time of this writing, one LOOKS is valued at $1.02. Crypto Academy predicts that the price of one LOOKS token will increase

 (over six times higher than its current price.) Its price may further increase to $7.09 by 2024, and $7.33 by 2025.

The LooksRare platform has filled the gaps created by OpenSea since it rewards, empowers and gives back to its loyal and active user base. On the flip side, LooksRare has a long way to go before it matches OpenSea’s platform development and level of services offered.

The LooksRare token, LOOKS, cannot be purchased directly using fiat currency. However, you can buy

 tokens with fiat money and swap them for LOOKS tokens.

Here’s how you can acquire LOOKS tokens in three simple steps:

 To purchase LOOKS tokens, you’ll first have to 

 on an exchange like Bybit. You may be asked to provide basic details like your name and

 information, including your phone number, email ID, and address.

 If you don’t own USDT, you need to purchase USDT tokens with a debit card, credit card or bank transfer.

 Finally, you can complete your transaction at a price of your choice using a

. Enter your order price in USDT and specify the number of LOOKS tokens 

. If the price hits your stipulated amount, your order will execute, and the corresponding number of LOOKS tokens will be reflected in your account.

LooksRare is worth keeping an eye on if you want to buy or sell NFTs in the near future. As a community-first NFT trading platform, LooksRare has a solid rewards system that benefits everyone, from platform traders to token stakers. Although OpenSea has gained significant headway on other marketplaces so far, LooksRare is catching up and has managed to create a vibrant community, following through on its promise of rewards for its users, and serving as a viable alternative.

As long as there’s active interest in the NFT market, LooksRare has plenty of potential to grow. That said, we recommend that you assess your portfolio and determine the risks you’re willing to take before joining the platform.

Intermediate

LooksRare LOOKS A Community First NFT Marketplace

LooksRare (LOOKS): A Rewarding NFT Marketplace for Anyone

Want close to 20% yield for staking stablecoins? Read on as we cover everything you need to know about Anchor Protocol and ANC tokens.

As with any type of investment portfolio, diversification is essential if you want your crypto portfolio to be balanced. By making sure that your portfolio is properly balanced and diversified, you’ll be able to protect against any unforeseen losses. If your current crypto portfolio is focused almost entirely on risky investments, one sharp decline in a single investment could lead to widespread losses if your other investments have yet to pan out.

On the other hand, having safe and steady investments in your crypto portfolio allows you to accrue consistent income that can mitigate any losses on riskier investments. With a diverse portfolio, it will also be easier for you to make gains in both bull and bear markets.

Even when the market is in a downturn and performing poorly, a diverse portfolio will provide you with at least small gains while you wait for the market to improve. This article takes a look at Anchor Protocol, Anchor crypto and why it’s the ideal staking protocol if you want to obtain safe yields.

Anchor Protocol is a popular savings protocol that’s based around the Terra blockchain. The Anchor Protocol coin (ANC) provides users with low-volatility yields of just under 20% when taking the Anchor Rate into account.

 and initially launched in March 2021. It was created in part to boost the overall demand for UST. Keep in mind that UST is the USD-pegged stablecoin from Terra. When the Anchor Protocol coin was first introduced, deposits could only be made in UST. However,

 was soon launched with the assistance of 

Users are now able to deposit various stablecoins based on Ethereum, which include BUSD, USDC, Dai and USDT. Yields for UST typically range from 19.5–20.5%, and revolve around the Anchor Rate, which is maintained by the platform. If you deposit other stablecoins, your yields would be around 16.5%. Even though these yields are high, they’re consistent, which makes this a great investment if you need to diversify your crypto portfolio. Once you place your money into Anchor Protocol, you’ll be able to borrow and lend your assets while earning interest on any of the currency you’ve deposited. This ultimately opens up possibilities for even higher yield as you explore various liquidity pool options. Curious about exploring this staking opportunity? Read on as we cover the fundamentals of how Anchor Protocol works.

Anchor Protocol runs on three primary mechanisms, which include loan liquidation, bonded asset (bAsset), and money market. A bAsset is a tokenized stake that’s situated on a 

 (PoS) blockchain. If you have a bAsset token, it effectively displays ownership of a PoS asset. Just like the underlying asset that you’ve staked, holding a bAsset will give you access to block rewards.

The main difference between a bAsset and a staked asset is that the bonded asset is fungible and transportable. What this means is that transactions can be completed with the bAsset in the same way that you would use the underlying asset to perform transactions.

Keep in mind that it’s possible for bAssets to be made on any PoS blockchain that’s equipped to handle smart contracts. In the time that Anchor Protocol has existed, bAssets have proven to be a key component of the platform because of how they are able to deliver consistent interest rates to any Terra deposits.

The money market that exists within Terra is a 

 smart contract that’s present on the Terra blockchain. This market facilitates borrowing and depositing of Terra stablecoins. As mentioned previously, the Terra stablecoin is UST. It’s important to understand that the money market acts as the foundation for the Anchor Protocol. Terra deposits are brought together to form a pool, which generates interest from any loans.

If you want to borrow from this pool, you’ll be tasked with using some of your digital assets as a form of collateral. The interest rate that’s generated from the pool of Terra deposits is calculated based on the current demand and supply from borrowers. You can determine what this rate is by looking at the current utilization ratio for the pool.

It’s possible for someone to take out a loan via the Terra money market by securing the right amount of collateral that can be provided in return for the loan. The interest rates for the depositor and borrower are based on an algorithm that’s maintained by Anchor Protocol. With this algorithm, interest rates for a loan are generated based on the current availability and borrowing demand.

Anchor Protocol has an interest rate objective that’s known as the Anchor Rate. In order for the desired Anchor Rate objective to be reached, the smart contract will intuitively divide the block rewards from the bAssets that are serving as collateral. These rewards are divided between the depositor and the borrower.

Rewards are liquidated into UST, which provides depositors with the ability to obtain deposit yields that reach as high as 20%. Keep in mind that the two bAssets that are currently recognized by Anchor Protocol include bETH and bLUNA. These assets are liquid, and can be used to borrow UST.

Is Anchor Protocol Sustainable at Such High Yields?

With a yield that’s as high as 20%, many potential users wonder about the sustainability of Anchor Protocol. While these yields are high and practically unheard of even with stablecoins, the yields are possible because of how Anchor Terra is structured. The Anchor Protocol coin is feasible because of its ability to accept bAssets as a form of collateral.

Since users who hold bAssets will obtain a constant yield via staking, the protocol itself receives a nearly constant stream of income, which incentivizes the use of this protocol. Along with the staking return that’s generated from any deposited bAssets, Anchor also obtains income from all of the interest that a user will be tasked with paying when they take out a loan. Since Anchor is able to bring in two income streams at the same time, the protocol can maintain its 20% yields, which are paid to UST depositors.

In the long run, however, there is a potential downfall to Anchor Protocol. Whenever the money market is deficient and is unable to make enough payouts during the year, Terra must take money from its own yield reserve. At current Anchor rates, Anchor Protocol is expected to have a deficiency of just under $9 million per year.

While the yield reserve grew temporarily in November 2021 because of an increase in staking earnings, it isn’t expected to grow for long. Since November, the deposits have continued to exceed earnings, which means that the yield reserve is being pulled from on a near-continual basis. The Terra yield reserve is currently at around $35 million, which has been cut in half since early December.

Keep this issue in mind before you invest in Anchor crypto. Even though there are steps that Terra could take to resolve this problem, it’s possible that your yield would decrease. Even though a small decrease in yield can be navigated in most situations, this drop could be the difference between making gains for the year or reporting losses.

While Anchor Protocol provides consistent yields of 20% that you can depend on because of the Anchor Rate, it begs the question – is Anchor Protocol safe? Overall, there are still some risks for you to be aware of even if you’ve been involved with the Terra ecosystem for a long time. These risks include everything from UST de-pegging to a potential crash in yields. While some of the following risks are unlikely to occur, it’s important to take into account their possibility so you’re aware of the risk you’re undertaking as an Anchor Protocol investor.

Because the value of UST is determined based on an algorithm — and is backed solely by the value of LUNA — it’s possible for the conversion ratio to differ from 1:1 in particularly volatile markets, which may make your Anchor crypto investment less stable than it should be. In order for UST to return to $1, LUNA will need to be burned for UST, which means that fewer LUNA will be available for selling.

Even though UST has remained relatively stable, it’s only been around since late 2020, which means that it hasn’t been tested extensively during volatile market conditions. During its brief existence within the Terra ecosystem, UST has encountered two notable drops in value, the worst of which occurred in December 2020 when it lost around 15% of its value before it recovered.

Even though the Terra ecosystem currently seems strong, there’s always a possibility that UST could drop in value and never recover. Another USD-pegged coin known as IRON saw its value drop to zero in 2021, even though it was officially backed by USDC. Although UST could potentially crash, the value of IRON dropped because the only use for this coin was yield farming. In comparison, UST is spread throughout the entire Terra ecosystem and is part of 

The main risk with decentralized finance involves human error, which could lead to successful attempts at hacking the platform. If Anchor Terra were hacked, the protocol and users could be at risk. Anchor Terra strives to mitigate this risk by performing regular security audits and by putting out an effective Bug Bounty Program.

The Bug Bounty program provides hackers who act in good faith with the ability to test Anchor Protocol for the purpose of detecting bugs. The broader Terra ecosystem offers anywhere from $500–$150,000 whenever a bug is discovered and reported, which incentivizes hackers to continue acting in good faith.

As for the security audits that occur with Anchor crypto, Terra has hired two audit companies to make sure that the protocol remains safe for all users. These companies perform audits on a regular basis to detect any security issues that might exist.

While Anchor crypto and the Terra ecosystem as a whole are strong platforms that make for sound investments, you can’t completely eliminate the possibility of a crash in yields. When an imbalance in borrowers and lenders occurs, the yields can fluctuate and put the entire system at risk.

In the event that the crypto market drops substantially in a short period of time, the individuals who have borrowed money from Anchor Terra are possibly at risk of losing all of their collateral. When the loans are liquidated, borrowers won’t be paying interest to the depositors, which places a considerable amount of pressure on the interest rate.

As mentioned previously, there’s always the possibility that the yield reserve could be depleted, which means that the 20% Anchor Rate couldn’t be paid to those who’ve deposited their assets. If this reserve ever runs out and isn’t subsidized by the Terra ecosystem, problems would likely occur immediately. Because yield reserves could be depleted, it’s important that you always keep an eye on the Anchor Protocol coin and its value.

Before you start worrying too much about your Anchor crypto investment, it’s important to understand that there are several things Terra can do to fix this issue. For one, Terra could inject money into the yield reserve, which they already did once in 2021. While this injection would eventually run out, it would allow depositors to continue receiving the 20% interest rate that they’re owed from investing in Anchor Terra. However, UST is currently worth well over $10 billion, which means that it’s unlikely that another injection by Terra will occur anytime soon.

Another solution that’s much more likely to occur is for Anchor Terra to reduce the yields that depositors receive from staking their assets on the platform. Even though the yield reserve has dropped quickly over the past few months, reducing the yield rate to 15–16% would likely allow expenses and income to break even. Since the average yield for a stablecoin is between 10–12%, a 15–16% yield with Anchor crypto would still be higher than most alternatives.

Now that you know about the risks that exist with Anchor crypto, it’s important to understand that you can mitigate these risks by purchasing Anchor Terra insurance plans. Crypto insurance has become increasingly sought after in these volatile times. Thus, Anchor Terra has partnered with third-party insurance providers who offer plans for the purpose of reducing the risks of de-pegging and smart contracts. Insurance can be purchased by effectively lowering your annual yields.

Even though the premium price for an insurance plan differs with each insurer, the average price is around 7.3% per year. Keep in mind that the insurer determines how much they pay out in the event that you file a claim, which means that there’s a risk the payout could be lower than you’d like. However, these insurance plans are a great way to lessen the amount of risk you take on when you invest in Anchor crypto, diminishing risks of fears of depegging and DeFi hacking.

If you’ve decided that you would like to invest in Anchor Protocol, there are some basic guidelines to be aware of. First, you’ll need to purchase LUNA currency, which can be done on Bybit by seeking out the 

. Once you’ve purchased the amount of LUNA that you would like to invest in the Anchor Protocol coin, you’ll then need to withdraw LUNA and send it to your Terra Station wallet, which is fairly straightforward.

From here, you’ll want to connect your wallet to the Anchor Protocol app, after which you’ll have the opportunity to deposit your LUNA assets to start earning yield. Because Anchor Protocol provides you with a safe yield, you won’t need to manage your investment once it’s been made. If you have yet to diversify your investment portfolio, the Anchor Protocol coin should help you provide your portfolio with a solid foundation that allows you to make crypto gains even when other investments aren’t performing as well.

Investing in Anchor Protocol coin is currently a great way to diversify your portfolio if you’re part of the Terra ecosystem. Because the Anchor Rate for this protocol is high, you can be confident that you’ll be provided with consistent returns. However, there are also some risks that you’ll need to take into account before investing in Anchor crypto. With the potential crash in yields, as well as the ever-present DeFi hacking risk, any investment you make in the Anchor protocol coin must be well-researched and monitored accordingly.

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Is Anchor Protocol the Best Defi Staking Protocol for Safe Yields?

Like the idea of passive income? Read on as we compare yield farming vs. staking so you understand which is strategy is best for you.

As major cryptocurrencies have flirted with all-time highs this year, investors have looked toward passive income strategies as opposed to active trading. Sone example of such strategies include debating between the merits of yield farming vs. staking. Spurred in part by low interest rates in other markets, and in reaction to the risks of active trading, yield farming and staking are becoming more popular as ways to reward investors when they HODL their favorite tokens and coins.

Not satisfied with just storing their digital assets and hoping that the value will appreciate, investors have found ways to put their crypto to work. Of all the various ways of earning passive income on your crypto assets, yield farming and staking are taking center stage. Between the two strategies, which one will work best for you?

In this article, we’ll look at yield farming vs. staking in order to better understand how they work, their associated risks and benefits, and which strategy could better fit your goals.

 is a method of generating cryptocurrency from your crypto holdings. It has drawn analogies to farming because it’s an innovative way to “grow your own cryptocurrency.” The process involves lending crypto assets for interest to 

 platforms, who lock them up in a liquidity pool, essentially a smart contract for holding funds.

The funds locked in the liquidity pool provide liquidity to a DeFi protocol, where they’re used to facilitate trading, lending and borrowing. By providing liquidity, the platform earns fees that are paid out to investors according to their share of the liquidity pool. Yield farming is also known as liquidity mining.

Liquidity pools are essential for AMMs, or automated market makers. 

 offer permissionless and automated trading using liquidity pools instead of a traditional system of sellers and buyers. Liquidity provider tokens, or LP tokens, are issued to liquidity providers to track their individual contributions to the liquidity pool. 

For example, if a trader wants to exchange 

 (DAI), they pay a fee. This fee is paid to the liquidity providers in proportion to the amount of liquidity they add to the pool. The more capital provided to the liquidity pool, the higher the rewards.

As a yield farmer, you might lend digital assets such as Dai through a 

, such as Compound (COMP), which then lends coins to borrowers. Interest rates change depending on how high demand is. The interest earned accrues daily, and you get paid in new COMP coins, which can also appreciate in value. Compound (COMP) and Aave (AAVE) are a couple of the most popular DeFi protocols for yield farming which have helped popularize this section of the DeFi market.

Instead of just having your cryptocurrency stored in a wallet, you can effectively earn more crypto by yield farming. Yield farmers can earn from transaction fees, token rewards, interest, and price appreciation. Yield farming is also an inexpensive alternative to mining — since you don’t have to purchase expensive mining equipment or pay for electricity. 

More sophisticated yield farming strategies can be executed using smart contracts, or by depositing a few different tokens onto a crypto platform. A yield farming protocol typically focuses on maximizing returns, while at the same time taking liquidity and security into consideration.

 is the process of supporting a blockchain network and participating in transaction validation by committing your crypto assets to that network. It’s used by blockchain networks which use the 

 (PoS) consensus mechanism. Investors earn interest on their investments while they wait for block rewards to be released.

PoS blockchains are less energy intensive than proof of work (PoW) blockchains, such as Bitcoin, because unlike PoW networks, they don’t require massive computing power to validate new blocks. Instead, nodes — servers that process transactions — on a PoS blockchain are used to validate transactions and act as checkpoints. “Validators” are users on the network who set up nodes, are randomly chosen to sign blocks, and receive rewards for doing so. 

You might not even have to understand the technicalities of setting up a node, because crypto exchanges often allow investors to provide their crypto assets, and then the network handles the node setup and validation process. For instance, brokerages such as Binance, Coinbase and Kraken offer this service. Kraken reported in January that its customers already have more than $1 billion worth of crypto assets staked on the platform.

Since PoS consensus is based on ownership, it requires an initial setup to distribute coins fairly among the validators in order for the protocol to work correctly. This can be done through a trusted source, or via proof of burn. Once the staking has started up, and all nodes are synced with the blockchain, proof of stake becomes secure and fully decentralized.

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