• Staking is a way for crypto investors to earn passive income in addition to their token price gains.
• Allnodes’ Tally Greenberg explains why now is the time to bet in an environment of higher inflation and volatility.
• She also shares 5 altcoins with some of the highest annual returns and risks involved.

Staking – the act of ‘locking in’ a portion of your crypto for a period of time to help validate transactions on a proof-of-stake blockchain in exchange for rewards – is emerging as the next trend in investment favorable to retail.

The crypto exchange Coinbase, which still derives the lion’s share of its revenue from trading, is increasing its staking capabilities towards Ethereum 2.0, COO Emilie Choi said at the recent Mainnet 2021 conference.

“We’re very bullish on ETH 2.0, we’re very bullish on staking being a very big part of the next frontier for crypto,” she said, “and that’s why we’re spending so much time on it. time and resources. “

A recent CoinShares report estimated that 6.6% of Ethereum is at stake in Ethereum 2.0, which is an upgrade from Ethereum that aims to improve its scalability and security. The report says the growth of Ethereum staking is key to sentiment as investors see it as “a potential environmental alternative to other digital proof-of-stake assets.”

Robinhood Crypto CTO, Johann Kerbrat, is also excited about the staking. “When we talk about rising inflation and savings accounts that don’t really produce a return, I think staking could be something very interesting for a lot of people,” he said at the time. of the Mainnet conference.

Indeed, with a period of higher inflation and market volatility expected in the fourth quarter, it’s no wonder that investors are looking for ways to make money in crypto rather than keeping their eyes on it. ‘screen for an opportunity to make a transaction.

“It looks like the market is in a state of anticipation. Now is not a bad time to step into the asset that you are looking to invest,” Tally Greenberg, business development manager, told Insider. Allnodes staking provider. maintenance.

Allnodes, a non-custodial staking provider, is ranked number one in the industry based on its total amount of assets staked, which is approximately $ 610 million, according to stakingrewards.com. The company also achieved the top awards against other vendors in the first quarter of this year, according to a report from Consensys.

Top 5 altcoins to bet

While each cryptocurrency has different rules for how it calculates and distributes rewards, Greenberg suggests that investors start small, gradually increase their bets, and diversify.

In choosing which altcoins to stake, she recommends investors look beyond the cryptocurrencies that are currently trending and focus on blockchain technologies that can stand the test of time.

“The coin is what powers the blockchain, but the blockchain itself is where the gold mine is located,” she said. “I would invest in assets that make sense to me over the long term in terms of performance in 10 or 20 years.”

Ethereum 2.0 (ETH) is Greenberg’s preferred crypto asset for staking. However, investors would need to lock down 32 ethers on a single node or computer in order to join ethereum 2.0 as a full validator. The guarantee of 32 ethers is equivalent to over $ 100,000 on Friday afternoon.

Ethereum staking also requires investors to have a long-term belief in the second largest crypto. Biters will not be able to withdraw their bets until the current Ethereum mainnet merges with the Beacon Chain Proof of Stake system, which would mark the official end of Ethereum’s proof of work system. Greenberg said this unique attribute works for newbie investors because it prevents them from making emotional trades during times of high volatility.

The estimated annual percentage rate for ethereum 2.0 staking is around 4.95%, according to stakingrewards.com. The return on investment of ethereum staking is lower than that of some other altcoins, because the more validators a network has, the smaller the proportion of staking rewards will be, Greenberg said.

However, when investors bet on Ethereum, they still benefit from the price appreciation in the meantime.

“Imagine you blocked 32 ethers in January of this year when the ether was over $ 700,” she said. “Ether is now over $ 3,000, so you would have a lot more money just because the coin appreciated, plus the annual percentage rate, not of the $ 700 but of the $ 3,000. That’s fine. in proportion to the appreciation of the piece, it’s crazy. “

Polygon (MATIC), a layer two scaling solution for Ethereum, is another popular token for staking. The estimated APR for the Matic token staking, which was trading at $ 1.24 on Friday afternoon, is around 12.8%.

Greenberg also likes tokens from smart contract platforms, including avalanche (AVAX), Peas (DOT), and Cosmos (ATOM), which respectively generate 3.07%, 13.25% and 10.71% of the estimated APRs.

Besides large cap crypto assets, small and micro cap altcoins such as Energi (NRG), Sentinel (DVPN), and Phore (PHR) yield estimated APRs of 47.24%, 59.85% and 62.89%, respectively, according to stakingrewards.com. However, the risks of sudden price reversals are also higher when staking less established altcoins, Greenberg said.

Another key risk for staking is slashing, which occurs when validators lose staked tokens due to malicious behavior or network accidents, including downtime and double signing, resulting in reference to signing two blocks at the same block height.

Greenberg said that every blockchain has some sort of penalty for underperforming, which is why proper technology setup and risk management are paramount for those who stake out themselves.