Crypto Staking or Mining? Top Staking Assets to Buy in 2024
Crypto staking and mining play a crucial role in ensuring the operation of a blockchain network. They are used to protect a network and validate and verify transactions. They also are used to earn crypto: in the form of mining or staking rewards.
While the basic functions of mining and staking are the same, the principles based on which they operate are different. Let’s have a look at what mining and staking is, and how to earn with them.
Crypto Mining: Proof-of-Work Consensus Mechanism
Crypto mining is pertinent to the proof-of-work blockchains such as Bitcoin, Litecoin, and some others. To validate a transaction, nodes have to perform a specific amount of work - to solve a complex mathematical problem. When the problem is solved, a new block is added to the blockchain, and a miner - the device that solved the problem - gets a reward in the form of newly created coins and transaction fees.
Mining requires special devices. Application-specific integrated circuits (ASICS) or graphic processing units (GPUs) are used for more popular and complex networks such as Bitcoin. These devices are optimized for these specific tasks and most of them consume a lot of electricity. This high electricity consumption is one of the major drawbacks of mining on some of the major blockchains.
Even though proof-of-work is the safest consensus mechanism, it is often criticized for its negative impact on the environment.
Crypto Staking: Proof-of-Stake Consensus Mechanism
The proof-of-stake consensus mechanism came as an environmentally friendly alternative to proof-of-work consensus mechanism. Blockchains that rely on staking require users to lock a specific number of coins in a special wallet (staking wallet). These coins become unavailable for any activities such as selling, swapping, etc.
After staking a specific amount of coins, users can participate in validating transactions (they become validators) and start receiving transaction fees. In most cases, also staking rewards are paid.
Staking doesn’t require performing any work, and thus, there is no need to consume energy. This is why proof-of-stake blockchains are considered more environmentally friendly. Many specialists claim they are the future of crypto.
Staked coins are the guarantee that validators will behave fairly. If a validator acts maliciously, he can be fined. Usually, fines are high to prevent validators from damaging the ecosystem, and this is also one of the reasons why blockchains require significant amounts of coins to stake to become a validator.
There are some platforms that allow staking smaller amounts of coins to get rewards, such as Lido for Ethereum staking. In such a case, a user who stakes crypto on such a platform doesn’t participate in transaction verification but gets staking rewards.
Crypto Mining vs Staking: What to Choose?
It depends on your resources and expectations of whether to choose staking or mining. This table will help you to make a better decision.
Crypto mining | Crypto staking | |
Special device | Yes | No |
Computational power | Very high | Insignificant |
Electricity consumption | Very high | Insignificant |
Rewards | Newly mined coins, usually high | Staking rewards and transaction fees, rewards are lower than in mining |
Accessibility | Requires special devices, expenses are very high | Requires initial capital to become a validator but very accessible if you are fine with staking rewards only |
Top Crypto Coins to Stake
Some crypto coins are more profitable to stake than others. Here is the list of top crypto coins to stake.
Ethereum
Ethereum is one of the main blockchains, and it has moved to the proof-of-stake consensus mechanism to ensure its further growth and sustainability. Now, ETH is one of the major assets for staking.
- Estimated staking APR: 2.48%
- Minimum to stake: 32 ETH
Cardano
Cardano is one of the most successful PoS blockchains, and its native coin ADA is one of the most profitable assets to stake.
- Estimated staking APR: 4.96%
- Minimum to stake: 2 ADA
Tezos
The Tezos blockchain was launched in 2017, and since then, its native coin has experienced very high volatility. But still, the blockchain is growing, and the rewards offered for staking XTZ are high enough to compensate for the volatility-connected losses.
- Estimated staking APR: 5.89%
- Minimum to stake: 6,000 TXZ
Polkadot
Polkadot is a blockchain that has introduced the interoperability concept to the Web3 space. This is why it is one of the most promising projects in the long term, and staking its coin DOT may result in a good passive income.
- Estimated staking APR: 15.31%
- Minimum to stake: 350 DOT
Polygon
Polygon is a Layer-2 solution to the Ethereum blockchain. It resolves such Ethereum’s issues as high fees and low scalability. Staking MATIC is available directly through the MetaMask wallet.
- Estimated staking APR: 8.61%
- Minimum to stake: More than the balance of the 100th validator
Avalanche
Avalanche is a smart contract blockchain that offers lower fees and faster transaction confirmation time. There are more than $bln worth of AVAX staked by users, and this number speaks for itself.
- Estimated staking APR: 9.51%
- Minimum to stake: 2,000 AVAX
Algorand
Algorand was designed to offer instant transaction processing. It uses a pure proof-of-stake consensus mechanism. The Algorand blockchain doesn’t require you to be a validator to receive staking rewards. All you have to do is to hold at least one ALGO in a wallet that supports ALGO staking.
- Estimated staking APR: 7.2%
- Minimum to stake: 1 ALGO
Bottom Line
Whether you opt for mining or staking, don’t forget to perform due diligence before investing in any equipment of any coin. Cryptocurrency is a highly volatile asset, and thus, never invest more than you can afford to lose.