Crypto staking has become an increasingly popular way for cryptocurrency holders to earn passive income. Staking involves holding a certain amount of cryptocurrency in a wallet and locking it up to help validate transactions on the blockchain network. In return, stakers receive rewards in the form of more cryptocurrency. However, there are certain things to keep in mind when staking. Here are the do’s and don’ts of crypto staking.
## The Do’s
### 1. Research the Project
Before staking your cryptocurrency, it’s important to research the project thoroughly.
Look into the team behind the project, their experience, and their track record. Also, check the project’s roadmap, whitepaper, and community engagement.
You can also stay updated via Crypto staking blogs such as stakingrewards.com or cryptonastic
This will help you make an informed decision about whether the project is worth staking your cryptocurrency in.
### 2. Choose a Reliable Staking Wallet
Reputation precedes you” applies to wallets too. Look for wallets with established track records and positive community reviews on platforms like Reddit, CoinMarketCap, and Trustpilot.
Also, make sure the wallet supports the cryptocurrency you want to stake.
According to the Atlas VPN report
- 83% of DeFi hacks in 2022 targeted private keys stored in web wallets.
### 3. Diversify Your Portfolio
Diversification is key when it comes to cryptocurrency staking. Don’t put all your eggs in one basket. Instead, spread your staking across different projects to minimize your risks. This will also help you earn more rewards in the long run.
A study by Delphi Digital found that diverifying across 5-10 staking projects can reduce volatility by up to 50%. Imagine doubling your potential rewards while halving your risk!
Staking leading blockchains like Ethereum (ETH) and Cardano (ADA) provides stability and moderate returns, while newer projects like Flux staking and gala staking offer higher potential rewards with slightly higher risk.
A diversified portfolio could include a mix of these to balance risk and reward.
### 4. Keep Your Wallet Secure
Security is paramount when it comes to staking cryptocurrency.
Make sure you keep your staking wallet secure by using strong passwords, two-factor authentication, and other security measures.
A 2023 NordPass report revealed that 99% of data breaches were caused by weak or reused passwords. Use complex, unique passwords for your wallet and enable 2FA.
Also, never share your private keys with anyone.
## The Don’ts
### 1. Don’t Chase High Rewards
While high rewards may be tempting, it’s important to be cautious when staking your cryptocurrency.
Don’t chase high rewards without doing your research.
High rewards may be a red flag, indicating that the project is not sustainable in the long run.
High rewards shouldn’t overshadow thorough research.
Prioritize understanding the project, its team, and its long-term viability before making staking decisions.
### 2. Don’t Panic Sell
Cryptocurrency prices can be volatile, and it’s important to remain calm during market fluctuations. Don’t panic sell your staked cryptocurrency during a market dip. Instead, hold on to your cryptocurrency and wait for the market to recover.
Despite significant drops, Bitcoin has recovered and reached new highs over time. For example, after falling to $3,600 in March 2020, it reached $69,000 in November 2021.
### 3. Don’t Overcommit
It’s important to only stake what you can afford to lose. Don’t overcommit your funds to staking, as this can lead to financial difficulties. Instead, start small and gradually increase your staking as you become more comfortable with the process.
Allocate only a small percentage (5-10%) of your overall investment portfolio to crypto staking. This limits potential losses while allowing you to participate in the potential rewards.
Start with well-established, reputable projects offering moderate, sustainable staking rewards. Avoid chasing high-risk, unknown projects with unrealistic returns.
### 4. Don’t Ignore Updates
Finally, don’t ignore updates from the project team. Make sure you stay up to date with the latest developments, as this can affect your staking rewards. Also, make sure you update your staking wallet regularly to ensure it’s running the latest version.
Recommended Read: Crypto staking Vs Lending comparison Guide?
Final Thought
crypto staking can be a great way to earn passive income, but it’s important to approach it with caution.
By following these do’s and don’ts, you can minimize your risks and maximize your rewards.
