Ready to Stake DOT Now? Get Started Easily with These Tips
Cryptocurrency & Blockchain
In the United States alone, there are over 46 million cryptocurrency holders. Ever since Bitcoin took the world by storm in 2010, it’s generated massive interest in digital currencies.
Now, in the 2020s, there are more than 12,000 cryptocurrencies, each with its own pros and cons. And not only do users buy and sell them, they also stake their cryptos.
Read on to find out what this is and how to do it with Polkadot cryptocurrency.
What Is Cryptocurrency Staking?
Cryptocurrency staking is when you hold onto your funds in your crypto wallet. The network benefits in two ways from this: they get better security and more help validating transactions.
When people invest in cryptos, they typically monitor the market to determine the best times to sell. But staking requires patience since you don’t get to sell at will.
You might be asking: what do you get out of this then? Well, you’ll get staking rewards for Polkadot and other cryptos from the networks. They give you part of the block rewards; these are usually new coins, but can be lower transaction fees too.
The one caveat to crypto staking is that you can’t do it for every cryptocurrency. It’s only available for proof-of-stake (PoS) systems, which some of the bigger cryptos don’t use. For example, Bitcoin uses proof-of-work (PoW) systems instead.
Now that you know more, let’s get started. Here are some tips to start staking DOT (Polkadot’s token).
Start Staking on an Exchange
There are several ways to stake DOT, but for beginners, it’s recommended that you start with an exchange. This is a type of custodial staking, which means there are no complicated steps you need to take.
When you buy DOT on the crypto exchange, you can then directly stake your tokens with a few clicks. You won’t have to get a crypto wallet either; that’s how simple staking on an exchange is.
Another benefit here is that there aren’t as many requirements. This makes staking easier and more accessible, especially for beginners.
However, the tradeoff is that you’ll get a lower yield. Also, the compounding periods may be longer. Reward payouts are less frequent too.
Do note that the drawback to staking on an exchange is that Americans don’t have many options. So you might want to consider other staking methods to get in on the action.
In addition, crypto exchange security isn’t fantastic when compared with other staking methods. Because you’re storing your DOT on the exchange, it’s easy to lose them if the site gets hacked. You can also lose your crypto through government actions and exchange shutdowns.
Liquid Staking Can Work for Beginners Too
Liquid staking is a bit more complicated, but it allows you more freedom.
With traditional staking, your DOT holdings are locked for a certain period. As a result, this reduces DOT’s liquidity.
Liquid staking allows you to stake your DOT with a validator without actually transferring ownership. This is made possible through smart contract technology.
You’ll get the best of both worlds here, as you can earn rewards while retaining the ability to freely trade your DOT on exchanges. The network also benefits from better overall security and decentralization.
Like with exchange staking, liquid staking has the downside of lower yields and more risks.
Consider Staking With a Crypto Wallet
Wallet staking is more secure than exchange staking, but it involves more steps. You’ll need to use the Polkadot.js extension, which only works in Chromium-based browsers.
To start staking, you’ll need to connect a crypto wallet with the extension. You can choose to have your staking rewards paid to a stash account or elsewhere.
As you might imagine, this process is more complicated than exchange staking. But the good news is, Polkadot has a video walkthrough, so study this carefully before taking action.
Buy at Least 10 DOT
For those interested in plain crypto staking, then you need to buy at least 10 DOT. As of late January 2023, one DOT is worth around $6.20, so an investment of $62 isn’t too bad.
If you don’t like having minimum requirements, then look into an exchange or liquid staking. Exchanges may have their own requirements though.
Get a Crypto Wallet
If you don’t want to do exchange staking, or just want better security for your DOT, then you need to get a crypto wallet. This is the digital equivalent of taking cash and putting it into your own physical wallet.
There are both hardware and software wallets, as well as hot (connected to the internet) and cold (disconnected from the internet). As a beginner, downloading free software crypto wallets will suffice.
Join a Staking Pool
You can stake DOT either on your own or in a pool. But it’s better to join pools since you have a higher chance of getting rewards.
Do your due diligence before selecting a pool. You want one with the highest uptime since you won’t earn rewards if the servers are down. Plus, choose a medium-sized pool to boost your chances of success and avoid oversaturation.
As a fee for joining, pools will take a small percentage of your staking rewards. Most will take between 2% and 5%.
Only Run a Validator Node if You’re Tech-Savvy
Running a validator node is considered expert-level. You’ll stake DOT on your own, which means you don’t have to share the rewards with anyone else.
However, running a validator node requires not only technical knowledge but also high-quality equipment. It’s similar to mining crypto in that it’ll use a lot of energy, so take your utility bills into account before starting.
Earn Rewards by Staking DOT
If you were considering investing in DOT anyway, then you might benefit from staking it too. It’s not difficult to get started, especially if you follow our advice.
Just remember to start slow and don’t risk more than you can afford. If you’re cautious and smart, then staking DOT can really pay off.
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