How To Stake Polkadot in 2023

Staking is one of the most popular Defi terms in the crypto industry today, but not many know what it is and how to participate in the process. Given the incredible growth of Defi in the past few years, users who are interested in earning from staking need a way to understand what the process entails. This guide aims to do that in the simplest way possible.

Staking is no more than earning money from helping a blockchain secure its transactions by depositing your tokens in a lock. Nodes with the most locked tokens are usually selected as validators. Many decentralized networks offer coin staking, but today's article will focus on staking Polkadot - how to get started, and some of the risks you might encounter.

Top Staking Platforms

	Name	Score	Visit	Disclaimer
	1Binance	9.1	Visitbinance.com
	2Ledger	8.0	Visit

What is Staking

Staking is a process employed by Proof of stake blockchains and it involves locking up tokens to be used in the transaction verification method. In return for locking up these tokens, the network rewards contributors by paying them interest based on the size of their stake. There are several types of staking, and many depend on how the blockchain selects transaction validators. Below we will see the key differences in the staking types.

How Nominated Proof of Stake Works

Polkadot uses Nominated Proof of stake which involves two key roles - nominator and validator. Nominators select nodes they believe are qualified to handle the validator role, and they stake some of their DOT tokens in support of those validators.

Nominators earn money when validators are selected from the list they choose, and the money is paid based on the size of their stake. One huge benefit of Nominated Proof of Stake is that any DOT holder can participate in the process.

Proof of Work Vs. Proof of Stake vs. Nominated Proof of Stake

Let's compare Nominated Proof of Stake to other consensus protocols to understand how it works.

Proof of Work: This is the consensus protocol used by Bitcoin, Litecoin, and many others to validate transactions. It involves solving complex equations in the hope of winning the right to mine new blocks of transactions on the Bitcoin blockchain. Proof of work is energy intensive but offers high security because of the high cost involved in taking over the network.

Proof of Stake: This is the most basic form of staking and it allows individuals to stake tokens in order to get selected as transaction validators. There is a base amount, and nodes who meet that requirement will win the right to validate transactions. When they handle the transaction validation properly, they are paid commissions depending on the size of their stake. When they behave maliciously or make costly errors, some of their staked tokens are taken away in a process called Slashing.

Nominated Proof of Stake (NPOS): In this method, nominators choose nodes they trust to handle the transaction verification process. Nominated proof of stake does not allow everyone to become validators, as individuals would need a good reputation before being selected. However, the financial rewards of staking are open to everyone, as any DOT holder can become a nominator and earn interest depending on the size of their contribution to the transaction verification process.

Polkadot Staking - Useful Words To Know

• Nominators - Anyone who votes on which individuals should handle the staking process and deposits a small amount of their DOT tokens.

• Validators - Individuals selected to handle the transaction verification process and also transaction finality

• Voting - The process by which Polkadot selects validators from Nominated nodes

How To Stake Polkadot

Staking Polkadot is a great way to earn money, but there are different ways to do it - each comes with a different set of rules, complexities, and even risks. Below, we will look at those key differences so you can know how to choose the best option.

Polkadot Staking Options Compared

Where to Stake Polkadot

Below is a selection of the top Polkadot staking platforms so you can find what suits you. Each of them has their unique attributes which cater to different investors.

1. Binance Polkadot Staking - Offers the Highest Rewards

Binance is one of the world's leading crypto exchanges. It is popular for excellent service delivery, a wide range of yield-earning options, and a smooth trading experience. Binance offers Polkadot staking, and it has different staking options which depend on the lockup period.

The platform is a great option for many investors because it offers over 60 cryptocurrencies for staking. It also has a simple dashboard that simplifies the entire staking process for all users. Lastly, Binance offers a 16.9% APR for DOT staking, while Binance.US users can earn 12%.

How to stake on Binance

Register or Sign In

Sign up for a Binance account if you don't have one. Then log in and go to the home page.

Go to the Binance Staking homepage:

Find and select Polkadot. If you don’t own any Polkadot tokens, then you’d need to purchase some from Binance’s marketplace or you can deposit some into your Binance wallet.

Read the terms and conditions before choosing DOT

If you’ve never staked on Binance US before, you’ll be shown some on-screen prompts that will help you understand the terms and conditions involved. Make sure you click “I Understand” to continue.

Choose a desired stake size:

Make sure you choose an amount you are comfortable staking on the platform. Also, consider the risks of staking with CEXs mentioned above before choosing a stake size.

Configure the Auto-Restake function.

Enable Auto-Restake if you want to restake any rewards you get from staking. Otherwise, you can disable the function so your rewards will be sent to your wallet. Then preview stake to ensure you are satisfied.

Complete the transaction by pressing “Confirm stake”.

While the stake is ongoing, you won’t be able to access your funds. Once done, you'll get a confirmation that the staking process was successful.

2. Bitfinex Polkadot Staking - Best For Those on a Small Budget

Bitfinex is another great option for people who want to stake Polkadot tokens. The platform doesn't allow anonymous users to participate in the staking process, as there is a mandatory Know Your Customer (KYC) requirement to staking on Bitfinex. Even better, the platform also offers staking for 10 cryptocurrencies.

Being a crypto exchange, Bitfinex ensures that investors who want to stake Polkadot tokens but don't own any can easily buy them on the platform. Bitfinex also charges low trading fees, which cost around 0.1%.

Bitfinex offers flexible and fixed staking options. Flexible staking tends to have lower yield potential than fixed staking options. Finally, with no minimum staking amount, anyone can participate in staking through Bitfinex, regardless of how many tokens they own.

How to Stake Polkadot on Bitfinex

Sign in or create an account

Create an account and buy some DOT tokens using the buy-crypto button. Otherwise, you can transfer DOT tokens to the Bitfinex exchange from your wallet.

Go to the staking page

Find and click the Staking rewards page

Check the staking calculator

Use the reward calculator to find out how much you stand to earn

Choose Polkadot

Go to the bottom of the page and find supported currencies for staking. There, you’ll find Polkadot tokens. Click on the DOT option and fund your wallet.

3. Ledger Polkadot Staking - Most Secure Way To Stake

Ledger is one of the most trusted hardware wallets in the world. It offers top-notch security and easy buying, selling, and staking tokens. In addition, Ledger wallets grant users full control over their assets as their private keys remain offline in the wallet.

Staking Polkadot on Ledger will require the wallet's live app, which boasts many applications that simplify the staking and earning process.

How To Stake with Ledger Wallet

Buy a device

Choose your preferred device from the Ledger website and make a purchase.

Download Ledger Live

Download Ledger Live to enable buying, selling, staking, and other yield growth opportunities.

Configure your device

Set up your Ledger device and create your Polkadot account.

Add DOT to your Ledger

Fund your wallet by either buying DOT tokens or transferring them from another account.

Stake your DOT

On your Polkadot account, go to earn rewards and choose the Ledger validator. Select the amount you want and confirm.

Polkadot Staking Platforms Compared

How Much Can You Make From Staking Polkadot

The potential earnings from staking Polkadot tokens vary depending on several factors, including the number of blocks an investor's stake contributed to creating. How much an investor earns from staking DOT tokens depends on the method used.

It is also affected by the type of wallet used, the type of centralized exchange, and the number of validators. The potential maximum return that DOT holders can get is 14.34% which means Polkadot staking rewards are among the highest in the crypto market. Nominators on the Polkadot network can earn a maximum APY of 14.1%, while validators can earn up to 14.8%.

Please note that investors can increase their earning opportunities and the size of rewards from staking. Platforms that give users liquidity tokens are perfect for increasing profit from staking because users can re-invest their liquidity tokens into yield farming or defi lending protocols. However, these methods of increasing profit carry considerable risk.

Is There a Downside to Polkadot Staking?

Staking has many incredible yield-earning benefits, but it also has significant disadvantages that investors have to consider.

• No access to tokens during lock up - Many staking platforms use a fixed time duration where investors can't access their tokens until the lock-up period is complete, thus limiting the potential to earn money with your stake during the lock period. Polkadot, for instance, has a lockup period of 28 days. However, some platforms give out liquidity tokens that can be used in other Defi activities.

• Financial and technical requirements - Running a validator node can be quite expensive as the needed equipment costs a significant amount of money and also knowledge. On the other hand, using staking pools or wallets might be cheaper but still require technical know-how. For Polkadot staking, the easiest options seem to be using a centralized crypto exchange or staking natively on the network.

• Counterparty risk and other security challenges - Refer to the risk of using third parties to stake tokens on your behalf. These third parties are at risk of slashing due to not fulfilling their validator obligations properly. They are also at risk of hacks and security breaches. For individuals staking their tokens through wallets, it is possible to lose their key phrase or their hardware wallets. Staking with trusted centralized exchanges might be the simplest alternative.

• Price fluctuation - Another main issue stakers have to worry about is price volatility which simply means the tendency for coin prices to rise and fall. The crypto market is very popular for extremely high volatility and so the size of stake rewards a user can expect is affected by the value of their staked tokens. Investors who stake tokens for a relatively long period should be aware that the value of their rewards is susceptible to change due to high volatility.

Is Polkadot Staking For Me?

While staking could be a great investment opportunity, it's not for everyone because of the risks and the technical requirements needed. To decide whether you should participate in the DOT staking process, consider the following.

• Staking skill and knowledge: How much you know about staking should help decide whether you become a DOT staker and what kind of staking to choose. If you have very little experience, then running a validator node is very risky and would likely lead to losses. Using stake pools is less technical but investors still bear the brunt of transferring their tokens to the stake pool.

• Investment Plans: Staking is an investment like any other, and it should be guided by an investor's plans. One thing to consider is how long you intend to hold the DOT tokens. If you have a long-term strategy, staking could be a great option, especially as you don't have to worry about short-term price fluctuation. On the other hand, investors looking for short-term investments might not be satisfied with staking. Overall, investors should follow basic investment principles, which state that they should only stake an amount they can afford to lose, especially because the crypto industry is famous for extremely high price fluctuations.

• Upsides vs. downsides: As we discussed above, staking DOT tokens comes with an upside and a downside. Investors should thoroughly consider both sides to see if staking is for them. They should also consider how much risk they are willing to bear.

• Tax regulations in your area: Different regions have varying regulations on what can be called a taxable event. Investors who intend to stake DOT tokens should ensure that they understand whether the method they choose can trigger a taxable event according to their local laws to ensure that they don't break any local tax laws.

• Hodl or Trading: Some investors prefer to earn money from the crypto market by holding tokens for the long term while other investors might prefer to trade tokens to make profits from their short-term price fluctuations. Investors should consider the type of trading they prefer, and it should guide their investment decisions. For long-term holders, staking might be more suitable as there is no worry over price fluctuations.

Final Thoughts

Polkadot staking helps keep the network secure and provides extra income for investors who participate in the staking process. However, like most networks that offer staking, there is a bit of technical knowledge required alongside dedicated high-end hardware and software to run the staking operations.

Thankfully, there are cheaper and simpler options for many investors. Some of which include staking tokens via DOT staking pools or staking natively on the network, which costs as low as 1 $DOT.

Investors looking for an even simpler method can choose to stake with a centralized exchange. When it comes to CEXs for staking DOT, Binance comes first because it is the most efficient and simple platform for new and professional coin stakers.

	Name	Score	Visit	Disclaimer
	Binance	9.1	Visitbinance.com

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