How To Stake Tezos in 2023

One of the most popular ways of earning money from cryptocurrencies is through staking, which involves contributing tokens to a stake pool for network security in return for financial rewards. Staking is very popular among investors because it generally involves less risk than trading. There are different approaches to staking, and they vary according to the network.

This guide will look at how to stake Tezos and all the processes involved including how to set up a wallet and how to withdraw or reinvest staking rewards to increase profit. We will also cover the risks and difficulties that investors are likely to face and the best platforms to use to ensure a smooth staking experience.

	Name	Score	Visit	Disclaimer
	1Coinbase	8.4	Visitcoinbase.com
	2Kraken	7.6	Visitkraken.com
	3Uphold	8.4	Visituphold.com

What is Tezos Staking?

Staking is a method of verifying transactions and keeping a blockchain secure. It is employed by blockchains that use the proof of stake consensus protocol. Staking involves locking up tokens for a set time to be used for transaction verification. Individuals who contribute their tokens to the staking process are rewarded with extra tokens once the lockup period ends.

The most common proof-of-stake blockchains are Ethereum, Cardano, and Tezos. To get a better understanding of staking, we need to understand what makes it valuable to blockchains. Blockchains rely on computers to stay secure and ensure accurate transactions. There are different approaches to this, but the most common are proof of work (PoW) and Proof of Stake (PoS).

In proof of work, computer nodes spend huge amounts of energy trying to solve complex equations in return for the right to verify transactions and mine new blocks. Proof of work is employed by blockchains like Bitcoin and Litecoin.

Proof of stake, on the other hand, involves locking up tokens in a pool in exchange for the right to verify transactions. When tokens are locked in a stake pool, the network independently selects validator nodes from stakers, and those validators get to verify transactions.

Once the validation process is complete, they are rewarded with extra tokens. Validators who receive tokens from others called “delegators” will then repay the money with interest. The money is paid according to the share of tokens contributed - their stake.

There are different staking approaches that vary according to the network's protocols. Ethereum, for instance, has different staking requirements from Cardano. The same condition applies to Tezos. On many networks, validators need a base amount to participate in the staking process. On Tezos, validators are called “bakers”, and they need a minimum of 6000 XTZ, which is termed a “roll”.

Investors who do not have the required amount can then delegate their tokens to a baker who stakes on their behalf and pays rewards based on the amount of staked coins.

There are no lock-up periods for staking Tezos. Investors can change bakers (validators) anytime they wish. Furthermore, Tezos staking has no fixed number of validators, and the network uses the amount staked to select bakers.

The network also allows individuals to run staking operations with low hardware requirements. Staking and delegating also vary by the platform used. For instance, staking Tezos on a centralized exchange differs from staking Tezos via a stake pool.

How To Stake Tezos

Before choosing to stake on any platform, investors must understand all the factors involved and how they vary according to platform or network. This helps investors fully understand and mitigate the risks involved.

There are multiple ways to stake Tezos and they differ by requirements, difficulty, risk, and reward potential.

Staking on a Centralized Exchange - Easy

The easiest way to stake any token is via a centralized exchange (CEX). Staking with centralized exchanges offers the advantage of not worrying about setting up a wallet or moving funds in and out of platforms. All investors need to do is open an account with the centralized exchange of their choice and head to the staking page to get started.

Centralized exchanges act as the middleman in the staking process, thus allowing investors to stake tokens with little technical know-how.

Another reason centralized exchanges are good for staking is that they offer more security for customer funds and have the resources to help smoothen the process for many investors. Centralized exchanges are also among the most licensed crypto firms in operation today, meaning they are the most trusted platforms with the least risk of losing investor funds.

The most common centralized exchanges used for coin staking include Coinbase, Binance, Crypto.com, and Kraken.

Using a Stake Pool - Intermediate

A stake pool is a pool of funds contributed and given to a pool operator to participate in staking for investors, who then earn rewards from the interest generated from staking. Investors who stake tokens via a stake pool do so to get benefits like higher chances of being selected as a validator because of a larger number of tokens.

Proof of stake networks usually select nodes with the largest amount of tokens as validators because they are more likely to engage in the verification process properly. This is because such networks use slashing to maintain proper behavior on proof-of-stake blockchains.

Slashing is a process of deducting tokens from a node's stake size for inappropriate behavior. Nodes with larger amounts of tokens are less likely to engage in bad behavior because slashing will have a higher impact on them.

This puts stake pools at an advantage because they can generate a larger size of funds, which increases their chance of being selected as validators. Some of the most common stake pools available are MoonStake, Stakefish, and Everstake.

Becoming a Tezos Baker (Validator) - Hard

The final and most direct way of staking Tezos is becoming a baker. To do this, an individual needs a minimum of 6000 XTZ. The profits from running a Tezos staking node directly are higher than other staking methods.

Bakers are rewarded for validating blocks and confirming blocks validated by other bakers. Tezos allows bakers to participate in the staking process via the use of low-hardware computers, thus reducing the barrier to entry for new bakers.

When staking directly as a baker, the network freezes 10% of a node's stake as Security Deposits, and the funds will remain locked for 14 days. During the freeze period, a baker is not allowed to sign a block twice, or they will be punished by having their Security Deposits taken away - in a process known as slashing.

Tezos staking options compared

Where to Stake Tezos

Centralized exchanges represent the easiest places to stake, and below are our top three recommendations when it comes to staking Tezos.

1. Coinbase - Best for Beginners

Coinbase is a crypto exchange that offers staking and other crypto services. The platform is renowned for being one of the easiest to use especially for beginners. Although there are a limited number of cryptocurrencies available for staking, the process only takes a couple of clicks.

The platform uses automatic re-staking to compound interest earned from staking. Using Coinbase also offers benefits like extra security and trust because Coinbase is largely regulated. Coinbase offers a smooth interface alongside clear staking guidelines that help beginner investors get started immediately.

The platform is also known for offering stable and competitive rates for its Tezos staking which can reach up to 4.60% APY. Staking on Coinbase also offers better customer service and guidance than many other crypto exchanges or DeFi protocols.

How To Stake Tezos on Coinbase

Step 1: Open an account

If you don’t already have an account, you’ll need to sign up to Coinbase. This involves providing some personal information and a valid photo ID to prove your identity. You will then need to buy some AVAX or transfer it from an external wallet.

Step 2: Go to the Earn tab

Click the Earn tab on the left hand side and scroll through the assets available for staking until you find Tezos. Click on it and then click the “Start Earning” button.

Step 3: Read the disclaimer

This will bring up a disclaimer that will tell you the estimated APY and any important information about Tezos staking you should know. Once you have read this information, click “Continue”.

Step 4: Enter the amount

Type in how much you want to stake in your local currency, or click the toggle on the right to enter the amount in XTZ instead. You can click the “Stake all” button if you want to stake all the XTZ in your account. Once you’ve entered an amount, click “Preview stake”.

Step 5: Preview your stake

The next page will show you a preview of your staking details. If you are satisfied, click “Stake now”. That’s it! You will now automatically receive rewards in XTZ every 3 days.

2. Kraken - High APR for Tezos staking

Kraken is a popular crypto exchange that offers crypto staking services for many tokens including Tezos. The platform is popular among Tezos stakers because it offers significantly higher interest rates than many others.

There are 16 cryptocurrencies available for on-chain staking on Kraken, with many available for both flexible and bonded staking. The flexible option provides the ability to withdraw at any time, while bonded staking means locking up tokens for a fixed period in return for a higher interest rate.

One of the main advantages of using Kraken is that it offers more security than most platforms - it is among the most licensed crypto financial services providers. Kraken also has professional service delivery which makes it highly rated among users. The platform offers 24-hour customer services alongside comprehensive learning materials to help users get started. The FAQ section is comprehensive enough to answer most questions new stakers will have.

How To Stake Tezos on Kraken

Step 1: Create an account

If you don’t already have one, create an account on Kraken by providing your personal details and verifying your identity.

Step 2: Go to the Earn section

At the top of the website, click the Earn tab to see some information about staking, your current balance and rewards, and a list of available cryptocurrencies.

Step 3: Select Tezos

Select Tezos from the list of staking assets, or click the Stake button at the top to search for it.

Step 4: Enter the amount

Type in how much XTZ you want to stake or click on a proportion of your available balance. Then click “Stake”.

Step 5: Start earning rewards

Your transaction will now appear at the bottom of the page with the status “Initiated”. After a few minutes, the status will update to “Successful” and you can view your updated Tezos staking and reward balances.

3. Uphold - Best for Transparency

Another great way to stake Tezos is the Uphold crypto exchange which offers comprehensive crypto trading services for new and regular investors alike. Uphold’s wide range of services includes staking services for 32 coins. While Uphold doesn’t offer the highest APY rates for many coins, it has a very transparent fee structure. Tezos stakers on Uphold get an APY of 3.4%, which is a bit lower than other exchanges

Uphold also offers clear fees on trading tokens - which is an advantage for investors looking to trade their staking profits. The platform provides relatively good customer care that includes 24-hour email and live chat support. Uphold has been licensed by several institutions including the Tenessee Department of Financial Institutions.

How To Stake Tezos on Uphold

Step 1: Create an account

You’ll need to sign up to Uphold if you don’t have an account already. The verification process should take a couple of minutes, and then you can either buy some XTZ on the platform or transfer some across from an external wallet.

Step 2: Select Tezos on the staking page

If you’re using the mobile app, you can tap the “More…” button, and then “Staking” and “Next”. You should see a list of cryptocurrencies available for staking. Select Tezos and then tap “From:” and select your wallet balance.

Step 3: Enter an amount

Enter how much XTZ you want to stake, and then tap “Preview Staking” to see the staking details.

Step 4: Start earning rewards

If you are happy with the details in the preview, tap the “Start Staking XTZ” button. Then you can sit back and start receiving rewards payments on a weekly basis.

Tezos Staking Platforms Compared

How Much Can You Make Staking Tezos

While staking can provide solid returns, the exact rewards that can be earned from staking depend on the platforms and the staking method used. Most times, the APR specified for staking tokens might be higher or lower than what investors will actually earn due to how APR is calculated.

Current Estimated Tezos APR

Crypto wallets and digital asset exchanges tend to offer the lowest APR for staking Tezos. Platforms like Binance offer investors around 4.3% APY while stake pools offer APY rates that reach up to 5%. Staking directly via Tezos' platform offers investors almost 6% APY. One important factor is that the higher the APY, the more risk and technicality involved. For instance, staking directly through Tezos' website offers the highest APY but involves the most staking effort.

How to increase earnings from staking

Investors can also increase their overall earnings by reinvesting the tokens they receive as staking rewards in other yield-earning opportunities.

Is there a downside to Staking Tezos?

While staking can provide returns, it also comes with some inherent risks that you should take into account.

Slashing

Slashing refers to the deduction of tokens from the node's stake size as a penalty for bad behavior on the network. When staking, nodes are rewarded for good behavior by receiving extra tokens. When those nodes behave in ways that are harmful to the network's security, some of their tokens are deducted.

A good example of such bad behavior is trying to verify the same transaction twice. Investors need to be extra careful when choosing which bakers to delegate to, as they could potentially lose some XTZ if their chosen baker gets slashed.

Security

Staking protocols are often targets of malicious attacks by hackers and crypto thieves. When using a staking protocol, investors' funds are at risk of being stolen by hackers. One way of reducing the security risks of staking is by using a centralized exchange which is generally known for having better security than stake pools.

Lack of access to staked tokens

Although the Tezos blockchain doesn’t impose a lock-up or unbonding period, some platforms offer fixed-term earning products for XTZ. If you opt for one of these, you may be unable to access your XTZ until the end of the term.

This also means you could be unable to withdraw your funds in the case of a serious market crash - a situation that could lead to serious financial losses. One way to avoid this risk is to use flexible staking options like those provided by the platforms in this guide, which allow investors to access and trade their funds anytime they wish.

Price volatility

One of the biggest risks investors face when staking tokens is the risk of price volatility, which is very common in the crypto industry. As many investors already know, the crypto industry is famous for sharp price crashes - a situation that can lead to very serious losses.

Difficulty

Staking tokens generally come with higher requirements like more technical know-how and computer requirements for investors who choose to stake directly. Investors who avoid the higher difficulty can opt for centralized exchanges like Coinbase, but they will generally get lower APYs.

Investors who opt for staking directly or via stake pools must understand how to find good stake pools and operate the necessary technology. One advantage of becoming a validator on Tezos is that the hardware requirements are pretty low, though bakers do need 6,000 XTZ.

Should I Stake Tezos?

Choosing to stake tokens is an individual choice - one that investors can only make when they've understood the main factors that will affect their staking journey. These factors include the following.

• Risk vs. Reward - The first factor to consider is the expected risk vs. the potential outcome. Like anything in the financial industry, staking comes with its risks. Before choosing to stake, investors must be sure that the risks involved are worth the potential profit they will make from staking.

• Tax Implications - Staking tokens is a form of earning interest on cryptocurrencies, and it is considered income under the tax regulations of many countries, including the U.S.A. Investors who want to stake Tezos should first consider the tax implications and how they will fulfill their tax obligations.

• Skill Level - There are different ways to stake Tezos, each with a different level of required skill. Investors who choose to go for more complex forms of staking should ensure they have the needed skill level. For instance, setting up a baker node and verifying transactions directly requires significant technical know-how. Investors who participate in this kind of staking need to be skilled at operating a baker node; otherwise, they could lose a chunk of money to slashing penalties.

• Investment Strategy - Whether an investor chooses to stake Tezos or not should depend on their overall investment strategy. Investors interested in holding Tezos for a long time, otherwise known as “hodling”, can choose to participate in staking as they would not need to sell their tokens. Investors looking to trade regularly might decide that it’s not worth the effort to keep moving their tokens in and out of staking accounts whenever they want to trade.

• Inherent Crypto Risks - Cryptocurrencies have significant inherent risks, primarily high volatility and lack of clear regulations. Investors willing to participate in the crypto industry should ensure they do so only with funds they can afford to lose.

Final Thoughts

Staking is one of the most popular ways to earn money from the crypto industry. It involves contributing tokens to a pool to be used for transaction verification. XTZ is a popular choice for stakers due to its longevity and lack of lock-up periods.

There are various ways to stake tokens, and each method will affect how much profit an individual makes and the ease of the staking process. The easiest method is using a centralized crypto exchange like Coinbase or Kraken. Other popular methods include using a stake pool or running a validator node directly. While staking is generally profitable, it comes with significant risks like market volatility, network hacks, and slashing penalties.

	Name	Score	Visit	Disclaimer
	1Coinbase	8.4	Visitcoinbase.com
	2Kraken	7.6	Visitkraken.com
	3Uphold	8.4	Visituphold.com

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