Crypto staking platforms are an integral part of the decentralized finance (DeFi) space that have simplified digital asset staking, making it accessible to retail investors.

As the DeFi industry continues to rise, new and lucrative opportunities to earn passive income from crypto holdings have emerged, which often surpass returns from traditional financial systems. Among these, crypto staking stands out for its broader accessibility, inclusivity, and attractive reward structure.

Today, as crypto staking has become increasingly mainstream, it is important to choose the right staking platform that democratizes investments and offers innovative solutions.

In our blog, we will explore the different types of crypto staking platforms and how they work.

Understanding Crypto Staking

Crypto staking is one of the easiest ways to earn crypto simply by locking or holding your crypto assets in a DeFi staking platform. It is a core mechanism of Proof-of-Stake (PoS) blockchain networks like Ethereum or Solana that allows participants to earn staking rewards in the form of additional tokens by committing their assets to enhance network security and for validating transactions.

Key components of crypto staking:

• Rewards are directly related to the amount staked. The more the stake, the greater the rewards.
• Staking rewards are proportional to the lock-up time.
• There is a minimum stake amount to qualify as a validator and participate in staking. Ethereum requires a minimum stake amount of 32 ETH to become a validator.
• PoS networks impose “slashing,” a penalty mechanism to ensure node operators or validators follow the network rules, avoid misconduct, and complete the designated tasks correctly.
• Rewards accumulate and are deposited in the supported digital wallets. They can be withdrawn after unstaking, but there is a waiting period. It depends on the staking platform or protocol.

How does it work?

There are mainly three parties in crypto staking:

• Validators: They are also called node operators as they run full nodes to verify new transactions and add new blocks to the blockchain. It requires technical expertise and hardware setup.
• Delegators: They delegate the “staking power” to a trusted validator who performs the staking process or validates transactions on behalf of delegators.
• Staking platforms: These are online service providers or platforms that offer the infrastructure, external validators, and tech support for seamless staking.

What are Crypto Staking Platforms?

 A crypto staking platform is an online interface or an intermediary that supports PoS blockchain networks and streamlines the staking process. Users who do not have the time to stake directly or lack the hardware or technical acumen can use the services of a staking platform to stake on their behalf.

How does a crypto staking platform work?

• Token deposit: Deposit crypto into the platform. You can also purchase the relevant crypto through the platform before depositing. The token deposited is supported by the staking platform and the PoS consensus mechanism.
• Connect wallet: You must connect a supported digital wallet like MetaMask, Trust Wallet, or Tezos with the platform to start the staking process and receive staking rewards.
• Lock-up period: Select the staking or lock-up period for which you want to stake your assets. A long lock-up period offers greater rewards. Once the assets are locked in, they are inaccessible during the staking period.
• Staking process: The platform aggregates funds of multiple participants into a staking pool. Validators are assigned to complete the staking process.
• Reward distribution: Rewards depend on the staked amount, staking period, and platform fees. These rewards are generally distributed at specific intervals. Some of these platforms also offer a “staking rewards calculator.”  The platform deducts a service fee from the total staking rewards as commission.

Types of Crypto Staking Platforms 

Crypto staking platforms can be broadly classified into:

Staking-as-a-Service provider (StaaS)

StaaS is a platform or institution that acts as an intermediary and provides tech support, hardware, and infrastructure to participate in crypto staking. These service providers distribute the rewards after deducting a commission for the staking services. Examples: Figment and Everstake.

StaaS platforms are of two types:

• Custodial Staking-as-a-Service: You give control of your funds and private keys to the custodial service provider. The staked amount is transferred to the custodian wallet. It is a good option for beginners who do not have the technical acumen or institutions that do not want to actively participate in staking or need a professional storage for their funds.
• Non-custodial Staking-as-a-Service: They provide the infrastructure and tech support, and allow participants to control their wallet and private keys. Users can directly stake without involving intermediaries.

Centralized platforms (Custodial)

These are centralized exchanges (CEXs) or dedicated centralized staking platforms that directly control the funds, private keys, and wallets, and manage the staking process on behalf of the user. They handle the technical aspects and provide a user-friendly interface that simplifies the staking process. They often offer higher returns compared to other staking platforms. It is helpful for beginners who do not have the expertise or knowledge to stake directly. Binance and Coinbase are some of the leading centralized staking platforms in India.

Decentralized Platforms (Non-custodial)

These are completely decentralized (DeFi) platforms that eliminate intermediaries. They are non-custodial, which means you have complete control of your funds and keys. It is a good choice for investors who prefer decentralization and want to control their funds and wallet keys. Examples: Ethereum, Aave, Polkadot, etc.

Liquid Staking Platforms

These are third-party interfaces or platforms that allow users to stake Proof-of-stake-supported coins like ETH (Ethereum) or SOL (Solana) without locking their funds completely. They generate Liquid Staking Tokens (LSTs) that can be traded, transferred, or used in other DeFi applications without disturbing the underlying staked amount. They provide flexibility and greater rewards. Examples: Lido, Stader Labs, and Rocket Pool.

Staking Wallets

Some crypto wallets that support PoS networks offer staking services. It is hassle-free staking as you can stake directly through the wallet interface, and they are non-custodial, which means you control the coins and keys. These wallets offer a mobile app, browser, and desktop extensions, and a staking rewards calculator. Examples: Trust Wallet, Ledger, and Exodus.

Crypto Staking Platform Must-Haves 

Choosing the right staking platform may seem a bit overwhelming. Here are 5 must-haves for a reliable staking platform:

• User-friendly interface: The interface should be simple and easy to navigate with built-in features that provide quick insights into staking rewards, balances, and other details.
• Easy wallet integration: The platform must allow easy and seamless integration with the supported wallet. It must offer robust security features to secure users’ funds and private keys and prevent hacks and other malicious activities.
• Multi-chain support: Seamless integration with multiple crypto assets and blockchain networks to enhance rewards.
• Real-time monitoring: Users must have 24/7 access to data in real-time. Staking platforms must offer regular updates on staked assets, reward distribution, slashing risks, and other insights. Supported mobile apps can simplify access to data.
• Competitive rewards: Users expect consistent and competitive rewards. The platform must disclose the status of reward accumulation and distribution. Some platforms also provide a staking reward calculator, which amplifies the user experience.
• Security and support: Before staking, investigate and verify the platform’s security features and the project team of developers, technicians, and client service. A dedicated team and comprehensive security measures are crucial for a successful staking experience.
• Unstaking options: If you prefer flexible staking options without a rigid lock-in period, consider a platform that offers an easy and flexible unbonding process. Review the unstaking terms before committing your assets.

Benefits and Limitations of Crypto Staking Platforms

Benefits

• Passive income: Staking platforms offer secure options to earn steady long-term rewards from idle crypto holdings. They provide end-to-end services and are an easy way to generate passive income for retail investors in India who have limited exposure to crypto investments.
• Easy interface: These platforms offer an intuitive, user-friendly interface for beginners and pro investors alike. The built-in features provide real-time and transparent monitoring and regular updates. Users can delegate the staking task to an external service provider without worrying about the staking mechanics and hardware.
• Maximize returns: Users can diversify their crypto investments into multiple protocols and provide re-staking services that amplify returns.
• Liquidity provisions: Liquid staking fosters liquidity by providing liquid staking tokens or LSTs. These tokens can be used in multiple crypto functions like transfer, trading, buy, sell, or other DeFi applications, while the underlying asset remains locked.
• Low entry barrier: The initial deposit needed in crypto staking platforms is low compared to traditional banking investments, democratizing investments across diverse income groups.

Limitations

• Custodial risks: Custodial or centralized staking platforms hold complete control of user funds and private keys. Users lose access to their funds. These platforms are susceptible to hacking and smart contract risks.
• Validator risks: Staking platforms appoint external validators. If validators perform poorly, misbehave, or engage in fraudulent activities, the network may impose “slashing,” a penalty by cutting a portion or the entire staked amount, resulting in losses.
• Reduced rewards: Users must pay a platform fee as commission for the services rendered. It invariably reduces the rewards compared to direct or solo-staking, where the user does not have to share the rewards with any third party.
• Market volatility: Returns are influenced by the market price of the staked token. If the market price drops, then the returns also decrease.
• Unstaking process: Some blockchains may have a definite lock-up period. The unstaking process may also take time, and there is a waiting period before the final withdrawal. This may limit the liquidity of the asset.  

Final Thoughts 

Crypto staking platforms offer convenient, reliable, and versatile investment options for everyday investors. They offer flexibility and transparency that allow users to monitor their crypto wealth and staking performance in real time. While these platforms offer lucrative and diverse options for passive income earnings, it is also crucial to verify their reputation, reward structures, and underlying technology, and be well-informed before committing funds.