How to Benefit from Staking Crypto
The difference is simply that APR is the gains that you can expect before compounding interest of your staked crypto. While APY is the percentage that already accounted for compounding. Meaning that if you had 1000 on your balance compounded monthly, 10% APY at the end of the year would net you 1100. While 10% APR on the same 1000 after one year would become 1105. That way the factual APY was 10.47% noticeably higher that the APR. On the same principal amount, the amount earned on an equal percentage APR would be greater than on APY.
Staking crypto variations
Most crypto exchanges offer locked or flexible savings schemes. Locked staking is expected to give higher APY but involves transferring the crypto into a separate pool for a specific period of time. Those funds will be inaccessible until that period expires, or if withdrawn will incur a penalty resulting in the loss of the expected interest gain. Flexible savings isn’t limited by a specific time frame to get a return, but the rewards might be slightly less attractive.
Keeping the crypto
An important aspect is on-chain or off-chain staking. As the name suggests, on-chain requires keeping the assets on respective blockchain networks. This involves downloading the entire ledger and connecting a node through a wallet. This process does require an extensive understanding of cryptocurrency and isn’t well suited for beginners. Off-chain is best done on regulated exchanges that offer rewards for keeping funds on their platform. It is a much simpler and faster way to begin earning but technically doesn’t provide physical ownership of the coins held there. Whichever method of staking crypto you chose, it is best to value the trust and reliability of the project than the interest percentage offered.
Any movement of assets involves risk and often transaction fees. For most people, it is easier and safer to keep their assets on a centralized exchange. A steady compounding gain doesn’t beat some strategies that involve more risk but give sky-high APYs. However, it does provide more security while much faster and simpler to set up. Almost always, the priority is keeping your funds safe and secure and not staking crypto in unreasearched and untrusted coins.
Finding the best solutions
It is good practice to compare the return rates on different platforms while keeping in mind their terms for withdrawals and staking. Don’t forget that if it seems too good to be true, it is a likely scam. Always keep your funds on regulated exchanges and put safety and trust before higher returns. Check the terms of the offer you chose before committing to staking crypto, mostly if it will be locked for more than a month.