Crypto has gained notoriety as a scheme to get rich rapidly. Even in the volatile market of crypto, there are different ways to invest your resources depending on your risk appetite (or reward gluttony).
For the conventional investors, there is the time-proven formula of purchasing tokens at a reasonably low price, and waiting for the opportunity to sell them off at a high premium. This opportunity might arise after just a couple of days if you turn lucky; it might also end up being an excruciating wait over months.
Some people also try their hand at day trading. They typically look for small profit margins (even as low as 5%) and increase their holding my repeating this a number of times. Successful day traders have a good knowledge of technical analysis, and oodles of grit.
For the more adventurous, there’s margin trading. Some exchanges (like BitMex and Poloniex) allow you to borrow tokens against your current holding. For example, you can trade with 10 bitcoins, even though you actually own just one. So a 10% profit actually ends up doubling your possessions. However, the risk associated with margin trading is extremely high. If you end up making a loss of just 10%, the exchange will seize all your assets.
All these methods have different risk-reward ratios, and none of them guarantee fixed returns (or any returns, for that matter). For investors looking for a safe way, there’s ‘Staking’. In this article, we see what staking means, understand how staking can be used as a means of crypto investment, and take a look at 5 of the hottest cryptos of 2018 that follow PoS consensus that you can stake and earn dividends.
The Consensus Algorithm
As you all know, the blockchain is a decentralized data structure which stores details of all transactions made between users. It is literally a chain of blocks, with each block containing a list of transactions. In order to make the blocks tamper-proof, once a new block is added to this chain, it has to be ‘sealed’. This seal is a unique code word, generated by solving a cryptographic puzzle. Anyone can figure out whether a block is genuine or not by means of this code word. The algorithm used to decide which blocks are genuine and can be added to the chain is called ‘Consensus Algorithm’.
Proof of Work
The 2 most popular cryptos, Bitcoin and Ether, have a Consensus Algorithm called PoW (Proof of Work). Here, computer processors in the system (called nodes) solve exceptionally tough cryptographic mathematical puzzles by guessing the solution. Yes, you heard that right - there’s no other way apart from guessing. The solution involves a lot of attempts, and eats away a lot of computing resources. In simple terms, the person running the computer (called a ‘miner’) has to pay a hefty electricity bill at the end of the month. So why does he go through all this trouble? If he happens to be the first person to guess the solution of the puzzle (and seal or ‘mine’ the block), then he gets rewarded by coins that the network generates as reward for him.
Proof of Stake
PoW was the first Consensus Algorithm, but it has been falling out of favour in the crypto community, particularly because of the high costs associated with mining. It is being replaced by what is called PoS, or Proof of Stake. Even Ether is trying to shift to PoS now. Here the users stake or lock up their coins in a wallet for a certain amount of time, and become what is known as ‘validators’ (or ‘voters’). The validators vote to decide whether a block is authentic or not. If a validator tries to insert a fraudulent block in the network (by voting for it), he risks losing all his staked tokens.
PoW vs PoS
Just like PoW, the validators get rewarded by new tokens. PoS also involves solving some sort of cryptographic puzzle, but these are much easier than their PoW counterparts and so less electricity is consumed. You don’t have to buy expensive mining equipment either; you just need to own a wallet. Moreover, while PoW depends a lot on luck, PoS ensures a fixed return. Obviously, the longer you stake your coins, the more dividend you earn. This is no different than locking money up in a bank account and earning 6% return per annum.
Coins that you can stalk and earn passive income in 2018
Neo is possibly the most popular example of PoS coins, and has been generating Gas tokens for owners simply for owning Neo. You don’t even need to be connected to the internet for your Neo to earn you dividend. With PoS rising up on the popularity scale, a lot of tokens have been adopting this Consensus Algorithm.
Neon wallet interface - just click on the green button to claim Gas
Let’s take a look at 5 of the hottest tokens which have hit (or are going to hit) exchanges in 2018, and which allow you to stake tokens and earn dividends.
Republic Protocol (REN)
Republic Protocol is a decentralized ‘dark pool’ for trustless cross-chain trading between Eth, ERC20 tokens and BTC pairs. Dark pool implies that traders can trade with any volume without any details being revealed. They held their ICO in Feb, 2018, where they raised around $34m. One needs to own at least 100,000 REN tokens to run a dark node. These nodes would be used to match orders in the order book, and shall be paid in terms of the trading fees of the orders that they end up matching. Apart from the tokens, a stable internet connection is also required for running a dark node.
REN tokens are currently trading at around $0.08, at 2x from ICO price in terms of Eth. Owning 100,000 tokens might be tall ask for an individual, but you can always take the initiative to arrange a pool, or join one. The mainnet is scheduled to be launched in Q3, 2018, which should see a spurt in price. So get yourself some REN while it’s still comparatively cheap. Even if you don’t want to run a dark node, you can sell them off to others planning to do the same.
Apex is implementing a system which would reward the consumer for sharing data with whoever seeks it. Backed by Shanghai-based AI and data technology company Chinapex, they had in ICO in Jan, 2018, where they raised $25m. Initially Apex had planned to build a dApp on the NEO blockchain, but recently they announced that they would be building their own blockchain, where Apex would be the native token. This will give them more flexibility to implement features more suited for B2C (business-to-consumer) interactions. Apex tokens are trading at around $0.25 now, a cool 4x from ICO in terms of Neo.
Apex also updated their whitepaper and announced how much dividend voters can earn. Voters will be split into 3 tiers – T1, T2 and T3 – with a profit sharing ratio of 50%-32%-18%. For tiers T1 and T2, you should own at least 200,000 and 70,000 CPX tokens respectively. For Tier 3, there is no minimum requirement. Invest whatever amount you can spare and keep on earning dividend. Chinapex is a leading player in the field of marketing and customization, with more than 300 enterprise partners, including Microsoft Azure, Amazon Web Services and Oracle Marketing Cloud. This is one brand which is expected to make it really big in Q4 of 2018, something worth considering if you’re planning to enter the staking business.
Apex is currently trading at Switcheo
OriginTrail is decentralized protocol for sharing supply chain data, backed by the security of blockchain technology. They are comparatively a late entrant to the field, with projects lie Walton Chain, VeChain and WaBi already existing in the market. Even with the presence of such heavyweight competitors, they have done exceedingly well. They had their ICO in Jan, 2018, and raised $21.5m. Trac tokens are currently priced at $0.2, at 3.6x in Eth pricing from ICO.
OriginTrail has mentioned in a Medium post that staking would be implemented in the near future. They haven’t worked out the details yet, and that the staking metrics would be decided only after detailed analysis and tests over the next few months. Their testnet is scheduled to be launched in June, 2018. Given the dream run that other supply chain tokens have had, this is one coin you should keep on your radar. Implementation of staking should only lead to increase of the coin value.
Eximchain is another project trying to solve the problems associated with supply chain logistics. They are implementing a blockchain that would allow enterprises to transact and share information securely. Eximchain did not have a public sale. They had raised $20m in presale, and decided to airdrop 1.5 million tokens (worth $500k) to whitelisted participants. Each person received 558 EXC tokens, equivalent to $186 as per ICO price. These tokens haven’t been unlocked yet.
After the airdrop, Eximchain announced that it would require only 1000 tokens to operate a node on their blockchain. If you had managed to get 2 accounts whitelisted, you are already in a position to run a node. If not, then you can either beg your friend to transfer his tokens over once they are unlocked, or wait for the tokens to hit the exchange. Having received funding from Chinese blockchain investment group INBlockchain and digtal asset management firm FBG Capital, this project might see an exponential growth. Needless to say, keep an eye out for EXC when it hits exchanges.
To round up the list, we present to you probably the most awaited arrival of the first quarter of 2018 – Wanchain. Wanchain is trying to implement a distributed infrastructure that will connect different blockchains together. Any digital asset from any blockchain can be converted into a proxy asset on Wanchain’s blockchain. As described in their whitepaper, they are trying to create a distributed “bank” which will provide traditional banking services based on digital assets. The ICO was held in Oct, 2017, but the listing happened only in Mar, 2018. So technically, Wanchain is still eligible to make it to this list. It’s currently trading at $8, a mind-numbing 11x in Eth price from ICO.
The Wanchain PoS algorithm mentions 3 different types of nodes – Validator, Voucher and Storeman. Now they haven’t released any detailed information regarding the staking of Wan tokens, or the rewards associated with them. More details are expected to emerge by June, 2018, when the next milestone in their roadmap (referred to as Wan 2.0) will be achieved. Be rest assured, whatever be their plan, this is one ambitious project that is expected to last the distance.
Please note: We will come up with a detailed analysis on WAN very shortly.
Wanchain showing no intent of slowing down
Does this post motivate you to give staking crypto coins a try? Which coins would you like to add to this list, and why? Do share your thoughts with us.
Disclaimer: The author owns REN and Apex from ICO, picked up some Wan from Binance and Trac from KuCoin, and pocketed a bit of Eximchain from their airdrop. The author is himself in need of investment advice, so blindly following his words can only lead to agony.