Cryptocurrency Staking [2025]: Locations for Staking ADA, XTZ, DOT, ALGO, and ETH

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This article will focus on the Proof of Stake (PoS) consensus mechanism and how blockchain investors can profit from cryptocurrency staking. In the coming sections, we will define and highlight the various staking models, some coins utilizing staking together with their returns on investment (ROI), and some leading staking-as-a-service providers.

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When Bitcoin (BTC) launched back in 2009…

When Bitcoin (BTC) launched back in 2009, it introduced the distributed ledger concept known as the blockchain. The distributed ledger was the missing ingredient that would make digital currencies a reality.

The idea behind the distributed ledger is to have copies of the blockchain held by multiple computers (called nodes) in different locations. It’s a system in which a simple majority of the nodes get to vote on what goes into the ledger. Whenever there is a conflict between copies of the ledger, the version held by the majority of the nodes becomes the ‘true’ version.

In essence, the nodes have to get into an agreement or a consensus of the true version of the ledger.

The process through which the consensus is reached varies between various projects and networks. For instance, Bitcoin (BTC) and Ethereum (ETH) use Proof-of-Work (PoW) consensus, while EOS and Cardano (ADA) use the Proof of Stake (PoS). In this definitive guide on cryptocurrency staking, we’ll focus on the latter consensus.

Cryptocurrency Staking

Cryptocurrency staking is the process of locking up a portion of your assets to qualify to earn passive income in the form of staking rewards (interest), participate in the governance, and verify the transactions within a certain decentralized network.

In some ways, this is similar to how a traditional company works. Shareholders have stakes within a company, which gives them the right to vote in the management and directorship of a company. Staking rewards can vary from 5% to 30% APR depending on which coin is being staked.

Cryptocurrency staking is a way to incentivize good behavior within the blockchain network. If a staker acts in a way that is contrary to community policies, they risk losing their staked assets.

Staking can be done through various methods – individually, within a pool, or using a delegate. The staking policies of each network determine the efficacy of any of these staking methods. As we will discuss later in this article, there are various models of staking, and some are similar to the three methods outlined here, while others allow for the use of more than one or all the staking methods.

Proof-of-Stake vs. Proof-of-Work

In the introductory section above, we mentioned that Bitcoin uses a Proof of Work (PoW) consensus mechanism. Ethereum, the second-largest blockchain network after Bitcoin in terms of market capitalization, currently uses PoW. However, Ethereum’s core developers are currently working on a core upgrade that will see Ethereum migrate from PoW to Proof of Stake (PoS).

And it’s not just Ethereum. Several other projects being launched today are also shunning PoW for PoS, which begs the question – is PoS better than PoW. How do the two consensus mechanisms compare?

Security

In terms of security, the PoW networks have proven to be a mixed bag. On the one hand, major networks such as Bitcoin, Litecoin, and Ethereum are extremely secure. This is because they have amassed a substantial hash rate that it is not economically viable for a malicious party to attack these networks. The hash rate is a measure of the amount of computing power miners within the network are contributing to keeping the network secure.

Unfortunately, smaller networks using PoW are prone to the infamous 51% attacks. Ethereum Classic is one such network that was attacked thrice in August 2020. In these attacks, a malicious party accumulates at least 51% of the network’s hash rate, which means that they can control the generation of blocks.

PoS networks don’t have to worry about 51% attacks. This does not mean that they can’t happen. It only means that just like well-established PoW networks, PoS networks are almost immune to these attacks. Given that all nodes within the PoS network have to stake a minimum amount of native coins or tokens, it will be foolish to try to jeopardize the value of your investment.

Scalability

Scalability is the ability of a network to increase its capacity to handle more transactions per second. This is a particular fault for the PoW networks such as Bitcoin and Ethereum. These networks can only process five and fifteen transactions per second, respectively.

PoS, on the other hand, is much more scalable. For instance, if Ethereum finally upgrades to version 2.0, it will process as many as 10,000 transactions per second (TPS). EOS, another popular PoS network, can process close to 4,000 TPS. These figures are several-fold higher compared to their PoW counterparts.

Environmental Impact

There is an ongoing debate about the environmental impact of mining PoW coins such as Bitcoin. According to the latest figures shared through the University of Cambridge’s bitcoin electricity consumption index website, Bitcoin miners are estimated to consume 27 terawatt-hours (TWh) a year.

And this is only the average estimate. The upper band of that estimate is 488 TWh. Arguably, a bulk of the energy used to mine PoW coins ends up wasted because only one of the miners is rewarded for their efforts.

Another debate related to energy consumption is that the bulk of the electricity used for mining is sourced from non-renewable resources. We are talking coal, natural gas, and nuclear energy. Environmentalists argue that the use of these limited resources leads to their depletion and contributes to global warming.

Scalability, security, and environmental impact

are not the only differences between PoW and PoS blockchain networks. However, these are arguably the main selling points for staking coins. PoW also has its pros, but we will focus on PoS in this guide.

Now that you understand a little about why staking matters beyond just profitability…

Now that you understand a little about why staking matters beyond just profitability, let’s briefly discuss the various models of PoS networks. These models dictate how stakeholders participate within the network, and sometimes, it affects profitability.

1. Pure Proof of Stake (PoS)

A plain or pure PoS network allows stakeholders to directly verify transactions and partake in the network’s governance without delegating responsibilities. In this model, the number of coins a stakeholder has goes towards determining their likelihood of being selected to create the next block. Coins utilizing a pure PoS consensus mechanism include Algorand (ALGO) and Ethereum 2.0.

2. Delegated Proof of Stake (dPoS)

This is a cryptocurrency staking model in which the network stakeholders vote for a delegation of stakeholders responsible for transaction verification, block generation, and network governance. This model is utilized in several PoS networks, including EOS, Tron (TRX), and Icon (ICX).

3. Masternodes

As the name alludes, Masternode is a blockchain server with more functionality compared to the normal nodes that only hold the full copy of the network ledger. It can be designed to offer additional functionality such as anonymizing transactions for privacy-oriented coins, partaking in governance tasks, and verifying transactions. The stakeholders maintain Masternodes. PoS coins utilizing masternodes include Dash, PIVX, SysCoin (SYS), and Energi (NRG).

4. Federated Byzantine Agreement

In this staking model, pioneered by Ripple then later adopted by Stellar, there is no reward to create and run a node. At least not from the network itself. In the Stellar implementation, node creators and maintainers are actual firms and individuals that require a cross-border payment solution. The incentive is to have a functional network through which to process your transactions. Once a party has created a node and invested in the infrastructure to run the node, they effectively have a stake in the network.

5. Dual token model

Most notably used by NEO network– the “Chinese Ethereum” network. NEO was nicknamed after Ethereum due to similarity in functionality. However, while Ethereum currently uses the PoW consensus mechanism, NEO uses the delegated Byzantine Fault Tolerance (dBFT) model to achieve consensus.

NEO uses a staking model to incentivize governance participation. Two tokens are used within the NEO network. NEO, which is the native token for value transfer and GAS for payment of transaction fees. NEO stakeholders are also responsible for voting for their governance council – a 21 member council.

For every successful block created on the NEO blockchain, 5 GAS tokens are rewarded and split amongst the council members, NEO token holders, and the network voters.

Staking Requirements

Staking requirements vary from network to network as various networks demand different levels of participation from their stakeholders. However, the two most common requirements to start staking in most networks are capital and technical know-how.

Capital

Most PoS networks demand a minimum investment from their stakeholders who wish to verify transactions, in governance, or both. This is a normal requirement, but not all coins have this as mandatory. Some networks such as Cardano have no minimum entry balance to qualify as a validator.

A majority, however, make it mandatory to hold a minimum balance of the native token. For instance, Ethereum requires stakers to hold at least 32 ETH coins to become validators.

Some networks require massive investments to join validator ranks. Dash, for instance, requires a minimum of 1,000 DASH coins to run a masternode. At current market rates, this represents a $330,000 investment.

Technical Considerations

The technical bit of staking might be a tall order for most beginners. Perhaps that is why staking-as-a-service (SaaS) providers are becoming more popular. We will be highlighting some of the most popular SaaS providers later in this article. These services help offload the stakeholder’s burden of having to deal with the technical requirements.

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