Will Crypto Staking Replace Traditional Savings Accounts?
Staking has emerged as one of the most popular ways to earn investment income in the crypto markets but does it have the potential to replace traditional savings accounts?
When Proof-of-Stake (PoS) networks first emerged, only the most tech-savvy crypto holders were able to jump onto the opportunity to earn newly minted tokens in exchange for locking crypto holdings as a stake to help secure a PoS network.
Today, the picture is very different. Now, anyone can start staking cryptocurrency simply by buying it and holding it in a wallet that supports staking.
As the barriers to entry to staking are broken down, it begs the question: does this new earning opportunity have the potential to replace traditional interest-bearing accounts?
What is Crypto Staking?
Crypto staking was made popular by the first wave of Proof-of-Stake (PoS) coins.
PoS blockchain networks require users to lock up a share of their tokens as “a stake” to secure the network. As an incentive to stake tokens, participants were rewarded with newly minted tokens. As a result, PoS coin holders were effectively able to earn interest on their holdings in the form of more crypto.
However, the technical requirements and know-how to efficiently stake crypto were reserved for tech-savvy crypto experts in the early days of the crypto staking economy. Continuously running GUI wallets on desktop computers 24 hours a day and following detailed technical instructions was simply too much for the average crypto investor.
Fortunately, the crypto staking economy looks very different today.
Now, you can stake on exchanges, using staking-as-a-service providers, or directly in staking-enabled wallets, making staking as easy as buying crypto.
And staking is no longer limited to smaller cryptocurrencies. Ethereum, the second-largest blockchain network, is moving from Proof-of-Work to Proof-of-Stake as part of its network-wide upgrade to Ethereum 2.0. With the launch of Beacon Chain, ETH holders can now stake tokens (a minimum of 32 ETH) to earn rewards for securing the network.
Learn how to stake ETH from within your Trust Wallet, here
What’s more, staking has moved beyond playing a role in the consensus mechanism for crypto networks to become a new way to earn yield in autonomous financial protocols in the DeFi market.
For example, DeFi apps such as PancakeSwap and BEPSwap, enable crypto holders to deposit their digital assets as a stake in a trading pool to earn trading fees and newly minted tokens as rewards for providing liquidity to a marketplace.
While this new form of crypto staking is risky and only meant for investors who understand the risks involved in DeFi investments, they may be precursors for more secure autonomous staking-based investments to come.
For now, the average crypto investor is better off investing in the digital assets they believe have the highest potential and staking them for additional income them using secure applications.
How to Stake Coins in Trust Wallet
Arguably, the easiest way to stake cryptoassets is using Trust Wallet.
The popular mobile app’s ‘Finance’ feature allows users to securely stake a range of cryptoassets, including but not limited to Tezos (XTZ), Tron (TRX), Cosmos (ATOM), and Algorand (ALGO).
The process to start earning staking rewards using Trust Wallet is very simple. It only takes the following steps:
Download Trust Wallet (Android or iOS)
Back up your wallet and securely store your seed phrase
Click on the Finance tab at the top
Choose the cryptocurrency you would like to stake
Either transfer the asset or buy it directly using the in-app purchase function
Once the cryptocurrency has arrived in your wallet, click the More button
Then, click Stake and choose a staking service provider
Finally, you decide how many of your tokens you want to stake and confirm the transaction
And that’s it. It’s that simple!
Your staking rewards will now start streaming into your Trust Wallet.
Staking rewards APRs currently range from 0.74% to 7.37%, but these figures change depending on market conditions.
Will Staking Replace Traditional Savings Accounts?
For now, staking volatile cryptoassets remains an exciting investment opportunity for risk-loving crypto investors. But the future could look very different.
If the crypto-economy continues to go mainstream at its current rate, it is not too far-fetched to envision more and more individuals around the globe choosing to buy a cryptocurrency and staking it using a mobile app than to walk down to a local bank branch to open a savings accounts.
What’s more, interest rates on savings accounts are at a historic low in many parts of the world while inflation is expected to rise, nullifying any interest earned on savings in real terms.
Additionally, there are next to no barriers to entry to buying crypto and staking it. All you need is an internet connection and the ability to buy a small amount of cryptocurrency online. No ID verification, no credit checks, and no AMY/KYC procedures exist that prevent individuals from marginalized, un(der)banked communities from joining the staking economy.
While bitcoin is poised to become part of everyone’s investment portfolio in the near future, crypto staking could replace the traditional savings account eventually — especially in parts of the world with limited access to legacy banking services.