Staking vs Crypto Loans: Which is Best for You

 

Staking is one of the most popular methods of earning money from crypto, alongside day-trading and holding. People who own large enough quantities of certain coins can use their money to help the blockchain run, whilst also making money from transaction fees. Staking has been around since 2013 with the creation of Peercoin, the first coin running on a Proof-of-Stake (PoS) consensus algorithm. Nowadays, the crypto market is filled with PoS coins, with even Ethereum soon to make the change from Proof-of-Work (PoW) to PoS.

 

Many people who are having cash-flow issues, or need extra money, consider both staking and crypto loans. Here are the main differences to keep in mind.

 

Staking is a Long Process

 

Staking is a well-known means of making money via crypto, but it takes a long time to work. Depending on the coin you are staking, you may need to have your funds locked up for months before you can access them again. And if you are trying to make a suitable profit, then you may need to stake them for years (depending on how much you own). It is, for the most part, a long-term investment. If you are planning for the future and you know you will not need your money for the next few years, then staking might be the best option as it is a slow experience. It is, however, still better than leaving your money to gain interest in a bank, as fiat banking offers atrociously low rates. If, however, you need your money faster, a crypto loan would be the better option, as money can be issued within the same day.

 

Staking Can Only Happen With PoS Coins

 

It should go without saying that staking is only available with coins that use a Proof-of-Stake consensus algorithm. This means that popular coins like Bitcoin, Litecoin, and Monero cannot be used for staking. It also means that currently, Ethereum cannot be used for staking either, although that is soon to change as it will become PoS at some point within this year. When getting a crypto-backed loan, you have more options, as practically any cryptocurrency can be used as collateral. This makes it much less restrictive than staking.

 

Staking Requires Your Money to be “Locked Up”

 

To stake your crypto, you have to essentially “lock” your funds away for a set period of time, with these funds being used to validate your blockchain activity and maintenance. You still own your money during this period, but you cannot access, move, or withdraw it. This means that, for any money you want to stake, you need to be confident that you will not need that money in the immediate future, because there is no way to release the funds before the set period ends. This is somewhat similar to how crypto loans work, where you will still own your collateralized crypto, although you won’t be able to access or spend it. However, there is a big difference: with a loan, you can pay it back early and get your coins and tokens back faster– this is impossible when staking.

 

The bottom line with staking is that it is a long-term investment. It is a fantastic means of earning interest on your money so long as you know you will not need it any time soon. But, for those who need money quickly, a crypto-backed loan is probably the better option. Nevertheless, staking is a tried and trusted method of earning money in the crypto industry, and so is certainly worth consideration for those who have the money and the time.