The cryptocurrency world offers many ways to earn profit through investments. XRP staking is one of the most lucrative ways to earn money.
Crypto investors are always looking for new ways to earn huge profits from their investments. Crypto staking is one such method in which investors can increase their profit margins from their cryptocurrency. Different crypto coins can be used for staking in the crypto world. XRP is one of them.
This article will explore XRP Staking, its potential benefits, and the huge profits one can obtain from XRP tokens.
What is Staking?
Blockchain Networks require upkeep to update the cryptocurrency data on their elaborate servers. This is a tedious exercise that requires resources and following operation protocols.
Staking is providing your crypto tokens to the blockchain network to support their operations. The crypto tokens provided are locked for a fixed period of the blockchain operations. By this, investors earn rewards from the blockchain network for locking the cryptocurrency tokens.
Different cryptocurrencies use different staking mechanisms. Proof-of-Stake (PoS) consensus mechanism is the primary staking system used by blockchain networks.
XRP uses an alternative staking mechanism in its blockchain network operations.
What is XRP Staking?
XRP Staking uses the Federated Byzantine Agreement (FBA) consensus staking mechanism in its staking operations.
This blockchain network is different from PoS blockchains. In PoS blockchain investors when staking crypto coins are validators. They lock up crypto coins to verify transactions and earn rewards accordingly.
XRP provides a different approach to investors to earn money through staking. These can be summarized as:
Custodial Staking: As the name suggests. a custodian or a qualified entity does the staking of XRP for the investor. The custodian is generally a centralized exchange or staking platform.
The exchange piles the XRP on the investor’s behalf, generally on PoS blockchain networks such as Ethereum, Cordana and then after the investor receives a share of the rewards generated from staking.
DeFi Staking: A permissionless financial ecosystem built on blockchain technology that allows investors to do XRP staking without 3rd person involvement. DeFi has numerous protocols allowing investors to deposit their XRP into liquidity pools.
These liquidity pools are used for decentralized trading. Investors earn rewards for providing liquidity. These rewards are protocol tokens or interest on XRP Staked in DEFi.
XRP Staking: Risks
XRP staking through the above two methods comes with its own set of challenges. The challenges are:
Security Risks: Crypto exchanges along with DeFi are susceptible for hacks or any other cyber crimes. Investors should use best security practices such as strong passwords with two-factor authentication. They should also choose a crypto exchange with a strong track record before XRP Staking.
Locking Periods: XRP Staking occurs only after one’s XRP tokens are locked for a fixed period. Once locked, one can’t access and trade their XRP holdings. Investors should be prepared for this period.
XRP Staking: Benefits
XRP offers lucrative rewards for helping the XRP community for XRP coin stakers. These include:
Passive Income: Using one’s XRP tokens through Custodial Staking or DeFi Staking so that they can earn interest on their staked XRP coins. A smart way to earn money without selling any XRP tokens.
Enhanced XRP network stability & Security: Leveraging XRP tokens on any PoS, Custodial, or DeFi Staking is an indirect contribution to strengthening the selected cryptocurrency Blockchain operations network.
Voting & Governance Rights: Investors can receive voting rights on protocol upgrades or other governance decisions on the staking platform.
How to do XRP Staking?
Staking can be done either through custodial staking or DeFi Staking. We will learn both ways to do XRP staking.
- Let’s first learn about XRP Staking through a custodial platform
- Any staking platform offers good security, staking options, fees, and reward structures. Do your own research before selecting a custodial platform.
- Check for XRP listings on the selected/choosen platform
- Binance, Kraken, Crypto.com are some good examples of custodial platforms.
To start XRP Staking:
- Login to your selected custodial platform account. (For instance one can use Binance)
- Look for crypto coins that support staking (We will Stake XRP so skip XRP in your search)
- Read the staking contract mentioning the locking period, and the interest rates to be earned
- Transfer the decided XRP tokens from your crypto wallet to the staking account
- You will receive your rewards as per the chosen contract
This process is different for each custodian platform. It’s better to one’s own research before staking one’s XRP tokens.
- Now, let’s learn about XRP Staking through the DeFi Staking
XRP can’t be directly staked on DeFi protocols. Few platforms, however, offer rewards for providing liquidity to XRP trading pairs (crypto coins).
- Research selected DeFi platform’s security, XRP supporting pools, and staking fees
- A few such platforms Uniswap, Sushiswap, and curve
- Connect your crypto wallet (self-custody) to the DeFi platform
- A few self-custody wallets are MetaMask or WalletConnect
- Transfer XRP and the corresponding token to your DeFi wallet
- For instance transfer XRP and USDT,or ETH to your DeFi wallet
- Find and select the liquidity pool for your transferred pair, like XRP/USDT, or XRP/ETH
- Select “Add Liquidity” and set a number for XRP and its token pair on the platform for staking
This process differs for different DeFi platforms, one should carefully do their research before staking XRP tokens on DeFi platforms.
XRP staking is a great way to earn profits without loosing one’s XRP tokens as a passive income, however, a in-depth knowledge is must to stake XRP tokens to earn money. The information shared here will assist XRP staking enthusiasts in the right direction. Crypto market is volatile by nature, it will be better if one does their own research or seeks financial advise before XRP staking for the first time.
Also Read: Robinhood Crypto Exchange Introduces Solana Staking
