October 7, 2025 • 51 mins
The source provides an overview of cryptocurrency staking as a method for investors to earn passive income by participating in Proof-of-Stake (PoS) blockchain networks. It explains that staking involves locking up tokens to validate transactions and earn rewards, differentiating it from traditional, energy-intensive mining. The central focus is a ranked list of the top ten cryptocurrencies for staking in 2025, prioritizing those with the highest sustainable real reward rates after adjusting for inflation. The episode details the annual percentage yield (APY), specific staking mechanisms, wallet requirements, and potential risks (like slashing and lock-up periods) for major assets, including Cosmos (ATOM), Polkadot (DOT), and Ethereum (ETH). Ultimately, the article advocates for a balanced approach to staking that considers both high yields and network security for sustained returns.
“If you don't find a way to make money while you sleep, you will work until you die.”
Warren Buffett
“If you don't find a way to make money while you sleep, you will work until you die.”
Warren Buffett
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back to the deep dive. We're here to cut
through the noise, look at the sources, and really give
you that informed understanding fast that's legal. Today we are
jumping right into the world of crypto investing, specifically that
sort of holy grail of passive income staking. We're talking
earning rewards without needing massive hardware setups, dealing with heat,
(00:23):
huge electricity bills, none of that old PIW stuff exactly.
Speaker 2 (00:27):
We're focused squarely on getting sustainable returns through proof of
steak POS. It's really central now, isn't it to a
modern crypto portfolio? Definitely, And our mission today, I think
is probably the most critical thing anyone new to this
needs to grasp. We have to systematically separate those big
apy numbers from the real sustainable reward rates.
Speaker 1 (00:49):
Yeah, it's crucial.
Speaker 2 (00:50):
If you see like fifteen percent advertised somewhere, Yeah, your
first thought shouldn't be wow, where do I sign up?
It should be Okay, but what's the inflation rate? That's
the key question.
Speaker 1 (01:00):
Okay, let's unpack that right away then, because everyone wants
passive income, right, but those numbers they often look way
better than the reality.
Speaker 2 (01:09):
They can be engineered.
Speaker 1 (01:10):
Yeah, so our sources today they really dive deep. We're
analyzing the top ten cryptos for staking, looking ahead to
twenty twenty five, and we're prioritizing networks that are you know, established, secure,
battle tested, and most importantly give you a genuine yield,
something that actually outpaces the token dilution.
Speaker 2 (01:28):
Yeah, established security over just chasing hype. That's key because staking,
fundamentally it's a longer term commitment usually makes sense. So
just to set the scene, Yeah, across these top networks,
you're going to see advertised apise ranging from maybe a
conservative three percent all the way up to like a
dynamic eighteen percent.
Speaker 1 (01:47):
Big range, huge range.
Speaker 2 (01:48):
But before we even get into the coins, we absolutely
have to talk risks. Volatility in crypto always there, always extreme.
Of course, then you've got token lockups that can mean
real pain if you need your fund unexpectedly illiquidity.
Speaker 1 (02:02):
Yeah, we'll get into those periods.
Speaker 2 (02:03):
And if you pick the wrong validator or the network
has issues slashing penalties they're very real. They can literally
burn a chunk of your capital instantly.
Speaker 1 (02:13):
Okay, serious stuff, So let's start with the basics. Then
Part one, staking fundamentals, separating that hype from reality good
place to start. So, if you've been around crypto a while,
you know bitcoin mining proof of work pow W. How
does po wes proof of steak really change how security works?
Why is it so much more accessible?
Speaker 2 (02:34):
RIGHTW? Like Bitcoin, it's a competition, isn't it. It's all
about raw computing power, energy consumptions, specialized hardware, the mining
rigs exactly solving these incredibly complex puzzles to validate blocks.
It's basically a race to burn the most energy and
the winner gets the reward. Pos just completely flips that.
So instead of computational power, you're using economic security. Staking
(02:58):
means you lock up or well bond your tokens to
the network.
Speaker 1 (03:01):
You commit your own coins.
Speaker 2 (03:02):
Precisely, you're putting your capital at risk. Think of it
like a security deposit. You do that to get the
right to validate transactions secure the network. If you act
honestly follow the rules, you earn rewards the yield. If
you try to cheat or you mess up badly like
being offline too long, yeah, you lose some or all
of your deposit. That's slashing.
Speaker 1 (03:23):
Ah okay. So that economic incentive, that skin in the
game makes it way more accessible. You don't need a
warehouse full of.
Speaker 2 (03:30):
GPS exact, no massive physical infrastructure needed, much lower barrier
to entry.
Speaker 1 (03:36):
So for someone listening thinking about doing this, walk us
through the practical steps. Let's say three key steps from
having cash to actually earning those staking rewards.
Speaker 2 (03:45):
Okay, yeah, the process is pretty streamlined these days, but
you really need to pay attention to the details, especially security.
Always security, always, So Step one, get the tokens you
want a steak, usually buy them on a reputable, big
centralized exchange. That's the easy part.
Speaker 1 (03:59):
Okay.
Speaker 2 (04:00):
Step two, this is crucial. Get those tokens o off
the exchange. Immediately transfer them to a secure, compatible wallet
that you control.
Speaker 1 (04:07):
Why off the exchange so fast?
Speaker 2 (04:08):
Not your keys, not your crypto. If the exchange gets
hacked or goes bankrupt or freezes withdraws, your funds are
at risk. You need self custody.
Speaker 1 (04:17):
Right, and you mentioned compatible wallets.
Speaker 2 (04:19):
Yeah, it depends on the network. For something like Cosmos Atom,
you'll need a specific wallet like Kepler that supports its
features for Polka dot Polka dot dot JS. But for
maximum security always always aim to use.
Speaker 1 (04:34):
A hardware wallet like a Ledger treasure.
Speaker 2 (04:36):
Exactly Ledger is kind of the gold standard. It keeps
your private keys completely offline, safe from hackers. That's where
you should ultimately hold anything significant in your staate.
Speaker 1 (04:45):
Okay, got it, So acquire tokens, transfer to a secure,
preferbly hardware wallet. What's step three?
Speaker 2 (04:51):
Step three is delegation. Once the tokens are safe in
your wallet, you need to choose who you're gonna stick with.
You select a reputable validator or maybe join a staking pool,
and then you formally delegate or bond your assets to
them through your wallet interface.
Speaker 1 (05:04):
So you mentioned wallets like Kepler or Polka dot dot js.
Why are those specific non custodial wallets often needed, especially
when big exchanges like say coinbase, offer staking directly on
their platform. Isn't the exchange simpler for a beginner?
Speaker 2 (05:22):
Ah? Yeah, that's a really important distinction. When you stak
on coinbase or Binance or crack in, it's custodial staking,
meaning they hold the keys exactly, they hold your private keys,
They handle all the technical bits of delegation behind the scenes.
Super simple, click a button. You're done.
Speaker 1 (05:37):
Sounds easy.
Speaker 2 (05:38):
It is easy, but you give up control. You're trusting
the exchange completely. When you use a wallet like Kepler,
you're doing non custodial staking. You hold your keys, you
choose the validator directly, you initiate the delegation transaction yourself.
Speaker 1 (05:50):
It's a bit more involved, maybe a slight learning.
Speaker 2 (05:52):
Curve a little bit, yeah, but it's necessary for true decentralization.
You're not relying on a single large company and avoid
that centralized exchange risk we just talked about. It's worth learning.
I think.
Speaker 1 (06:04):
Okay, that makes sense, and this whole area has evolved fast,
hasn't it, especially addressing that lock up problem, the illiquidity.
Let's talk about accessibility and these things called liquid staking
derivatives lsds.
Speaker 2 (06:15):
Yes, LSD's are probably the single biggest innovation in steaking
usability recently, huge impact.
Speaker 1 (06:22):
How do they work?
Speaker 2 (06:23):
Okay, So normally, when you stake say ethereum, your eth
gets locked up. Could be weeks, could be longer depending
on the queue. You can't touch it right, that illiquidity
risk exactly. But if you use a liquid staking platform
like Lido is the biggest example, you deposit your eth
with them, They stake it for you, but in return
they instantly give you back a different token for Lito.
(06:45):
It's stef steve YEP staked eth. This stiff token represents
your original staked ethereum plus all the staking rewards it's
accruing over time.
Speaker 1 (06:54):
I see, so you're earning this staking yield, but you
also have this stiff token. What can you do with that?
Speaker 2 (07:00):
That's the magic. You can use that steeth and other
defied protocols. You could lend it out, use it as
collateral for a loan traded on a decentralized exchange. Remains liquid, so.
Speaker 1 (07:09):
It basically solves the lock up problem. You get the
yield and keep liquidity pretty much.
Speaker 2 (07:14):
Yeah, it bypasses that specific illiquidity risk. But and this
is a big butt, there's always a catch always in crypto.
You trade one risk for another, you get liquidity, but
you introduce a new significant risk smart contract vulnerability.
Speaker 1 (07:29):
Meaning the code behind Lido or whatever platform could have.
Speaker 2 (07:33):
A bug exactly the entire system, the derivative token, the
staking mechanism relies on complex smart contracts working perfectly. If
there's a bug and exploit a hack in the Lido code,
the underlying eth that your steeth represents could be stolen
or lost.
Speaker 1 (07:50):
So it's a sophisticated trade off liquidity and DeFi usability
versus taking on smart contract risk.
Speaker 2 (07:55):
That's the trade offf Precisely, the informed staker needs to
understand that are you comfortable with that X layer of
code risk to get the liquidity benefits?
Speaker 1 (08:02):
Right? Okay? That brings us perfectly to maybe the most
crucial concept in this whole deep dive, unpacking real yield
versus APY. This is where the marketing meets reality, isn't
it where the hype gets exposed?
Speaker 2 (08:15):
This is it. This is the key economic point that
separates let's say, sophisticated stakers from more casual ones who
just see a big number APY annual percentage yield. That's
the gross reward rate the headline numbers see advertise exactly.
But almost every single proof of steak network pays out
those rewards by issuing new tokens.
Speaker 1 (08:35):
That's network inflation, printing new money basically.
Speaker 2 (08:38):
Essentially, Yeah, and that inflation dilutes the value of every
single token in circulation, including the ones you hold and
the new ones you're earning as rewards.
Speaker 1 (08:46):
How does that dilution work?
Speaker 2 (08:48):
Think of it like this. If the network's total token
supply increases by ten percent in a year due to
reward issuance. Then unless demand for the token grows by
at least that much, each individual token is now worth
roughly ten percent less in terms of its share of
the total network value.
Speaker 1 (09:05):
Okay, So if I'm earning, say a twelve percent APY,
but the network is inflating its supply by eleven percent
per year to pay for those rewards.
Speaker 2 (09:13):
Then your real gain in terms of actual purchasing power
or your share of the network is only one percent,
not twelve percent.
Speaker 1 (09:20):
Wow. Okay, so you're mostly just keeping pace with the dilution.
You have to beat the inflation rate just to actually
get ahead.
Speaker 2 (09:26):
That's the perfect way to put it. You have to
outpace dilution just to stand still relative to the network's
total value. So the metric we really care about today,
the one we're focusing on for these top ten, is
the real reward rate.
Speaker 1 (09:37):
And the formula is simple.
Speaker 2 (09:39):
Simple concept, sometimes tricky to get exact numbers, but yeah,
real reward rate equals APY minus the estimated network inflation.
Speaker 1 (09:46):
Rate, and running that calculation, it must completely change how
you rank staking opportunities completely.
Speaker 2 (09:53):
A network screaming about fifteen percent APY might look amazing
until you see it as fourteen percent inflation real one
percent terrible.
Speaker 1 (10:01):
Right.
Speaker 2 (10:02):
Meanwhile, another network might offer a boring six percent atuy.
But if it's inflation is only one percent, it's really
yield is five percent. That's far, far superior.
Speaker 1 (10:11):
So we're hunting for that solid real yield. What's a
good target range among the best.
Speaker 2 (10:15):
Performers, Generally among the really strong established networks we'll discuss,
you're looking for real yields, typically landing in the five
percent to eight percent range. That's after accounting for inflation.
That's the sweet spot.
Speaker 1 (10:26):
Okay, five to eight percent real yield. That changes the
whole conversation, doesn't it. It's not about the biggest apy number.
It's about network health, smart tokenomics.
Speaker 2 (10:36):
Absolutely, it's about sustainable rewards coming from real network usage,
transaction fees. Carefully managed issuance, not just hitting prints on
the token supply takes sense. And one last really critical
point before we dive into the coins. Taxes.
Speaker 1 (10:51):
Ah, Yes, the unavoidable.
Speaker 2 (10:53):
Completely unavoidable. In most major places like the US, UK, Canada, Australia,
every single staking reward you receive is treated as.
Speaker 1 (11:02):
Taxable income when you receive it.
Speaker 2 (11:03):
The moment it hits your wallet and it's valued at
its fair market value at that moment. So you need
meticulous records, crack every reward the date the value. Compliance
is absolutely essential. Don't ignore taxes.
Speaker 1 (11:15):
On staking, right, Okay, good warning. Let's move into part
two then, top tier performers. We're starting with protocols focused
on interoperability, connecting blockchains and delivering those high real yields.
First up, Cosmos ATOM, often called the Internet of blockchains.
Speaker 2 (11:31):
Yeah, Cosmos is a fantastic place to start. It really
embodies that interconnected pos vision. Its whole philosophy is built
around sovereignty and interoperability.
Speaker 1 (11:40):
How does it achieve that?
Speaker 2 (11:41):
Through something called the inter Blockchain Communication Protocol IBC. It
allows totally separate, independent blockchains built with the Cosmos SDK
to talk to each other, send tokens, send data securely.
Speaker 1 (11:54):
Okay, And Atom's role.
Speaker 2 (11:56):
ATEM is the native token of the Cosmos Hub. The
hub acts as the central router, the economic core, connecting
all these dozens soon hundreds of independent app chains the
spokes in the model. So ADEM secures the central hub, and.
Speaker 1 (12:09):
Its utility comes from enabling this whole ecosystem.
Speaker 2 (12:12):
Exactly enabling sovereign chains to connect and thrive rather than
forcing everything onto one single monolithic chain. That's the core
utility driving ATOM demand.
Speaker 1 (12:21):
Now, Cosmos is famous for very high staking yields. We're
talking twelve percent, sometimes up to eighteen percent API.
Speaker 2 (12:28):
Advertising YEP, often the highest headline numbers out there, which, based.
Speaker 1 (12:31):
On what you just said, immediately makes me think high inflation.
How do they offer that and still provide a competitive
real yield?
Speaker 2 (12:38):
Great question. It comes down to Cosmos' unique dynamic inflation mechanism.
It's quite clever.
Speaker 1 (12:44):
How does it work?
Speaker 2 (12:45):
The network has a built in target. It wants exactly
two thirds, or sixty six point seven percent of all
ADEM tokens to be staked at any given time to
ensure the hub is sufficiently secure.
Speaker 1 (12:55):
Okay, a target participation rate exactly.
Speaker 2 (12:58):
Now, If the actual amount of stake atom falls below
that sixty six point seven percent target, the protocol automatically
starts increasing the.
Speaker 1 (13:06):
Inflation rate to incentivize more staking.
Speaker 2 (13:08):
Precisely, higher rewards should attract more stakers, pushing participation back
up towards the target. Conversely, if more than sixty six
points seven percent of ATOM is staked, the protocol gradually
decreases the inflation rate, less incentive is needed.
Speaker 1 (13:22):
Ah, So it's like an economic thermostat trying to keep
staking levels stable. That's smart, It is quite smart.
Speaker 2 (13:27):
It directly links reward issuance to the network's security needs.
Speaker 1 (13:31):
So what does that mean for someone looking at ATOM
right now in twenty twenty five, what's the reality of
the yield?
Speaker 2 (13:37):
Well, participation is generally pretty strong, often above the target.
But even so, the dynamic inflation still tends to run
quite high compared to other networks. You'll typically see it
between say ten percent and fourteen percent.
Speaker 1 (13:50):
Still high inflation then it is.
Speaker 2 (13:52):
However, and this is key, the Cosmos ecosystem is growing
incredibly fast. You've got new chains launching constantly, expand into
specialized areas like AI integrated chains, tons of activity using
IBC for cross chain transfers, all generating real transaction fees
and demand, so.
Speaker 1 (14:10):
That growth offsets the inflation.
Speaker 2 (14:12):
It helps significantly. So even with ten fourteen percent inflation
against a twelve eighteen percent apy, the net reel yields
for adem stakers typically land in a very healthy range.
It can be as low as two percent sometimes, but
often it pushes up towards five percent, six percent, even
eight percent or more depending on the exact inflation rate
and network activity at the time.
Speaker 1 (14:30):
That's impressive managing that with high issuance. What about the
practical side. Staking Atom involves a twenty one day on
bonding period. That's three weeks where your funds are locked
if you want unstake.
Speaker 2 (14:38):
Yeah, twenty one days is a significant commitment. In the
crommet world, three weeks can feel like an eternity if
the market moves against you.
Speaker 1 (14:46):
So how does a staker weigh that lock up against
the potentially high real return.
Speaker 2 (14:51):
It really requires a strategic decision based on your time
horizon and conviction. If you truly believe in the long
term vision of Cosmos, this interconnected web of blockchains, which
looking at twenty twenty five seems increasingly likely to be
a dominant model, then that twenty one day lock is
a hurdle. You accept the price of admission for those
yields kind of Yeah, It's designed to reward long term
(15:14):
commitment to securing the hub. Practically, you'd use a wallet
like Kepler. It's super user friendly for the Cosmos ecosystem,
and the minimum steak is tiny like one etem very
accessible to start, Okay.
Speaker 1 (15:26):
And risks you mentioned validator choice earlier. Is centralization a
concern on a high value chain like the Cosmos Hub.
Speaker 2 (15:33):
It's definitely the primary risk to be aware of when
delegating ad on because the rewards are attractive. Large validators
can accumulate a significant amount of state and.
Speaker 1 (15:41):
If you delegate to one of those huge ones, well.
Speaker 2 (15:43):
First you're contributing to centralizing the network security, which isn't ideal.
But more directly, if that big validator messes up, maybe
they have downtime or worse, they try to double sign
a block, they get slashed and.
Speaker 1 (15:55):
The penalty hits the delegators too.
Speaker 2 (15:57):
Absolutely, slashing penalties on Cosmos can be severe. Up to
five percent of the total stake delegated to that validator,
that includes your funds instantly gone ouch.
Speaker 1 (16:06):
So how do you defend against that?
Speaker 2 (16:08):
Diversification is key. Don't put all your atom with one validator,
especially not one of the top five or ten largest ones.
Choose multiple highly reputable validators with excellent uptime records, maybe
slightly smaller ones outside that top tier spread the risk.
It mitigates both the centralization issue and the financial hit
if one specific validator gets slashed.
Speaker 1 (16:28):
Okay, diversify validators. Got it. Let's move to another giant
in the interoperability space, Polka dot dot different architecture right
focused on securing its pair chain ecosystem.
Speaker 2 (16:38):
Yeah, Polka dot has a very distinct architecture. Instead of
a hub and spokes like Cosmos, it has a central
chain called the relay chain. That's the core, that's the
core source of security and consensus. Then you have parachains.
These are independent, specialized blockchains that connect to the relay
chain and essentially lease its security.
Speaker 1 (16:57):
So dot staking secures that central relay chain exactly.
Speaker 2 (17:01):
Staking dot is absolutely fundamental to Polkadot's entire model. It
secures the relay chain, which in turn allows all these
different para chains to operate securely and transfer assets or
data between each other trustlessly.
Speaker 1 (17:13):
And Polka doots yields. I recall them being a bit
more controlled than Cosmos.
Speaker 2 (17:18):
They are generally more controlled. You'll typically see APIs topping
out around eleven point five percent, maybe twelve percent sometimes,
and crucially, their inflation is also managed more predictably.
Speaker 1 (17:28):
What's the typical inflation rate?
Speaker 2 (17:29):
It's usually designed to be around ten percent, maybe slightly
less depending on the staking ratio, but it's less dynamic
than cosmosis.
Speaker 1 (17:35):
So with around eleven point five percent ATY and maybe
ten percent inflation, how do the really yield stack up?
Are they competitive?
Speaker 2 (17:43):
Very competitive? Polka Doot consistently maintains a high and healthy
staking ratio, usually well over fifty percent, often closer to
fifty six percent or more of the total Dot supply.
Speaker 1 (17:52):
Is staked, which helps keep inflation in check relative to rewards.
Speaker 2 (17:56):
Exactly, so that calculation APY minus inflation usually lands Polka
Dot steakers with a real reward rate somewhere between five
percent and eight percent. Very strong, very consistent.
Speaker 1 (18:07):
And what underpins the value and demand for Dot to
support that yield? Besides just security.
Speaker 2 (18:13):
A huge factor is the parachain auction.
Speaker 1 (18:15):
Mechanism ah right, How does that work again?
Speaker 2 (18:19):
Teams that want to build a project and connect it
as a parachain to Polka Dot's relay chain need to
win an auction for a lease slot. These slobs are
limited to win, they need to bond lock up a
significant amount of Dot tokens for how long, typically for
the duration of a lease, which is often around two years.
Speaker 1 (18:34):
Two years, so that takes a lot of DOT at
a circulation.
Speaker 2 (18:37):
A huge amount. These auctions constantly remove dot from the
liquid circulating supply and lock it away for long periods.
This creates persistent demand for DOT, which directly supports the
token's value and helps sustain those strong real staking yields.
Even with that ten percent issuance. It's a really powerful
economic flywheel effect.
Speaker 1 (18:57):
Okay, that makes sense now practically staking, I remember reading
there were some unique challenges or friction points for users.
Speaker 2 (19:04):
Yeah, there definitely are a few things to be aware
of with dot staking. While they've introduced nomination pools which
make it easy for anyone to stake with just one dot.
Speaker 1 (19:13):
That's good for small holders, it is, But if.
Speaker 2 (19:15):
You're doing it directly nominating validators yourself using the Polka
dot dot js wallet, there are a couple of hurdles. First,
running a full validator requires a pretty hefty steak, around
two hundred and fifty dot last I checked.
Speaker 1 (19:29):
Okay, so most people will.
Speaker 2 (19:30):
Nominate right, and when you nominate, you can select up
to sixteen validators you trust. But here's the first challenge,
the risk of over nomination. With that if too many
people nominate the same popular validator. That validator becomes oversubscribed.
The network then only pays rewards to a certain number
of the nominators for that validator in each era, which
(19:52):
is about a day. If you nominated them but aren't
in the active set for that era, you might earn
reduced rewards or even none.
Speaker 1 (19:58):
Ah So, picking popular validators isn't always best.
Speaker 2 (20:02):
Not necessarily, no, you need to monitor their status. The
nomination pools help manage this complexity automatically, which is why
they're popular.
Speaker 1 (20:10):
Okay, And the other challenge the.
Speaker 2 (20:12):
Lock up period. Polka Dot has the longest unbonding period
of any major chain we'll discuss today, a full twenty
eight days.
Speaker 1 (20:19):
Twenty eight days, a whole month where your dot is
locked if you decide to unstake yep.
Speaker 2 (20:24):
Nearly a month of total illiquidity.
Speaker 1 (20:26):
Wow, compared to atoms twenty one days, which already felt long.
Who does Dot appeal to with such a long lockup?
It seems like a different type of investor profile.
Speaker 2 (20:36):
It definitely targets a specific profile. That twenty eight day
lockup is a very strong signal that Polka Dot prioritizes
maximum security and long term stability above all else. It
discourages short term speculations, so it appeals to It appeals
to investors who are really focused on long term, stable returns.
People or perhaps institutions and funds who have high conviction
in Polka Dot's tech and ecosystem growth like its use
(20:58):
in Web three gaming apps, and who aren't concerned about
needing quick access to their capital. They value the predictability
that comes with that security focus. It requires real confidence
in the asset for the medium to long term.
Speaker 1 (21:12):
Okay, deep commitment needed there. Let's shift gears. In part three,
we're moving to chains known more for architectural innovation, speed,
unique staking mechanisms, or flexibility. Starting with Tessos XTZ. You
mentioned it's beginner friendly and flexible due to its liquid
proof of steak model.
Speaker 2 (21:30):
Yes, Tesos is fascinating architecturally, it was quite ahead of
its time. It's liquid proof of steak LPOS is a
real standout feature, especially for anyone wary of lockups.
Speaker 1 (21:39):
Liquid proof of steak, how's that different from regular pos?
Speaker 2 (21:42):
In most POS systems, when you delegate, your tokens are
actually bonded or locked into a smart contract. They leave
your direct control for the duration with tesoslpos.
Speaker 3 (21:52):
That doesn't happen really, so the token stay in my
wallet exactly.
Speaker 2 (21:55):
Your xtz tokens never leave your wallet. You simply assign
your delegateation rights to a baker. That's what Taso's called
its validators. You're telling the network, I trust this baker
to validate on my behalf, but your funds remain fully
liquid and under your control at all times.
Speaker 1 (22:11):
Wait a minute, so I'm earning staking rewards, but my
xdz are still completely accessible. I could sell them tomorrow
if I wanted.
Speaker 2 (22:18):
Yep, you could. That completely removes the illiquidity risk, the
pain point of those long unbonding periods we just talked
about with atom and dot.
Speaker 1 (22:27):
That sounds amazing, almost too good to be true.
Speaker 2 (22:31):
How does the network maintain security if the tokens aren't
actually locked up as collateral?
Speaker 1 (22:35):
Good question. The security comes from the baker's side. The
bakers themselves do have to post a significant bond of
their own xtz. It's collateral. If a baker misbehaves, say
they double sign a block, their bond gets slashed.
Speaker 2 (22:48):
But not the delegated funds.
Speaker 1 (22:49):
Correct, the delegator's funds remain safe in their own wallet.
This means for you, as a delegator on Taso's there
is virtually no slashing risk to your principal capital. Wow,
no lockup and no slashing risk for delegators. That's huge
for beginners or conservative folks.
Speaker 2 (23:05):
It's incredibly appealing for that reason. And Tasos has a
very high stacking ratio around sixty eight percent, showing deep
community commitment. The apy is strong, often up to ten.
Speaker 1 (23:15):
Percent, and the real yield after inflation.
Speaker 2 (23:17):
Inflation is managed well, so the real rates are consistently stable,
usually landing between six percent and eight percent. Very attractive,
very reliable.
Speaker 1 (23:25):
Any other unique tasos features.
Speaker 2 (23:26):
Yeah, Another big one is its self amending blockchain. Tasos
can upgrade itself smoothly through on chain governance without needing
disruptive hard forks that can split the community or cause
network instability. It makes for very predictable evolution, so.
Speaker 1 (23:40):
Stable yields, no lock up, no slashing risk for delegators,
smooth upgrades. It sounds very solid. What's driving its growth
in twenty twenty five.
Speaker 2 (23:48):
They're pushing hard on adoption, leveraging their low energy consumption
as a key selling point. You see tasos being used
increasingly for NFTs for certain DeFi applications, and even in
enterprise solutions like for supply chain track or ticketing systems
and gaming. That utility growth helps sustain demand for.
Speaker 1 (24:04):
Xtz Okay TASO sounds like a strong contender, especially for
risk management. Next up Avalanche AVAX, known for speed but
also this unique subnet architecture and attracting institutional interest.
Speaker 2 (24:17):
Yeah, Avalanche is all about speed and customization. Its core
innovation is the subnet model.
Speaker 1 (24:22):
Subnets explain those.
Speaker 2 (24:24):
Think of subnets as custom independent blockchains that anyone can
launch on top of Avalanche. You can find your own rules,
your own fee, structures, even require specific validators, but they
all inherit their security from the main Avalanche network, the
primary network.
Speaker 1 (24:39):
And avx staking secures that primary network exactly.
Speaker 2 (24:43):
Staking avx secures the main p chain platform chain where
validation happens, and by extension, provides the underlying security for
all the custom subnets built on it. This architecture allows
for incredible throughput. Avalanche regularly handles over forty five hundred
transactions per second.
Speaker 1 (24:59):
That's fast. Their APIs a solid too, around eight percent
to ten percent what drives the real yield, which you
mentioned is about five percent to seven percent? And why
are institutions apparently so interested The.
Speaker 2 (25:08):
Stable real yield comes from Avalanche having deliberately low inflation.
It's a core part of their tokenomics design. The institutional
interest is almost entirely driven by that subnet architecture. Why
subnets specifically because institutions, especially in finance, often need blockchains
with specific features, maybe high speed, low fees, or even
(25:30):
permissioned access where only certain participants are allowed. Subnets let
them build exactly that. They can create a custom compliant
blockchain for things like tokenizing real world assets RWAs, or
for regulated trading platforms, but still get the security benefits
of the public Avalanche network.
Speaker 1 (25:46):
So it's ideal for building those regulated, high value financial application.
Speaker 2 (25:50):
Precisely, that focus on RWAs and bespoke enterprise solutions is
really underpinning the demand for AVAX and supporting its staking yields.
Looking into twenty twenty five, Okay, do.
Speaker 1 (26:00):
You practically stake AVX lockups risks?
Speaker 2 (26:03):
You typically use the official Avalanche wallet, or some exchanges
like coinbase offer it too. If you're just delegating, the
minimums are low If you want to run a full
validator node yourself, you need at least twenty five AVX,
and critically you have to maintain very high uptime like
ninety percent or more.
Speaker 1 (26:20):
Uptime requirements suggest slashing is a risk.
Speaker 2 (26:23):
Yes, slashing is a risk on Avalanche, though maybe less
severe than on Cosmos. Validators can be slashed for significant
downtime or malicious behavior. Delegators are exposed, but perhaps less
directly than the validator themselves. Careful validator selection is still crucial.
Speaker 1 (26:39):
In the unbonding period, it's pretty.
Speaker 2 (26:40):
Reasonable, usually between fourteen and twenty one days, so some illiquidity,
but not as long as ATAM or DOT.
Speaker 1 (26:46):
Okay, let's switch to pure speed now. Solana sol maybe
infamous sometimes for its incredibly high transaction throughput.
Speaker 2 (26:55):
Yeah, Solana is built for speed. We're talking theoretical limits
of sixty five thousand transactions per second, which is just staggering.
Speaker 1 (27:01):
How do they achieve that?
Speaker 2 (27:02):
It's a combination a proof of steak with a unique
consensus mechanism called proof of history or POH. Proof of
hist think of POH as a kind of cryptographic clock.
It creates a verifiable ordered sequence of events before those
events are even bundled into blocks. This allows validators to
process transactions in parallel much more efficiently, leading to that
mass of speed. Sol Staking is what secures the selection
(27:26):
of validators in this high speed environment interesting.
Speaker 1 (27:29):
Their yields are a bit lower average six percent to
eight percent APY, translating to maybe four percent to six
percent real yield after inflation. What makes solana staking attractive,
especially given its ecosystem seems dominated by fast moving DeFi
and well mean coins.
Speaker 2 (27:46):
It really comes down to that balance between getting a
decent yield and maintaining high liquidity. Also, Solana has one
of the shortest unbonding periods around. It's typically measured in
et box and usually only takes about two to five
days to unstake your SOL days.
Speaker 1 (28:00):
That's incredibly fast compared to the others.
Speaker 2 (28:02):
It's super fast, and that's vital for the kind of
users Solana attracts. High volume DeFi traders, people flipping mean coins.
They often need very quick access to their capital to
react to market moves.
Speaker 1 (28:12):
So they can earn four to six percent real yield
while knowing they can get their SOL back almost instantly
if needed.
Speaker 2 (28:18):
Exactly that combination of respectable passive income plus new instant
liquidity is the killer feature for that specific user base.
Speaker 1 (28:26):
Now, Solana has had some bumps regarding network stability in
the past. There's talk about an upgrade called fire Dancer.
What is that and what does it mean for stakers?
Speaker 2 (28:35):
Yeah, reliability has been a focus. Fire Dancer is a
huge deal. It's a completely new independent validator client for Solana,
being built by Jump Crypto, a major trading.
Speaker 1 (28:45):
Firm, alternative to the original code exactly.
Speaker 2 (28:48):
Having multiple independent clients makes the network much more resilient.
If one client has a bug that causes issues, the
network can keep running on the other clients. Fire Dancer
is designed to be extremely performant and Robut.
Speaker 1 (29:00):
So for a staker. What's the benefit? Lower risk?
Speaker 2 (29:03):
Directly, lower risk. Fire Dancer, once fully rolled out, should
significantly improve Salana's already quite high up time usually over
ninety nine percent these days, and make network wide outages
much less likely. Fewer outages mean a much lower chance
of validators being slashed due to network instability.
Speaker 3 (29:19):
It boosts confidence and staking is easy. Wallets pools, yeah,
very easy. The phantom wallet is probably the most popular,
and there are excellent liquid staking options too, like MARINAID
finance m SOL which let you stake even small amounts
and get that liquidity token back. Similar Toledo for ethereum.
Speaker 1 (29:37):
Okay Solana for speed and liquidity. Next, near Protocol NEAR.
Their focus is on sharding for scalability, and they're making
a push into AI.
Speaker 2 (29:46):
That's right. Near's core approach to scaling is through sharding,
using a technique they call.
Speaker 1 (29:51):
Nightshade sharding splitting the network load.
Speaker 2 (29:54):
Essentially, Yeah, nightsheet allows the network to dynamically split itself
into multiple parallel processing share theoretically enabling near infinite scalability
as demand grows. This is designed to support really complex,
high throughput decentralized applications. Near Staking secures this whole sharded
architecture through delegation.
Speaker 1 (30:13):
And the yields look strong eight percent to ten percent API.
Speaker 2 (30:16):
YEP strong APY and with well managed inflation and high participation,
the real yields are very competitive, usually landing in that
five percent to seven percent range, quite attractive.
Speaker 1 (30:27):
The twenty twenty five outlook mentions a big focus on
AI integration. How does that actually translate into demand that
supports those staking yields. Is it just buzz or is
their substance.
Speaker 2 (30:37):
It seems to be gaining substance. Near is actively positioning
itself as the blockchain infrastructure layer for a future where
AI agents and decentralized autonomous organizations DAOs need to interact
on chain, coordinate tasks, and manage value.
Speaker 1 (30:49):
AI needing blockchain.
Speaker 2 (30:51):
Think about verifiable computation, secure data ownership for AI training models,
decentralized marketplaces for AI services. Is building tools and partnerships
to enable that. If these AI projects take off and
start generating significant transaction volume and fees on NEAR.
Speaker 1 (31:09):
That drives demand for the NEAR token, supporting its price
and the staking rewards.
Speaker 2 (31:13):
Exactly. It's a bet on that future intersection of AI
and Web three and they already have a solid foundation
over seventy one million dollars in total value locked TVL
justin staking, very low transaction fews, which developers like, and
good tooling.
Speaker 1 (31:27):
Okay, what's the main technical risk someone should consider with
the sharded chain like near? Is it more complex to secure?
Speaker 2 (31:33):
Sharding does inherently introduce complexities? You have challenges around ensuring
data is available across all shards, coordinating security seamlessly preventing
cross chard communication issues. It's technically more involved than a
single monolithic.
Speaker 1 (31:46):
Chain, so potential for unexpected issues.
Speaker 2 (31:48):
There's always that potential with cutting edge tech. However, Near
has been running its sharting implementation live for a while now,
and they are continually improving it and focusing on decentralization
efforts to make it more robot ust. It probably suits
stakers who are more focused on backing technological innovation and
believe that sharding is the ultimate path to scalability. Unbonding
(32:09):
is also quite short, which is a plus.
Speaker 1 (32:11):
Got it innovation focus there? All right, let's pivot in
part four. We're going to focus now on the established
blue chips, the giants and protocols that really appeal to
more conservative risk averse investors. Prioritizing stability security may be
sacrificing a bit of yield for that peace of mind.
Starting with Cardono, Ada, known for its research driven approach.
Speaker 2 (32:32):
Yes, Cardano is definitely in that category. Its proof of
state consensus protocol is called Roboros. It's famously based on
rigorous academic research, peer reviewed papers. The whole development process
is very methodical, very focused on formal verification and security.
Speaker 1 (32:47):
That translates into features for stakers.
Speaker 2 (32:49):
Absolutely. The standout feature for Cardano, especially for conservative folks,
is a massive advantage. When you delegate your eightya to Steak,
there are absolutely no token.
Speaker 1 (32:59):
Lock, zero hold on like Tizos, the Ada never leaves
your wallet. It remains completely.
Speaker 2 (33:05):
Liquid, exactly like Tezos in that regard, Your Ada stays
in your own wallet, like DATAALSS or euroy, fully accessible,
fully liquid while it's earning staking rewards.
Speaker 1 (33:16):
That's incredible. Zero lockup means zero protocol level liquidity risk
That must fundamentally change how someone approaches staking Ada, especially
during volatile markets.
Speaker 2 (33:26):
It completely does you get the passive income without sacrificing
immediate access to your capital. It makes Ada arguably one
of the lowest risk staking options from a liquidity perspective.
Speaker 1 (33:35):
Okay, so what are the yields like then? If there's
no lockup? Are they much lower?
Speaker 2 (33:38):
They are more modest? Yes, You're typically looking at stable
yields around three percent five percent APY.
Speaker 1 (33:44):
And the real yield after inflation.
Speaker 2 (33:46):
Cardano's inflation is also generally low and predictable, so the
real returns are usually in the two percent to four
percent range, not the highest numbers we've seen, but extremely
consistent and reliable, and that stability is backed by Cardano's
huge market cap, strong community and institutional recognition.
Speaker 1 (34:04):
How easy is it to stake eighty? You mentioned wallets
like day liss or Euroi super easy.
Speaker 2 (34:09):
Cardano has a huge network of community run steak pools,
over three thousand of them. You just open your wallet,
browse the list of pools, look at their performance and fees,
which are usually quite low, and click to delegate to
the one you choose.
Speaker 1 (34:22):
That's it and rewards.
Speaker 2 (34:24):
Rewards are calculated every epoch, which is five days on Cardano,
and they're automatically distributed to your wallet. The low minimum
requirement to steak and that no lock up feature make
it probably the ideal entry point for someone completely new
to staking and wanting a very conservative.
Speaker 1 (34:39):
Approach makes sense. What about future developments? There's talk of
the Hydra upgrade. What does that mean for staking yields.
Speaker 2 (34:45):
Hydra is Cardano's Layer two scaling solution. It's designed to
enable massive transaction through put by processing transactions off the
main chain in Hydra heads.
Speaker 1 (34:54):
Will that boost the API directly?
Speaker 2 (34:56):
Probably not directly or immediately, but Hydra success is absolutely
vital for Cardono's long term growth it's needed to attract
high volume DeFi applications, complex smart contracts, better governance tools. Basically,
more utility and.
Speaker 1 (35:11):
More utility drives demand for.
Speaker 2 (35:13):
AD Exactly, Increased network activity and demand for ADA ultimately
supports the value of the token and the long term
sustainability of those stable three five percent staking yields. It's
about ecosystem health, reinforcing the rewards.
Speaker 1 (35:26):
Okay, cardano for stability and no lockups. Now, the big one,
Ethereum eth the undisputed leader post merge, securing the largest
DApp ecosystem out there.
Speaker 2 (35:35):
Yeah, Ethereum staking is really the bedrock of the decentralized
world now since the merge moved it to proof of
steak staking, eth is what secures this enormous ecosystem of DeFi, NFTs,
DAOs everything.
Speaker 1 (35:46):
What are the typical yields for e staking?
Speaker 2 (35:48):
They usually hover around three percent to five percent APY,
although because rewards can be automatically compounded, especially if you
use certain services, the effective yield can sometimes push a
bit higher, maybe towards seven percent in some.
Speaker 1 (36:01):
Cases, and inflation. This is where ethereum gets interesting, right.
Speaker 2 (36:04):
Very interesting. The crucial economic detail for eth staking is
its minimal net inflation thanks to the fee burning mechanism
introduced in EP one feeds fifty nine right.
Speaker 1 (36:15):
EP one fifty nine burns a portion of the transaction.
Speaker 2 (36:18):
Fees exactly a base fee for every transaction gets permanently
removed from the supply burned. Depending on how busy the
network is, the amount of eth burn can actually exceed
the amount of new eth issued as staking rewards.
Speaker 1 (36:30):
Making ethereum deflationary.
Speaker 2 (36:32):
Sometimes potentially yes, or at least very close to me
zero inflation. This is incredibly powerful for stakers. Means the
three five percent APY they earn is rarely diluted by
new token issuants. The real yield tracks the headline apy
very closely, so that.
Speaker 1 (36:47):
Three five percent is pretty much a genuine return. That
makes eighth the definition of blue chip stability in the
staking world, doesn't It?
Speaker 2 (36:53):
Absolutely low, reliable yield, but backed by the largest ecosystem
and incredibly strong tokenomics that minimize inflation. It's the go
to for stable long term exposure.
Speaker 1 (37:05):
Okay, but there's a catch for the average person, isn't there?
Running your own validator requires a massive amount of eth.
Speaker 2 (37:10):
Huge amount. You need thirty two eth to run your
own validator node. At current prices, that's a lot of
money prohibitive for almost everyone.
Speaker 1 (37:18):
So how do most people stake eth?
Speaker 2 (37:21):
They turn to staking pools or increasingly liquid staking providers.
Lido Finance with its steath token we discussed earlier, is
by far the dominant player here. Rocket pool is another
popular decentralized option. These services pool user funds together to
run validators, lowering the entry barrier dramatically.
Speaker 1 (37:38):
But Lido's dominance doesn't that raise concerns? We talked about
centralization risk.
Speaker 2 (37:43):
It's arguably the biggest debate and concern within the ethereum
community right now. Lito controls such a large percentage of
the total staked eth, maybe a third or even more.
Speaker 1 (37:53):
A third of all staked eth controlled by one entity smart.
Speaker 2 (37:56):
Contracts essentially yes, and that concentrate of steak translates into
significant governance power. The validators run by Lido, or rather
the DAO that governs Leto's operations, wield immense influence over
the network's consensus, transaction ordering, and potentially even future protocol upgrades.
Speaker 1 (38:15):
So while Lito solves the thirty two eth barrier and
the liquidity problem with STEPH, it potentially reintroduces centralization at
a different layer, the staking.
Speaker 2 (38:26):
Layer, that's the core tension. It's a tradeoff accessibility and
liquidity for the average user versus the risk of concentrating
too much power in one protocol, potentially undermining Ethereum's core
decentralization ethos.
Speaker 1 (38:38):
Something sophisticated investors definitely need to watch.
Speaker 2 (38:41):
Absolutely how that dynamic plays out, especially as layer two
scaling solutions continue to grow Ethereum's utility and more institutions
look towards staking eth via these pools. It's critical for
the network's future.
Speaker 1 (38:52):
Okay, let's touch on algorand I'll go known for something
called pureproof of steak and instant transaction finality.
Speaker 2 (38:58):
Right. Algorn uses pure your proof of steak PPOs. It's
designed by Sylvia McCauley, a Touring Award winner, and it's
known for being incredibly fast and efficient. A key feature
is instant finality.
Speaker 1 (39:10):
Instant finality meaning once a transaction is confirmed, it's irreversible immediately,
no waiting for more block confirmations.
Speaker 2 (39:19):
Exactly as soon as it's in a block, it's final. That,
combined with very low fees, makes Algrand position itself strongly
for things like payments or applications where speed and certainty
or paramount. They also mark it heavily on being quantum secure.
Speaker 1 (39:33):
Interesting, what about staking Algo rewards risks?
Speaker 2 (39:37):
The rewards are pretty stable, usually around five point seven
percent epy, but the big draw for risk management, similar
to Cardono and tasos, is that Algorin's standard staking mechanism
involves no lockups and no slashing penalties for the participants,
just holding Algo in their wallet and participating.
Speaker 1 (39:52):
Another one with no lockup and no slashing risk for
the average holder.
Speaker 2 (39:56):
Correct. If you just hold Algo in an official wallet
like paril wallet and ensure you're marked as online, you
participate in consensus and earn rewards without bonding or delegation risk.
This makes it exceptionally low risk for passive income.
Speaker 1 (40:11):
Seekers, so very straightforward. Ongoing DeFi expansion keeps the yield steady.
Speaker 2 (40:15):
Yeah, continued growth in their DeFi ecosystem and institutional partnerships
helps maintain demand and keep those returns predictable. For twenty
twenty five, very passive, very low stress.
Speaker 1 (40:26):
Okay, And finally for our top ten, let's look at
tron TRX uses delegated proof of stake focused on content
and entertainment.
Speaker 2 (40:34):
That's Tron. It uses delegated proof of stake or DPOs.
It's a bit different from the others. How does DPOs
work In DPOs? Instead of everyone potentially being a validator,
TRX tokenholders vote for a limited number of entities called
superrepresentatives or srs. I think it's twenty seven of them.
These elected srs are the only ones who actually produce
blocks and validate transactions.
Speaker 1 (40:54):
So it's more like a representative democracy kind of.
Speaker 2 (40:56):
Yeah, it's generally faster and more efficient than pure POS
because you have fewer validators coordinating, but the trade off
is that it's often criticized for being inherently more centralized,
as power rests with those few elected srs.
Speaker 1 (41:09):
And Tron's ecosystem.
Speaker 2 (41:11):
Focus historically very focused on content delivery networks, decentralized storage,
and more recently DeFi platforms and stable coins, often targeting
the entertainment and Asian markets.
Speaker 1 (41:21):
Their apuwids are moderate four percent to six percent, with
real yields maybe two percent to five percent after low inflation.
How does that DPOs model impact the staking experience for
a user?
Speaker 2 (41:32):
For the user, the main action isn't direct delegation, but voting.
You need to use your TRX to vote for the
SR candidates you want to represent you. By voting, you
help secure the network and typically earn a share of
the rewards generated by the srs you voted for.
Speaker 1 (41:46):
So it requires active participation.
Speaker 2 (41:47):
In voting ideally yes to maximize rewards and contribute to governance.
The advantage is that tron is often known for relatively
short staking terms if you use certain platforms and generally
lower volatility compared to some other asset.
Speaker 1 (42:00):
What about staking on exchanges? I've seen some advertise very
high TRX yields like twenty percent.
Speaker 2 (42:06):
Yeah, you have to be careful there. While you can
stake TRX via exchanges or platforms like kryptomis, those super
high yields like twenty percent are almost certainly not coming
from native DPOs staking rewards.
Speaker 1 (42:18):
Where are they coming from?
Speaker 2 (42:19):
Then? They usually involve additional layers of risk, like the
platform lending out your TRX potentially in risky DFIVE protocols
to generate that extra yield. It's often tied to short
term promotional campaigns and carries significant counterparty risk, the risk
that the platform itself fails or loses the funds. It's
very different from the base four six percent apy from
(42:40):
simply voting for srs.
Speaker 1 (42:41):
Right. Need to distinguish native staking from platforms specific lending products. Okay,
we've covered a lot of ground ten chains diving into
real yields, lockups risks. We've seen top performers like ATM
and dot potentially offering up to eight percent real yield
balanced by longer lockups, and then incredible stability from ethan
A with eth having near zero inflation and Ada offering
(43:03):
zero lockups.
Speaker 2 (43:04):
Quite a range of options depending on your priorities.
Speaker 1 (43:06):
Definitely, But before anyone listening rushes off to delegate their
hard earned crypto, we need to really hammer home the
due diligence in Part five Mitigating risks and best practices,
Let's start with what you called the trinity of staking risks.
First one slashing.
Speaker 2 (43:24):
Yeah, slashing is the scariest one because it directly destroys
your capital. It's the penalty mechanism networks used to punish
validators for bad behavior.
Speaker 1 (43:32):
The kind of bad behavior two main things.
Speaker 2 (43:35):
Significant downtime being offline when you're supposed to be validating,
or much worse, actively trying to cheat the consensus, like
signing two different blocks at the same height double signing,
and the penalty hits It hits the validator's own staked collateral,
but crucially, it usually also hits a portion of the
funds delegated to that validator. So your capital is directly
(43:56):
at risk based on your validator's performance and honesty.
Speaker 1 (43:59):
So choosing your coolidator isn't just about maximizing yield. It's
a fundamental security.
Speaker 2 (44:03):
Decision, absolutely fundamental. Yet to treat it like choosing a bank,
almost their reliability directly impacts your investments safety.
Speaker 1 (44:10):
Okay, Risk number two illiquidity and lockups. We touch on
this lot.
Speaker 2 (44:14):
Yeah, this is the time component of risk. That unbonding
period twenty one days for ATUM, twenty eight for DOT
maybe fourteen twenty one for AVEX means your money is
completely frozen. You cannot access it, cannot sell it, cannot
react to market news, and.
Speaker 1 (44:29):
If the market tanks during that period, you just have
to watch it happen.
Speaker 2 (44:32):
You're locked in. It can turn a market dip into
a much more significant loss because you had no way
to exit. This is precisely why those no lock up
models on Kurdano, Algoran and Tazos are so appealing to
people who prioritize liquidity and why Solana's super short two
to five day unbonding is attractive too.
Speaker 1 (44:49):
Right. Risk three. You mentioned this in the context of
liquid staking derivatives like Lidos.
Speaker 2 (44:53):
Steith exactly smart contract vulnerabilities. This risk applies anytime you
interact with a decentralized staking pool or use an LSD.
Speaker 1 (45:00):
Platform because you're trusting their code.
Speaker 2 (45:03):
You are trusting their code one hundred percent. If that
complex web of smart contracts has a bug and exploit
an economic flaw, attackers could potentially drain the funds locked
within it, That includes the underlying assets backing your staff
or MSOL or whatever derivative token.
Speaker 1 (45:20):
You hold at you mitigate that specific risk.
Speaker 2 (45:22):
Due diligence on the platform itself. Only use protocols that
are well established, have undergone multiple rigorous security audits by
reputable third party firms, and ideally have bug bounty programs.
Never ever chase some random new pool offering an unbelievable
apy if it doesn't have a proven security track record.
The risk is just too high.
Speaker 1 (45:42):
Okay. Audits are key for pools and lsds. Let's switch
to broader best practices. Then, if someone is ready to start,
what are the absolute must do steps?
Speaker 2 (45:51):
Okay, First principle, security hygiene. Start small. Don't ape your
entire life savings into staking one asset on day one.
Get comfortable with the process. The wall is to the
lock up mechanics first makes sense. Second, protect your keys
like their gold. Use a hardware wallet, ledger treaser for
any significant amount you plan to stake long term. Store
your seed phrase offline securely, redundantly. Never type it into
(46:15):
a computer. Your private key security is paramount.
Speaker 1 (46:19):
Okay, self custody and hardware wallets. What about vetting the
validator you delegate to. You said that was crucial.
Speaker 2 (46:26):
It's probably the single most important active decision you make
as a staker. Few things to check. Number one, uptime history.
Look for validators with near perfect uptime like ninety nine
point nine percent or higher over a long period. Consistent downtime,
even if not malicious, can reduce your rewards and potentially
lead to slashing on some networks.
Speaker 1 (46:45):
Okay, uptime.
Speaker 2 (46:46):
Number two commission rate. This is the percentage fee the
validator takes from your gross staking rewards before passing the
rest to you rates very wildly.
Speaker 1 (46:54):
Is lower always better like zero percent commission?
Speaker 2 (46:56):
Not necessarily be a bit wary of zero percent commission validators.
Sometimes they are temporary promotions. Sometimes they might be cutting
corners on infrastructure to offer that rate, potentially making them
less reliable long term. A reasonable commission, say five to
ten percent, often indicates a serious sustainable operation. Compare rates,
but don't just pick the absolute lowest without checking reputation.
Speaker 1 (47:19):
Okay, uptime commission, what else?
Speaker 2 (47:22):
Third, and this is critical for network health and your
own risk management. Avoid over delegating to the biggest validators.
Check the validator list, see who has the most stake already,
and pick smaller ones. Ideally, yes, choose several reputable, reliable
validators who are outside the top five or ten in
terms of voting power. Diversify your stake across them.
Speaker 1 (47:42):
Why is diversification across validators so important even within the
same crypto asset.
Speaker 2 (47:46):
Two reasons. First, it supports network decentralization. You don't want
a handful of validators controlling the whole network. Second, it
protects you if you put one hundred percent of your
atum with one validator, and that single validator gets slacked,
even for an honest mistake, you bear the full brunt
of that penalty. If you spread your stake across, say
four validators and one get slash, you only lose a
(48:10):
quarter of the potential penalty amount. It spreads your risks significantly.
Speaker 1 (48:14):
Diversify assets diverse five validators makes total sense. And finally,
how do you stay on top of all this apise
change inflation changes?
Speaker 2 (48:23):
You need good information tools. You can't just set and
forget entirely. Use external resources like stakingrewards dot com, or
look at the specific block explorers for the network you're staking,
like mint scan for Cosmos. They provide real time data
on current APIs, validator performance, network participation rates, estimated inflation.
Speaker 1 (48:40):
So you need to check in periodically.
Speaker 2 (48:42):
Yeah, maybe every few weeks or months, just reevaluate your choices.
Is your validator still performing well, has the network's inflation
changed significantly? Is the real yield still attractive? It requires
a bit of ongoing monitoring and.
Speaker 1 (48:55):
We have to mention taxes again.
Speaker 2 (48:56):
Tracking tools, yes, absolutely, Since every reward is income, you
need to track it. Using crypto tax software like coinly,
cointracker or others is almost essential. Connect your wallets, they'll
import the transactions, calculate the value at the time of receipt.
It makes tax reporting manageable.
Speaker 1 (49:12):
Don't skip this, Okay, track everything for taxes solid advice.
Speaker 2 (49:16):
So let's try and summarize this deep dive for twenty
twenty five. The main takeaway staking top cryptocurrencies. It's definitely
a viable way to earn genuine passive income. But and
it's a big butt only if you look past the
flashy advertised APY number.
Speaker 1 (49:32):
Right focus on the real yield APY minus inflation exactly.
Speaker 2 (49:37):
And we've seen that among these well established, battle tested
networks you can realistically achieve real yields of up to
say eight percent in some cases like Atom or dot
or xtz. That's balancing strong income generation with solid network
security and reasonably controlled token economics.
Speaker 1 (49:54):
But getting that sustained return it requires doing your homework,
doesn't it. Understanding those liquidity trade offs, with the lock
up periods, vetting your validators carefully for security and reliability,
and always being aware of the smart contract risks. If
you opt for liquid.
Speaker 2 (50:10):
Staking, precisely your actions as a staker they aren't just passive.
You're actively contributing to the network security, its decentralization, and
even its future governance through your choices.
Speaker 1 (50:22):
Which actually leads perfectly into our final provocative thought for you,
the listener to mull over.
Speaker 2 (50:26):
Okay, let's tie together. We've established that staking rewards are
fundamentally linked to network inflation, which is often controlled by
participation rates and also by the overall economic success and
demand for the network. Right, And we've also seen how
large centralized staking pools, particularly LEDO dominating ethereum staking, are
concentrating significant power.
Speaker 1 (50:47):
Yeah, the governance influence.
Speaker 2 (50:49):
So here's the thought. If staking power translates to governance power,
and that power is increasingly concentrated, how might a major
external event, like a huge global shift in capital flows
towards crypto or perhaps significant new regulatory interest focused on
these large staking entities, how might that affects the inherent
(51:10):
governance power held by these dominant pools. And maybe more importantly,
what does that potential for centralized influence under external pressure
mean for the long term decentralization ethos. That the entire
cryptospace was supposedly.
Speaker 1 (51:23):
Built on centralized powerpoints potentially becoming targets or levers, what
does that mean for genuine network control? Definitely something profound
to think about as you research your own staking strategy.
Speaker 2 (51:34):
Food for thought.
Speaker 1 (51:36):
Indeed, that's all the time we have for this deep dive.
We really hope you feel thoroughly well informed now about
the realities of staking in twenty twenty five. Thanks for
joining us.
Welcome back to the deep dive. We're here to cut
through the noise, look at the sources, and really give
you that informed understanding fast that's legal. Today we are
jumping right into the world of crypto investing, specifically that
sort of holy grail of passive income staking. We're talking
earning rewards without needing massive hardware setups, dealing with heat,
(00:23):
huge electricity bills, none of that old PIW stuff exactly.
Speaker 2 (00:27):
We're focused squarely on getting sustainable returns through proof of
steak POS. It's really central now, isn't it to a
modern crypto portfolio? Definitely, And our mission today, I think
is probably the most critical thing anyone new to this
needs to grasp. We have to systematically separate those big
apy numbers from the real sustainable reward rates.
Speaker 1 (00:49):
Yeah, it's crucial.
Speaker 2 (00:50):
If you see like fifteen percent advertised somewhere, Yeah, your
first thought shouldn't be wow, where do I sign up?
It should be Okay, but what's the inflation rate? That's
the key question.
Speaker 1 (01:00):
Okay, let's unpack that right away then, because everyone wants
passive income, right, but those numbers they often look way
better than the reality.
Speaker 2 (01:09):
They can be engineered.
Speaker 1 (01:10):
Yeah, so our sources today they really dive deep. We're
analyzing the top ten cryptos for staking, looking ahead to
twenty twenty five, and we're prioritizing networks that are you know, established, secure,
battle tested, and most importantly give you a genuine yield,
something that actually outpaces the token dilution.
Speaker 2 (01:28):
Yeah, established security over just chasing hype. That's key because staking,
fundamentally it's a longer term commitment usually makes sense. So
just to set the scene, Yeah, across these top networks,
you're going to see advertised apise ranging from maybe a
conservative three percent all the way up to like a
dynamic eighteen percent.
Speaker 1 (01:47):
Big range, huge range.
Speaker 2 (01:48):
But before we even get into the coins, we absolutely
have to talk risks. Volatility in crypto always there, always extreme.
Of course, then you've got token lockups that can mean
real pain if you need your fund unexpectedly illiquidity.
Speaker 1 (02:02):
Yeah, we'll get into those periods.
Speaker 2 (02:03):
And if you pick the wrong validator or the network
has issues slashing penalties they're very real. They can literally
burn a chunk of your capital instantly.
Speaker 1 (02:13):
Okay, serious stuff, So let's start with the basics. Then
Part one, staking fundamentals, separating that hype from reality good
place to start. So, if you've been around crypto a while,
you know bitcoin mining proof of work pow W. How
does po wes proof of steak really change how security works?
Why is it so much more accessible?
Speaker 2 (02:34):
RIGHTW? Like Bitcoin, it's a competition, isn't it. It's all
about raw computing power, energy consumptions, specialized hardware, the mining
rigs exactly solving these incredibly complex puzzles to validate blocks.
It's basically a race to burn the most energy and
the winner gets the reward. Pos just completely flips that.
So instead of computational power, you're using economic security. Staking
(02:58):
means you lock up or well bond your tokens to
the network.
Speaker 1 (03:01):
You commit your own coins.
Speaker 2 (03:02):
Precisely, you're putting your capital at risk. Think of it
like a security deposit. You do that to get the
right to validate transactions secure the network. If you act
honestly follow the rules, you earn rewards the yield. If
you try to cheat or you mess up badly like
being offline too long, yeah, you lose some or all
of your deposit. That's slashing.
Speaker 1 (03:23):
Ah okay. So that economic incentive, that skin in the
game makes it way more accessible. You don't need a
warehouse full of.
Speaker 2 (03:30):
GPS exact, no massive physical infrastructure needed, much lower barrier
to entry.
Speaker 1 (03:36):
So for someone listening thinking about doing this, walk us
through the practical steps. Let's say three key steps from
having cash to actually earning those staking rewards.
Speaker 2 (03:45):
Okay, yeah, the process is pretty streamlined these days, but
you really need to pay attention to the details, especially security.
Always security, always, So Step one, get the tokens you
want a steak, usually buy them on a reputable, big
centralized exchange. That's the easy part.
Speaker 1 (03:59):
Okay.
Speaker 2 (04:00):
Step two, this is crucial. Get those tokens o off
the exchange. Immediately transfer them to a secure, compatible wallet
that you control.
Speaker 1 (04:07):
Why off the exchange so fast?
Speaker 2 (04:08):
Not your keys, not your crypto. If the exchange gets
hacked or goes bankrupt or freezes withdraws, your funds are
at risk. You need self custody.
Speaker 1 (04:17):
Right, and you mentioned compatible wallets.
Speaker 2 (04:19):
Yeah, it depends on the network. For something like Cosmos Atom,
you'll need a specific wallet like Kepler that supports its
features for Polka dot Polka dot dot JS. But for
maximum security always always aim to use.
Speaker 1 (04:34):
A hardware wallet like a Ledger treasure.
Speaker 2 (04:36):
Exactly Ledger is kind of the gold standard. It keeps
your private keys completely offline, safe from hackers. That's where
you should ultimately hold anything significant in your staate.
Speaker 1 (04:45):
Okay, got it, So acquire tokens, transfer to a secure,
preferbly hardware wallet. What's step three?
Speaker 2 (04:51):
Step three is delegation. Once the tokens are safe in
your wallet, you need to choose who you're gonna stick with.
You select a reputable validator or maybe join a staking pool,
and then you formally delegate or bond your assets to
them through your wallet interface.
Speaker 1 (05:04):
So you mentioned wallets like Kepler or Polka dot dot js.
Why are those specific non custodial wallets often needed, especially
when big exchanges like say coinbase, offer staking directly on
their platform. Isn't the exchange simpler for a beginner?
Speaker 2 (05:22):
Ah? Yeah, that's a really important distinction. When you stak
on coinbase or Binance or crack in, it's custodial staking,
meaning they hold the keys exactly, they hold your private keys,
They handle all the technical bits of delegation behind the scenes.
Super simple, click a button. You're done.
Speaker 1 (05:37):
Sounds easy.
Speaker 2 (05:38):
It is easy, but you give up control. You're trusting
the exchange completely. When you use a wallet like Kepler,
you're doing non custodial staking. You hold your keys, you
choose the validator directly, you initiate the delegation transaction yourself.
Speaker 1 (05:50):
It's a bit more involved, maybe a slight learning.
Speaker 2 (05:52):
Curve a little bit, yeah, but it's necessary for true decentralization.
You're not relying on a single large company and avoid
that centralized exchange risk we just talked about. It's worth learning.
I think.
Speaker 1 (06:04):
Okay, that makes sense, and this whole area has evolved fast,
hasn't it, especially addressing that lock up problem, the illiquidity.
Let's talk about accessibility and these things called liquid staking
derivatives lsds.
Speaker 2 (06:15):
Yes, LSD's are probably the single biggest innovation in steaking
usability recently, huge impact.
Speaker 1 (06:22):
How do they work?
Speaker 2 (06:23):
Okay, So normally, when you stake say ethereum, your eth
gets locked up. Could be weeks, could be longer depending
on the queue. You can't touch it right, that illiquidity
risk exactly. But if you use a liquid staking platform
like Lido is the biggest example, you deposit your eth
with them, They stake it for you, but in return
they instantly give you back a different token for Lito.
(06:45):
It's stef steve YEP staked eth. This stiff token represents
your original staked ethereum plus all the staking rewards it's
accruing over time.
Speaker 1 (06:54):
I see, so you're earning this staking yield, but you
also have this stiff token. What can you do with that?
Speaker 2 (07:00):
That's the magic. You can use that steeth and other
defied protocols. You could lend it out, use it as
collateral for a loan traded on a decentralized exchange. Remains liquid, so.
Speaker 1 (07:09):
It basically solves the lock up problem. You get the
yield and keep liquidity pretty much.
Speaker 2 (07:14):
Yeah, it bypasses that specific illiquidity risk. But and this
is a big butt, there's always a catch always in crypto.
You trade one risk for another, you get liquidity, but
you introduce a new significant risk smart contract vulnerability.
Speaker 1 (07:29):
Meaning the code behind Lido or whatever platform could have.
Speaker 2 (07:33):
A bug exactly the entire system, the derivative token, the
staking mechanism relies on complex smart contracts working perfectly. If
there's a bug and exploit a hack in the Lido code,
the underlying eth that your steeth represents could be stolen
or lost.
Speaker 1 (07:50):
So it's a sophisticated trade off liquidity and DeFi usability
versus taking on smart contract risk.
Speaker 2 (07:55):
That's the trade offf Precisely, the informed staker needs to
understand that are you comfortable with that X layer of
code risk to get the liquidity benefits?
Speaker 1 (08:02):
Right? Okay? That brings us perfectly to maybe the most
crucial concept in this whole deep dive, unpacking real yield
versus APY. This is where the marketing meets reality, isn't
it where the hype gets exposed?
Speaker 2 (08:15):
This is it. This is the key economic point that
separates let's say, sophisticated stakers from more casual ones who
just see a big number APY annual percentage yield. That's
the gross reward rate the headline numbers see advertise exactly.
But almost every single proof of steak network pays out
those rewards by issuing new tokens.
Speaker 1 (08:35):
That's network inflation, printing new money basically.
Speaker 2 (08:38):
Essentially, Yeah, and that inflation dilutes the value of every
single token in circulation, including the ones you hold and
the new ones you're earning as rewards.
Speaker 1 (08:46):
How does that dilution work?
Speaker 2 (08:48):
Think of it like this. If the network's total token
supply increases by ten percent in a year due to
reward issuance. Then unless demand for the token grows by
at least that much, each individual token is now worth
roughly ten percent less in terms of its share of
the total network value.
Speaker 1 (09:05):
Okay, So if I'm earning, say a twelve percent APY,
but the network is inflating its supply by eleven percent
per year to pay for those rewards.
Speaker 2 (09:13):
Then your real gain in terms of actual purchasing power
or your share of the network is only one percent,
not twelve percent.
Speaker 1 (09:20):
Wow. Okay, so you're mostly just keeping pace with the dilution.
You have to beat the inflation rate just to actually
get ahead.
Speaker 2 (09:26):
That's the perfect way to put it. You have to
outpace dilution just to stand still relative to the network's
total value. So the metric we really care about today,
the one we're focusing on for these top ten, is
the real reward rate.
Speaker 1 (09:37):
And the formula is simple.
Speaker 2 (09:39):
Simple concept, sometimes tricky to get exact numbers, but yeah,
real reward rate equals APY minus the estimated network inflation.
Speaker 1 (09:46):
Rate, and running that calculation, it must completely change how
you rank staking opportunities completely.
Speaker 2 (09:53):
A network screaming about fifteen percent APY might look amazing
until you see it as fourteen percent inflation real one
percent terrible.
Speaker 1 (10:01):
Right.
Speaker 2 (10:02):
Meanwhile, another network might offer a boring six percent atuy.
But if it's inflation is only one percent, it's really
yield is five percent. That's far, far superior.
Speaker 1 (10:11):
So we're hunting for that solid real yield. What's a
good target range among the best.
Speaker 2 (10:15):
Performers, Generally among the really strong established networks we'll discuss,
you're looking for real yields, typically landing in the five
percent to eight percent range. That's after accounting for inflation.
That's the sweet spot.
Speaker 1 (10:26):
Okay, five to eight percent real yield. That changes the
whole conversation, doesn't it. It's not about the biggest apy number.
It's about network health, smart tokenomics.
Speaker 2 (10:36):
Absolutely, it's about sustainable rewards coming from real network usage,
transaction fees. Carefully managed issuance, not just hitting prints on
the token supply takes sense. And one last really critical
point before we dive into the coins. Taxes.
Speaker 1 (10:51):
Ah, Yes, the unavoidable.
Speaker 2 (10:53):
Completely unavoidable. In most major places like the US, UK, Canada, Australia,
every single staking reward you receive is treated as.
Speaker 1 (11:02):
Taxable income when you receive it.
Speaker 2 (11:03):
The moment it hits your wallet and it's valued at
its fair market value at that moment. So you need
meticulous records, crack every reward the date the value. Compliance
is absolutely essential. Don't ignore taxes.
Speaker 1 (11:15):
On staking, right, Okay, good warning. Let's move into part
two then, top tier performers. We're starting with protocols focused
on interoperability, connecting blockchains and delivering those high real yields.
First up, Cosmos ATOM, often called the Internet of blockchains.
Speaker 2 (11:31):
Yeah, Cosmos is a fantastic place to start. It really
embodies that interconnected pos vision. Its whole philosophy is built
around sovereignty and interoperability.
Speaker 1 (11:40):
How does it achieve that?
Speaker 2 (11:41):
Through something called the inter Blockchain Communication Protocol IBC. It
allows totally separate, independent blockchains built with the Cosmos SDK
to talk to each other, send tokens, send data securely.
Speaker 1 (11:54):
Okay, And Atom's role.
Speaker 2 (11:56):
ATEM is the native token of the Cosmos Hub. The
hub acts as the central router, the economic core, connecting
all these dozens soon hundreds of independent app chains the
spokes in the model. So ADEM secures the central hub, and.
Speaker 1 (12:09):
Its utility comes from enabling this whole ecosystem.
Speaker 2 (12:12):
Exactly enabling sovereign chains to connect and thrive rather than
forcing everything onto one single monolithic chain. That's the core
utility driving ATOM demand.
Speaker 1 (12:21):
Now, Cosmos is famous for very high staking yields. We're
talking twelve percent, sometimes up to eighteen percent API.
Speaker 2 (12:28):
Advertising YEP, often the highest headline numbers out there, which, based.
Speaker 1 (12:31):
On what you just said, immediately makes me think high inflation.
How do they offer that and still provide a competitive
real yield?
Speaker 2 (12:38):
Great question. It comes down to Cosmos' unique dynamic inflation mechanism.
It's quite clever.
Speaker 1 (12:44):
How does it work?
Speaker 2 (12:45):
The network has a built in target. It wants exactly
two thirds, or sixty six point seven percent of all
ADEM tokens to be staked at any given time to
ensure the hub is sufficiently secure.
Speaker 1 (12:55):
Okay, a target participation rate exactly.
Speaker 2 (12:58):
Now, If the actual amount of stake atom falls below
that sixty six point seven percent target, the protocol automatically
starts increasing the.
Speaker 1 (13:06):
Inflation rate to incentivize more staking.
Speaker 2 (13:08):
Precisely, higher rewards should attract more stakers, pushing participation back
up towards the target. Conversely, if more than sixty six
points seven percent of ATOM is staked, the protocol gradually
decreases the inflation rate, less incentive is needed.
Speaker 1 (13:22):
Ah, So it's like an economic thermostat trying to keep
staking levels stable. That's smart, It is quite smart.
Speaker 2 (13:27):
It directly links reward issuance to the network's security needs.
Speaker 1 (13:31):
So what does that mean for someone looking at ATOM
right now in twenty twenty five, what's the reality of
the yield?
Speaker 2 (13:37):
Well, participation is generally pretty strong, often above the target.
But even so, the dynamic inflation still tends to run
quite high compared to other networks. You'll typically see it
between say ten percent and fourteen percent.
Speaker 1 (13:50):
Still high inflation then it is.
Speaker 2 (13:52):
However, and this is key, the Cosmos ecosystem is growing
incredibly fast. You've got new chains launching constantly, expand into
specialized areas like AI integrated chains, tons of activity using
IBC for cross chain transfers, all generating real transaction fees
and demand, so.
Speaker 1 (14:10):
That growth offsets the inflation.
Speaker 2 (14:12):
It helps significantly. So even with ten fourteen percent inflation
against a twelve eighteen percent apy, the net reel yields
for adem stakers typically land in a very healthy range.
It can be as low as two percent sometimes, but
often it pushes up towards five percent, six percent, even
eight percent or more depending on the exact inflation rate
and network activity at the time.
Speaker 1 (14:30):
That's impressive managing that with high issuance. What about the
practical side. Staking Atom involves a twenty one day on
bonding period. That's three weeks where your funds are locked
if you want unstake.
Speaker 2 (14:38):
Yeah, twenty one days is a significant commitment. In the
crommet world, three weeks can feel like an eternity if
the market moves against you.
Speaker 1 (14:46):
So how does a staker weigh that lock up against
the potentially high real return.
Speaker 2 (14:51):
It really requires a strategic decision based on your time
horizon and conviction. If you truly believe in the long
term vision of Cosmos, this interconnected web of blockchains, which
looking at twenty twenty five seems increasingly likely to be
a dominant model, then that twenty one day lock is
a hurdle. You accept the price of admission for those
yields kind of Yeah, It's designed to reward long term
(15:14):
commitment to securing the hub. Practically, you'd use a wallet
like Kepler. It's super user friendly for the Cosmos ecosystem,
and the minimum steak is tiny like one etem very
accessible to start, Okay.
Speaker 1 (15:26):
And risks you mentioned validator choice earlier. Is centralization a
concern on a high value chain like the Cosmos Hub.
Speaker 2 (15:33):
It's definitely the primary risk to be aware of when
delegating ad on because the rewards are attractive. Large validators
can accumulate a significant amount of state and.
Speaker 1 (15:41):
If you delegate to one of those huge ones, well.
Speaker 2 (15:43):
First you're contributing to centralizing the network security, which isn't ideal.
But more directly, if that big validator messes up, maybe
they have downtime or worse, they try to double sign
a block, they get slashed and.
Speaker 1 (15:55):
The penalty hits the delegators too.
Speaker 2 (15:57):
Absolutely, slashing penalties on Cosmos can be severe. Up to
five percent of the total stake delegated to that validator,
that includes your funds instantly gone ouch.
Speaker 1 (16:06):
So how do you defend against that?
Speaker 2 (16:08):
Diversification is key. Don't put all your atom with one validator,
especially not one of the top five or ten largest ones.
Choose multiple highly reputable validators with excellent uptime records, maybe
slightly smaller ones outside that top tier spread the risk.
It mitigates both the centralization issue and the financial hit
if one specific validator gets slashed.
Speaker 1 (16:28):
Okay, diversify validators. Got it. Let's move to another giant
in the interoperability space, Polka dot dot different architecture right
focused on securing its pair chain ecosystem.
Speaker 2 (16:38):
Yeah, Polka dot has a very distinct architecture. Instead of
a hub and spokes like Cosmos, it has a central
chain called the relay chain. That's the core, that's the
core source of security and consensus. Then you have parachains.
These are independent, specialized blockchains that connect to the relay
chain and essentially lease its security.
Speaker 1 (16:57):
So dot staking secures that central relay chain exactly.
Speaker 2 (17:01):
Staking dot is absolutely fundamental to Polkadot's entire model. It
secures the relay chain, which in turn allows all these
different para chains to operate securely and transfer assets or
data between each other trustlessly.
Speaker 1 (17:13):
And Polka doots yields. I recall them being a bit
more controlled than Cosmos.
Speaker 2 (17:18):
They are generally more controlled. You'll typically see APIs topping
out around eleven point five percent, maybe twelve percent sometimes,
and crucially, their inflation is also managed more predictably.
Speaker 1 (17:28):
What's the typical inflation rate?
Speaker 2 (17:29):
It's usually designed to be around ten percent, maybe slightly
less depending on the staking ratio, but it's less dynamic
than cosmosis.
Speaker 1 (17:35):
So with around eleven point five percent ATY and maybe
ten percent inflation, how do the really yield stack up?
Are they competitive?
Speaker 2 (17:43):
Very competitive? Polka Doot consistently maintains a high and healthy
staking ratio, usually well over fifty percent, often closer to
fifty six percent or more of the total Dot supply.
Speaker 1 (17:52):
Is staked, which helps keep inflation in check relative to rewards.
Speaker 2 (17:56):
Exactly, so that calculation APY minus inflation usually lands Polka
Dot steakers with a real reward rate somewhere between five
percent and eight percent. Very strong, very consistent.
Speaker 1 (18:07):
And what underpins the value and demand for Dot to
support that yield? Besides just security.
Speaker 2 (18:13):
A huge factor is the parachain auction.
Speaker 1 (18:15):
Mechanism ah right, How does that work again?
Speaker 2 (18:19):
Teams that want to build a project and connect it
as a parachain to Polka Dot's relay chain need to
win an auction for a lease slot. These slobs are
limited to win, they need to bond lock up a
significant amount of Dot tokens for how long, typically for
the duration of a lease, which is often around two years.
Speaker 1 (18:34):
Two years, so that takes a lot of DOT at
a circulation.
Speaker 2 (18:37):
A huge amount. These auctions constantly remove dot from the
liquid circulating supply and lock it away for long periods.
This creates persistent demand for DOT, which directly supports the
token's value and helps sustain those strong real staking yields.
Even with that ten percent issuance. It's a really powerful
economic flywheel effect.
Speaker 1 (18:57):
Okay, that makes sense now practically staking, I remember reading
there were some unique challenges or friction points for users.
Speaker 2 (19:04):
Yeah, there definitely are a few things to be aware
of with dot staking. While they've introduced nomination pools which
make it easy for anyone to stake with just one dot.
Speaker 1 (19:13):
That's good for small holders, it is, But if.
Speaker 2 (19:15):
You're doing it directly nominating validators yourself using the Polka
dot dot js wallet, there are a couple of hurdles. First,
running a full validator requires a pretty hefty steak, around
two hundred and fifty dot last I checked.
Speaker 1 (19:29):
Okay, so most people will.
Speaker 2 (19:30):
Nominate right, and when you nominate, you can select up
to sixteen validators you trust. But here's the first challenge,
the risk of over nomination. With that if too many
people nominate the same popular validator. That validator becomes oversubscribed.
The network then only pays rewards to a certain number
of the nominators for that validator in each era, which
(19:52):
is about a day. If you nominated them but aren't
in the active set for that era, you might earn
reduced rewards or even none.
Speaker 1 (19:58):
Ah So, picking popular validators isn't always best.
Speaker 2 (20:02):
Not necessarily, no, you need to monitor their status. The
nomination pools help manage this complexity automatically, which is why
they're popular.
Speaker 1 (20:10):
Okay, And the other challenge the.
Speaker 2 (20:12):
Lock up period. Polka Dot has the longest unbonding period
of any major chain we'll discuss today, a full twenty
eight days.
Speaker 1 (20:19):
Twenty eight days, a whole month where your dot is
locked if you decide to unstake yep.
Speaker 2 (20:24):
Nearly a month of total illiquidity.
Speaker 1 (20:26):
Wow, compared to atoms twenty one days, which already felt long.
Who does Dot appeal to with such a long lockup?
It seems like a different type of investor profile.
Speaker 2 (20:36):
It definitely targets a specific profile. That twenty eight day
lockup is a very strong signal that Polka Dot prioritizes
maximum security and long term stability above all else. It
discourages short term speculations, so it appeals to It appeals
to investors who are really focused on long term, stable returns.
People or perhaps institutions and funds who have high conviction
in Polka Dot's tech and ecosystem growth like its use
(20:58):
in Web three gaming apps, and who aren't concerned about
needing quick access to their capital. They value the predictability
that comes with that security focus. It requires real confidence
in the asset for the medium to long term.
Speaker 1 (21:12):
Okay, deep commitment needed there. Let's shift gears. In part three,
we're moving to chains known more for architectural innovation, speed,
unique staking mechanisms, or flexibility. Starting with Tessos XTZ. You
mentioned it's beginner friendly and flexible due to its liquid
proof of steak model.
Speaker 2 (21:30):
Yes, Tesos is fascinating architecturally, it was quite ahead of
its time. It's liquid proof of steak LPOS is a
real standout feature, especially for anyone wary of lockups.
Speaker 1 (21:39):
Liquid proof of steak, how's that different from regular pos?
Speaker 2 (21:42):
In most POS systems, when you delegate, your tokens are
actually bonded or locked into a smart contract. They leave
your direct control for the duration with tesoslpos.
Speaker 3 (21:52):
That doesn't happen really, so the token stay in my
wallet exactly.
Speaker 2 (21:55):
Your xtz tokens never leave your wallet. You simply assign
your delegateation rights to a baker. That's what Taso's called
its validators. You're telling the network, I trust this baker
to validate on my behalf, but your funds remain fully
liquid and under your control at all times.
Speaker 1 (22:11):
Wait a minute, so I'm earning staking rewards, but my
xdz are still completely accessible. I could sell them tomorrow
if I wanted.
Speaker 2 (22:18):
Yep, you could. That completely removes the illiquidity risk, the
pain point of those long unbonding periods we just talked
about with atom and dot.
Speaker 1 (22:27):
That sounds amazing, almost too good to be true.
Speaker 2 (22:31):
How does the network maintain security if the tokens aren't
actually locked up as collateral?
Speaker 1 (22:35):
Good question. The security comes from the baker's side. The
bakers themselves do have to post a significant bond of
their own xtz. It's collateral. If a baker misbehaves, say
they double sign a block, their bond gets slashed.
Speaker 2 (22:48):
But not the delegated funds.
Speaker 1 (22:49):
Correct, the delegator's funds remain safe in their own wallet.
This means for you, as a delegator on Taso's there
is virtually no slashing risk to your principal capital. Wow,
no lockup and no slashing risk for delegators. That's huge
for beginners or conservative folks.
Speaker 2 (23:05):
It's incredibly appealing for that reason. And Tasos has a
very high stacking ratio around sixty eight percent, showing deep
community commitment. The apy is strong, often up to ten.
Speaker 1 (23:15):
Percent, and the real yield after inflation.
Speaker 2 (23:17):
Inflation is managed well, so the real rates are consistently stable,
usually landing between six percent and eight percent. Very attractive,
very reliable.
Speaker 1 (23:25):
Any other unique tasos features.
Speaker 2 (23:26):
Yeah, Another big one is its self amending blockchain. Tasos
can upgrade itself smoothly through on chain governance without needing
disruptive hard forks that can split the community or cause
network instability. It makes for very predictable evolution, so.
Speaker 1 (23:40):
Stable yields, no lock up, no slashing risk for delegators,
smooth upgrades. It sounds very solid. What's driving its growth
in twenty twenty five.
Speaker 2 (23:48):
They're pushing hard on adoption, leveraging their low energy consumption
as a key selling point. You see tasos being used
increasingly for NFTs for certain DeFi applications, and even in
enterprise solutions like for supply chain track or ticketing systems
and gaming. That utility growth helps sustain demand for.
Speaker 1 (24:04):
Xtz Okay TASO sounds like a strong contender, especially for
risk management. Next up Avalanche AVAX, known for speed but
also this unique subnet architecture and attracting institutional interest.
Speaker 2 (24:17):
Yeah, Avalanche is all about speed and customization. Its core
innovation is the subnet model.
Speaker 1 (24:22):
Subnets explain those.
Speaker 2 (24:24):
Think of subnets as custom independent blockchains that anyone can
launch on top of Avalanche. You can find your own rules,
your own fee, structures, even require specific validators, but they
all inherit their security from the main Avalanche network, the
primary network.
Speaker 1 (24:39):
And avx staking secures that primary network exactly.
Speaker 2 (24:43):
Staking avx secures the main p chain platform chain where
validation happens, and by extension, provides the underlying security for
all the custom subnets built on it. This architecture allows
for incredible throughput. Avalanche regularly handles over forty five hundred
transactions per second.
Speaker 1 (24:59):
That's fast. Their APIs a solid too, around eight percent
to ten percent what drives the real yield, which you
mentioned is about five percent to seven percent? And why
are institutions apparently so interested The.
Speaker 2 (25:08):
Stable real yield comes from Avalanche having deliberately low inflation.
It's a core part of their tokenomics design. The institutional
interest is almost entirely driven by that subnet architecture. Why
subnets specifically because institutions, especially in finance, often need blockchains
with specific features, maybe high speed, low fees, or even
(25:30):
permissioned access where only certain participants are allowed. Subnets let
them build exactly that. They can create a custom compliant
blockchain for things like tokenizing real world assets RWAs, or
for regulated trading platforms, but still get the security benefits
of the public Avalanche network.
Speaker 1 (25:46):
So it's ideal for building those regulated, high value financial application.
Speaker 2 (25:50):
Precisely, that focus on RWAs and bespoke enterprise solutions is
really underpinning the demand for AVAX and supporting its staking yields.
Looking into twenty twenty five, Okay, do.
Speaker 1 (26:00):
You practically stake AVX lockups risks?
Speaker 2 (26:03):
You typically use the official Avalanche wallet, or some exchanges
like coinbase offer it too. If you're just delegating, the
minimums are low If you want to run a full
validator node yourself, you need at least twenty five AVX,
and critically you have to maintain very high uptime like
ninety percent or more.
Speaker 1 (26:20):
Uptime requirements suggest slashing is a risk.
Speaker 2 (26:23):
Yes, slashing is a risk on Avalanche, though maybe less
severe than on Cosmos. Validators can be slashed for significant
downtime or malicious behavior. Delegators are exposed, but perhaps less
directly than the validator themselves. Careful validator selection is still crucial.
Speaker 1 (26:39):
In the unbonding period, it's pretty.
Speaker 2 (26:40):
Reasonable, usually between fourteen and twenty one days, so some illiquidity,
but not as long as ATAM or DOT.
Speaker 1 (26:46):
Okay, let's switch to pure speed now. Solana sol maybe
infamous sometimes for its incredibly high transaction throughput.
Speaker 2 (26:55):
Yeah, Solana is built for speed. We're talking theoretical limits
of sixty five thousand transactions per second, which is just staggering.
Speaker 1 (27:01):
How do they achieve that?
Speaker 2 (27:02):
It's a combination a proof of steak with a unique
consensus mechanism called proof of history or POH. Proof of
hist think of POH as a kind of cryptographic clock.
It creates a verifiable ordered sequence of events before those
events are even bundled into blocks. This allows validators to
process transactions in parallel much more efficiently, leading to that
mass of speed. Sol Staking is what secures the selection
(27:26):
of validators in this high speed environment interesting.
Speaker 1 (27:29):
Their yields are a bit lower average six percent to
eight percent APY, translating to maybe four percent to six
percent real yield after inflation. What makes solana staking attractive,
especially given its ecosystem seems dominated by fast moving DeFi
and well mean coins.
Speaker 2 (27:46):
It really comes down to that balance between getting a
decent yield and maintaining high liquidity. Also, Solana has one
of the shortest unbonding periods around. It's typically measured in
et box and usually only takes about two to five
days to unstake your SOL days.
Speaker 1 (28:00):
That's incredibly fast compared to the others.
Speaker 2 (28:02):
It's super fast, and that's vital for the kind of
users Solana attracts. High volume DeFi traders, people flipping mean coins.
They often need very quick access to their capital to
react to market moves.
Speaker 1 (28:12):
So they can earn four to six percent real yield
while knowing they can get their SOL back almost instantly
if needed.
Speaker 2 (28:18):
Exactly that combination of respectable passive income plus new instant
liquidity is the killer feature for that specific user base.
Speaker 1 (28:26):
Now, Solana has had some bumps regarding network stability in
the past. There's talk about an upgrade called fire Dancer.
What is that and what does it mean for stakers?
Speaker 2 (28:35):
Yeah, reliability has been a focus. Fire Dancer is a
huge deal. It's a completely new independent validator client for Solana,
being built by Jump Crypto, a major trading.
Speaker 1 (28:45):
Firm, alternative to the original code exactly.
Speaker 2 (28:48):
Having multiple independent clients makes the network much more resilient.
If one client has a bug that causes issues, the
network can keep running on the other clients. Fire Dancer
is designed to be extremely performant and Robut.
Speaker 1 (29:00):
So for a staker. What's the benefit? Lower risk?
Speaker 2 (29:03):
Directly, lower risk. Fire Dancer, once fully rolled out, should
significantly improve Salana's already quite high up time usually over
ninety nine percent these days, and make network wide outages
much less likely. Fewer outages mean a much lower chance
of validators being slashed due to network instability.
Speaker 3 (29:19):
It boosts confidence and staking is easy. Wallets pools, yeah,
very easy. The phantom wallet is probably the most popular,
and there are excellent liquid staking options too, like MARINAID
finance m SOL which let you stake even small amounts
and get that liquidity token back. Similar Toledo for ethereum.
Speaker 1 (29:37):
Okay Solana for speed and liquidity. Next, near Protocol NEAR.
Their focus is on sharding for scalability, and they're making
a push into AI.
Speaker 2 (29:46):
That's right. Near's core approach to scaling is through sharding,
using a technique they call.
Speaker 1 (29:51):
Nightshade sharding splitting the network load.
Speaker 2 (29:54):
Essentially, Yeah, nightsheet allows the network to dynamically split itself
into multiple parallel processing share theoretically enabling near infinite scalability
as demand grows. This is designed to support really complex,
high throughput decentralized applications. Near Staking secures this whole sharded
architecture through delegation.
Speaker 1 (30:13):
And the yields look strong eight percent to ten percent API.
Speaker 2 (30:16):
YEP strong APY and with well managed inflation and high participation,
the real yields are very competitive, usually landing in that
five percent to seven percent range, quite attractive.
Speaker 1 (30:27):
The twenty twenty five outlook mentions a big focus on
AI integration. How does that actually translate into demand that
supports those staking yields. Is it just buzz or is
their substance.
Speaker 2 (30:37):
It seems to be gaining substance. Near is actively positioning
itself as the blockchain infrastructure layer for a future where
AI agents and decentralized autonomous organizations DAOs need to interact
on chain, coordinate tasks, and manage value.
Speaker 1 (30:49):
AI needing blockchain.
Speaker 2 (30:51):
Think about verifiable computation, secure data ownership for AI training models,
decentralized marketplaces for AI services. Is building tools and partnerships
to enable that. If these AI projects take off and
start generating significant transaction volume and fees on NEAR.
Speaker 1 (31:09):
That drives demand for the NEAR token, supporting its price
and the staking rewards.
Speaker 2 (31:13):
Exactly. It's a bet on that future intersection of AI
and Web three and they already have a solid foundation
over seventy one million dollars in total value locked TVL
justin staking, very low transaction fews, which developers like, and
good tooling.
Speaker 1 (31:27):
Okay, what's the main technical risk someone should consider with
the sharded chain like near? Is it more complex to secure?
Speaker 2 (31:33):
Sharding does inherently introduce complexities? You have challenges around ensuring
data is available across all shards, coordinating security seamlessly preventing
cross chard communication issues. It's technically more involved than a
single monolithic.
Speaker 1 (31:46):
Chain, so potential for unexpected issues.
Speaker 2 (31:48):
There's always that potential with cutting edge tech. However, Near
has been running its sharting implementation live for a while now,
and they are continually improving it and focusing on decentralization
efforts to make it more robot ust. It probably suits
stakers who are more focused on backing technological innovation and
believe that sharding is the ultimate path to scalability. Unbonding
(32:09):
is also quite short, which is a plus.
Speaker 1 (32:11):
Got it innovation focus there? All right, let's pivot in
part four. We're going to focus now on the established
blue chips, the giants and protocols that really appeal to
more conservative risk averse investors. Prioritizing stability security may be
sacrificing a bit of yield for that peace of mind.
Starting with Cardono, Ada, known for its research driven approach.
Speaker 2 (32:32):
Yes, Cardano is definitely in that category. Its proof of
state consensus protocol is called Roboros. It's famously based on
rigorous academic research, peer reviewed papers. The whole development process
is very methodical, very focused on formal verification and security.
Speaker 1 (32:47):
That translates into features for stakers.
Speaker 2 (32:49):
Absolutely. The standout feature for Cardano, especially for conservative folks,
is a massive advantage. When you delegate your eightya to Steak,
there are absolutely no token.
Speaker 1 (32:59):
Lock, zero hold on like Tizos, the Ada never leaves
your wallet. It remains completely.
Speaker 2 (33:05):
Liquid, exactly like Tezos in that regard, Your Ada stays
in your own wallet, like DATAALSS or euroy, fully accessible,
fully liquid while it's earning staking rewards.
Speaker 1 (33:16):
That's incredible. Zero lockup means zero protocol level liquidity risk
That must fundamentally change how someone approaches staking Ada, especially
during volatile markets.
Speaker 2 (33:26):
It completely does you get the passive income without sacrificing
immediate access to your capital. It makes Ada arguably one
of the lowest risk staking options from a liquidity perspective.
Speaker 1 (33:35):
Okay, so what are the yields like then? If there's
no lockup? Are they much lower?
Speaker 2 (33:38):
They are more modest? Yes, You're typically looking at stable
yields around three percent five percent APY.
Speaker 1 (33:44):
And the real yield after inflation.
Speaker 2 (33:46):
Cardano's inflation is also generally low and predictable, so the
real returns are usually in the two percent to four
percent range, not the highest numbers we've seen, but extremely
consistent and reliable, and that stability is backed by Cardano's
huge market cap, strong community and institutional recognition.
Speaker 1 (34:04):
How easy is it to stake eighty? You mentioned wallets
like day liss or Euroi super easy.
Speaker 2 (34:09):
Cardano has a huge network of community run steak pools,
over three thousand of them. You just open your wallet,
browse the list of pools, look at their performance and fees,
which are usually quite low, and click to delegate to
the one you choose.
Speaker 1 (34:22):
That's it and rewards.
Speaker 2 (34:24):
Rewards are calculated every epoch, which is five days on Cardano,
and they're automatically distributed to your wallet. The low minimum
requirement to steak and that no lock up feature make
it probably the ideal entry point for someone completely new
to staking and wanting a very conservative.
Speaker 1 (34:39):
Approach makes sense. What about future developments? There's talk of
the Hydra upgrade. What does that mean for staking yields.
Speaker 2 (34:45):
Hydra is Cardano's Layer two scaling solution. It's designed to
enable massive transaction through put by processing transactions off the
main chain in Hydra heads.
Speaker 1 (34:54):
Will that boost the API directly?
Speaker 2 (34:56):
Probably not directly or immediately, but Hydra success is absolutely
vital for Cardono's long term growth it's needed to attract
high volume DeFi applications, complex smart contracts, better governance tools. Basically,
more utility and.
Speaker 1 (35:11):
More utility drives demand for.
Speaker 2 (35:13):
AD Exactly, Increased network activity and demand for ADA ultimately
supports the value of the token and the long term
sustainability of those stable three five percent staking yields. It's
about ecosystem health, reinforcing the rewards.
Speaker 1 (35:26):
Okay, cardano for stability and no lockups. Now, the big one,
Ethereum eth the undisputed leader post merge, securing the largest
DApp ecosystem out there.
Speaker 2 (35:35):
Yeah, Ethereum staking is really the bedrock of the decentralized
world now since the merge moved it to proof of
steak staking, eth is what secures this enormous ecosystem of DeFi, NFTs,
DAOs everything.
Speaker 1 (35:46):
What are the typical yields for e staking?
Speaker 2 (35:48):
They usually hover around three percent to five percent APY,
although because rewards can be automatically compounded, especially if you
use certain services, the effective yield can sometimes push a
bit higher, maybe towards seven percent in some.
Speaker 1 (36:01):
Cases, and inflation. This is where ethereum gets interesting, right.
Speaker 2 (36:04):
Very interesting. The crucial economic detail for eth staking is
its minimal net inflation thanks to the fee burning mechanism
introduced in EP one feeds fifty nine right.
Speaker 1 (36:15):
EP one fifty nine burns a portion of the transaction.
Speaker 2 (36:18):
Fees exactly a base fee for every transaction gets permanently
removed from the supply burned. Depending on how busy the
network is, the amount of eth burn can actually exceed
the amount of new eth issued as staking rewards.
Speaker 1 (36:30):
Making ethereum deflationary.
Speaker 2 (36:32):
Sometimes potentially yes, or at least very close to me
zero inflation. This is incredibly powerful for stakers. Means the
three five percent APY they earn is rarely diluted by
new token issuants. The real yield tracks the headline apy
very closely, so that.
Speaker 1 (36:47):
Three five percent is pretty much a genuine return. That
makes eighth the definition of blue chip stability in the
staking world, doesn't It?
Speaker 2 (36:53):
Absolutely low, reliable yield, but backed by the largest ecosystem
and incredibly strong tokenomics that minimize inflation. It's the go
to for stable long term exposure.
Speaker 1 (37:05):
Okay, but there's a catch for the average person, isn't there?
Running your own validator requires a massive amount of eth.
Speaker 2 (37:10):
Huge amount. You need thirty two eth to run your
own validator node. At current prices, that's a lot of
money prohibitive for almost everyone.
Speaker 1 (37:18):
So how do most people stake eth?
Speaker 2 (37:21):
They turn to staking pools or increasingly liquid staking providers.
Lido Finance with its steath token we discussed earlier, is
by far the dominant player here. Rocket pool is another
popular decentralized option. These services pool user funds together to
run validators, lowering the entry barrier dramatically.
Speaker 1 (37:38):
But Lido's dominance doesn't that raise concerns? We talked about
centralization risk.
Speaker 2 (37:43):
It's arguably the biggest debate and concern within the ethereum
community right now. Lito controls such a large percentage of
the total staked eth, maybe a third or even more.
Speaker 1 (37:53):
A third of all staked eth controlled by one entity smart.
Speaker 2 (37:56):
Contracts essentially yes, and that concentrate of steak translates into
significant governance power. The validators run by Lido, or rather
the DAO that governs Leto's operations, wield immense influence over
the network's consensus, transaction ordering, and potentially even future protocol upgrades.
Speaker 1 (38:15):
So while Lito solves the thirty two eth barrier and
the liquidity problem with STEPH, it potentially reintroduces centralization at
a different layer, the staking.
Speaker 2 (38:26):
Layer, that's the core tension. It's a tradeoff accessibility and
liquidity for the average user versus the risk of concentrating
too much power in one protocol, potentially undermining Ethereum's core
decentralization ethos.
Speaker 1 (38:38):
Something sophisticated investors definitely need to watch.
Speaker 2 (38:41):
Absolutely how that dynamic plays out, especially as layer two
scaling solutions continue to grow Ethereum's utility and more institutions
look towards staking eth via these pools. It's critical for
the network's future.
Speaker 1 (38:52):
Okay, let's touch on algorand I'll go known for something
called pureproof of steak and instant transaction finality.
Speaker 2 (38:58):
Right. Algorn uses pure your proof of steak PPOs. It's
designed by Sylvia McCauley, a Touring Award winner, and it's
known for being incredibly fast and efficient. A key feature
is instant finality.
Speaker 1 (39:10):
Instant finality meaning once a transaction is confirmed, it's irreversible immediately,
no waiting for more block confirmations.
Speaker 2 (39:19):
Exactly as soon as it's in a block, it's final. That,
combined with very low fees, makes Algrand position itself strongly
for things like payments or applications where speed and certainty
or paramount. They also mark it heavily on being quantum secure.
Speaker 1 (39:33):
Interesting, what about staking Algo rewards risks?
Speaker 2 (39:37):
The rewards are pretty stable, usually around five point seven
percent epy, but the big draw for risk management, similar
to Cardono and tasos, is that Algorin's standard staking mechanism
involves no lockups and no slashing penalties for the participants,
just holding Algo in their wallet and participating.
Speaker 1 (39:52):
Another one with no lockup and no slashing risk for
the average holder.
Speaker 2 (39:56):
Correct. If you just hold Algo in an official wallet
like paril wallet and ensure you're marked as online, you
participate in consensus and earn rewards without bonding or delegation risk.
This makes it exceptionally low risk for passive income.
Speaker 1 (40:11):
Seekers, so very straightforward. Ongoing DeFi expansion keeps the yield steady.
Speaker 2 (40:15):
Yeah, continued growth in their DeFi ecosystem and institutional partnerships
helps maintain demand and keep those returns predictable. For twenty
twenty five, very passive, very low stress.
Speaker 1 (40:26):
Okay, And finally for our top ten, let's look at
tron TRX uses delegated proof of stake focused on content
and entertainment.
Speaker 2 (40:34):
That's Tron. It uses delegated proof of stake or DPOs.
It's a bit different from the others. How does DPOs
work In DPOs? Instead of everyone potentially being a validator,
TRX tokenholders vote for a limited number of entities called
superrepresentatives or srs. I think it's twenty seven of them.
These elected srs are the only ones who actually produce
blocks and validate transactions.
Speaker 1 (40:54):
So it's more like a representative democracy kind of.
Speaker 2 (40:56):
Yeah, it's generally faster and more efficient than pure POS
because you have fewer validators coordinating, but the trade off
is that it's often criticized for being inherently more centralized,
as power rests with those few elected srs.
Speaker 1 (41:09):
And Tron's ecosystem.
Speaker 2 (41:11):
Focus historically very focused on content delivery networks, decentralized storage,
and more recently DeFi platforms and stable coins, often targeting
the entertainment and Asian markets.
Speaker 1 (41:21):
Their apuwids are moderate four percent to six percent, with
real yields maybe two percent to five percent after low inflation.
How does that DPOs model impact the staking experience for
a user?
Speaker 2 (41:32):
For the user, the main action isn't direct delegation, but voting.
You need to use your TRX to vote for the
SR candidates you want to represent you. By voting, you
help secure the network and typically earn a share of
the rewards generated by the srs you voted for.
Speaker 1 (41:46):
So it requires active participation.
Speaker 2 (41:47):
In voting ideally yes to maximize rewards and contribute to governance.
The advantage is that tron is often known for relatively
short staking terms if you use certain platforms and generally
lower volatility compared to some other asset.
Speaker 1 (42:00):
What about staking on exchanges? I've seen some advertise very
high TRX yields like twenty percent.
Speaker 2 (42:06):
Yeah, you have to be careful there. While you can
stake TRX via exchanges or platforms like kryptomis, those super
high yields like twenty percent are almost certainly not coming
from native DPOs staking rewards.
Speaker 1 (42:18):
Where are they coming from?
Speaker 2 (42:19):
Then? They usually involve additional layers of risk, like the
platform lending out your TRX potentially in risky DFIVE protocols
to generate that extra yield. It's often tied to short
term promotional campaigns and carries significant counterparty risk, the risk
that the platform itself fails or loses the funds. It's
very different from the base four six percent apy from
(42:40):
simply voting for srs.
Speaker 1 (42:41):
Right. Need to distinguish native staking from platforms specific lending products. Okay,
we've covered a lot of ground ten chains diving into
real yields, lockups risks. We've seen top performers like ATM
and dot potentially offering up to eight percent real yield
balanced by longer lockups, and then incredible stability from ethan
A with eth having near zero inflation and Ada offering
(43:03):
zero lockups.
Speaker 2 (43:04):
Quite a range of options depending on your priorities.
Speaker 1 (43:06):
Definitely, But before anyone listening rushes off to delegate their
hard earned crypto, we need to really hammer home the
due diligence in Part five Mitigating risks and best practices,
Let's start with what you called the trinity of staking risks.
First one slashing.
Speaker 2 (43:24):
Yeah, slashing is the scariest one because it directly destroys
your capital. It's the penalty mechanism networks used to punish
validators for bad behavior.
Speaker 1 (43:32):
The kind of bad behavior two main things.
Speaker 2 (43:35):
Significant downtime being offline when you're supposed to be validating,
or much worse, actively trying to cheat the consensus, like
signing two different blocks at the same height double signing,
and the penalty hits It hits the validator's own staked collateral,
but crucially, it usually also hits a portion of the
funds delegated to that validator. So your capital is directly
(43:56):
at risk based on your validator's performance and honesty.
Speaker 1 (43:59):
So choosing your coolidator isn't just about maximizing yield. It's
a fundamental security.
Speaker 2 (44:03):
Decision, absolutely fundamental. Yet to treat it like choosing a bank,
almost their reliability directly impacts your investments safety.
Speaker 1 (44:10):
Okay, Risk number two illiquidity and lockups. We touch on
this lot.
Speaker 2 (44:14):
Yeah, this is the time component of risk. That unbonding
period twenty one days for ATUM, twenty eight for DOT
maybe fourteen twenty one for AVEX means your money is
completely frozen. You cannot access it, cannot sell it, cannot
react to market news, and.
Speaker 1 (44:29):
If the market tanks during that period, you just have
to watch it happen.
Speaker 2 (44:32):
You're locked in. It can turn a market dip into
a much more significant loss because you had no way
to exit. This is precisely why those no lock up
models on Kurdano, Algoran and Tazos are so appealing to
people who prioritize liquidity and why Solana's super short two
to five day unbonding is attractive too.
Speaker 1 (44:49):
Right. Risk three. You mentioned this in the context of
liquid staking derivatives like Lidos.
Speaker 2 (44:53):
Steith exactly smart contract vulnerabilities. This risk applies anytime you
interact with a decentralized staking pool or use an LSD.
Speaker 1 (45:00):
Platform because you're trusting their code.
Speaker 2 (45:03):
You are trusting their code one hundred percent. If that
complex web of smart contracts has a bug and exploit
an economic flaw, attackers could potentially drain the funds locked
within it, That includes the underlying assets backing your staff
or MSOL or whatever derivative token.
Speaker 1 (45:20):
You hold at you mitigate that specific risk.
Speaker 2 (45:22):
Due diligence on the platform itself. Only use protocols that
are well established, have undergone multiple rigorous security audits by
reputable third party firms, and ideally have bug bounty programs.
Never ever chase some random new pool offering an unbelievable
apy if it doesn't have a proven security track record.
The risk is just too high.
Speaker 1 (45:42):
Okay. Audits are key for pools and lsds. Let's switch
to broader best practices. Then, if someone is ready to start,
what are the absolute must do steps?
Speaker 2 (45:51):
Okay, First principle, security hygiene. Start small. Don't ape your
entire life savings into staking one asset on day one.
Get comfortable with the process. The wall is to the
lock up mechanics first makes sense. Second, protect your keys
like their gold. Use a hardware wallet, ledger treaser for
any significant amount you plan to stake long term. Store
your seed phrase offline securely, redundantly. Never type it into
(46:15):
a computer. Your private key security is paramount.
Speaker 1 (46:19):
Okay, self custody and hardware wallets. What about vetting the
validator you delegate to. You said that was crucial.
Speaker 2 (46:26):
It's probably the single most important active decision you make
as a staker. Few things to check. Number one, uptime history.
Look for validators with near perfect uptime like ninety nine
point nine percent or higher over a long period. Consistent downtime,
even if not malicious, can reduce your rewards and potentially
lead to slashing on some networks.
Speaker 1 (46:45):
Okay, uptime.
Speaker 2 (46:46):
Number two commission rate. This is the percentage fee the
validator takes from your gross staking rewards before passing the
rest to you rates very wildly.
Speaker 1 (46:54):
Is lower always better like zero percent commission?
Speaker 2 (46:56):
Not necessarily be a bit wary of zero percent commission validators.
Sometimes they are temporary promotions. Sometimes they might be cutting
corners on infrastructure to offer that rate, potentially making them
less reliable long term. A reasonable commission, say five to
ten percent, often indicates a serious sustainable operation. Compare rates,
but don't just pick the absolute lowest without checking reputation.
Speaker 1 (47:19):
Okay, uptime commission, what else?
Speaker 2 (47:22):
Third, and this is critical for network health and your
own risk management. Avoid over delegating to the biggest validators.
Check the validator list, see who has the most stake already,
and pick smaller ones. Ideally, yes, choose several reputable, reliable
validators who are outside the top five or ten in
terms of voting power. Diversify your stake across them.
Speaker 1 (47:42):
Why is diversification across validators so important even within the
same crypto asset.
Speaker 2 (47:46):
Two reasons. First, it supports network decentralization. You don't want
a handful of validators controlling the whole network. Second, it
protects you if you put one hundred percent of your
atum with one validator, and that single validator gets slacked,
even for an honest mistake, you bear the full brunt
of that penalty. If you spread your stake across, say
four validators and one get slash, you only lose a
(48:10):
quarter of the potential penalty amount. It spreads your risks significantly.
Speaker 1 (48:14):
Diversify assets diverse five validators makes total sense. And finally,
how do you stay on top of all this apise
change inflation changes?
Speaker 2 (48:23):
You need good information tools. You can't just set and
forget entirely. Use external resources like stakingrewards dot com, or
look at the specific block explorers for the network you're staking,
like mint scan for Cosmos. They provide real time data
on current APIs, validator performance, network participation rates, estimated inflation.
Speaker 1 (48:40):
So you need to check in periodically.
Speaker 2 (48:42):
Yeah, maybe every few weeks or months, just reevaluate your choices.
Is your validator still performing well, has the network's inflation
changed significantly? Is the real yield still attractive? It requires
a bit of ongoing monitoring and.
Speaker 1 (48:55):
We have to mention taxes again.
Speaker 2 (48:56):
Tracking tools, yes, absolutely, Since every reward is income, you
need to track it. Using crypto tax software like coinly,
cointracker or others is almost essential. Connect your wallets, they'll
import the transactions, calculate the value at the time of receipt.
It makes tax reporting manageable.
Speaker 1 (49:12):
Don't skip this, Okay, track everything for taxes solid advice.
Speaker 2 (49:16):
So let's try and summarize this deep dive for twenty
twenty five. The main takeaway staking top cryptocurrencies. It's definitely
a viable way to earn genuine passive income. But and
it's a big butt only if you look past the
flashy advertised APY number.
Speaker 1 (49:32):
Right focus on the real yield APY minus inflation exactly.
Speaker 2 (49:37):
And we've seen that among these well established, battle tested
networks you can realistically achieve real yields of up to
say eight percent in some cases like Atom or dot
or xtz. That's balancing strong income generation with solid network
security and reasonably controlled token economics.
Speaker 1 (49:54):
But getting that sustained return it requires doing your homework,
doesn't it. Understanding those liquidity trade offs, with the lock
up periods, vetting your validators carefully for security and reliability,
and always being aware of the smart contract risks. If
you opt for liquid.
Speaker 2 (50:10):
Staking, precisely your actions as a staker they aren't just passive.
You're actively contributing to the network security, its decentralization, and
even its future governance through your choices.
Speaker 1 (50:22):
Which actually leads perfectly into our final provocative thought for you,
the listener to mull over.
Speaker 2 (50:26):
Okay, let's tie together. We've established that staking rewards are
fundamentally linked to network inflation, which is often controlled by
participation rates and also by the overall economic success and
demand for the network. Right, And we've also seen how
large centralized staking pools, particularly LEDO dominating ethereum staking, are
concentrating significant power.
Speaker 1 (50:47):
Yeah, the governance influence.
Speaker 2 (50:49):
So here's the thought. If staking power translates to governance power,
and that power is increasingly concentrated, how might a major
external event, like a huge global shift in capital flows
towards crypto or perhaps significant new regulatory interest focused on
these large staking entities, how might that affects the inherent
(51:10):
governance power held by these dominant pools. And maybe more importantly,
what does that potential for centralized influence under external pressure
mean for the long term decentralization ethos. That the entire
cryptospace was supposedly.
Speaker 1 (51:23):
Built on centralized powerpoints potentially becoming targets or levers, what
does that mean for genuine network control? Definitely something profound
to think about as you research your own staking strategy.
Speaker 2 (51:34):
Food for thought.
Speaker 1 (51:36):
Indeed, that's all the time we have for this deep dive.
We really hope you feel thoroughly well informed now about
the realities of staking in twenty twenty five. Thanks for
joining us.
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