The dream of one day living off of staking rewards from investing in cryptocurrencies with Proof of stake has been my dream since proof of stake came into the cryptocurrency world. Just like dividends are earned from stocks, so too can you earn dividends from certain cryptocurrencies in the form of more coins through staking.
Bitcoin, which suddenly appeared in 2009 used a very intensive energy based consensus mechanism to validate blocks called proof of work. Bitcoin miners would employ sophisticated ASIC machines to solve the complex algorithmic puzzles to unlock rewards in the form of more Bitcoins. The puzzle would get increasingly more complex the more miners came on the network to get rewards and therefore it boiled down to who had the most efficient ASIC miners and cheapest electricity. This led to an arms race with the latest estimates leading us to believe that Bitcoin mining uses as much electricity as the entire country of Switzerland does in a year. In a time where climate change has come to the forefront and sustainability is being designed into everything we use it became clear that using proof of work as a consensus mechanism was not efficient.
Proof of stake evolved to combat the inefficiencies of proof of work. In a proof of stake consensus model a coin holder ‘stakes’ however many coins he or she wishes to stake by delegating them to a coin pool owner which validates transactions on the blockchain and the staker is rewarded in the form of more coins therefore earning them passive income. Different blockchains employ different forms of the proof of stake model but essentially the basis is you stake coins by delegating them to a pool of your choice and after a certain period of time you receive more coins back as a rewards. This is the part of proof of stake that really appeals to me, you pick a coin you speculate will increase in value over time and you get passive income through staking while you wait for the coin to appreciate in value.
Below are my five top picks for proof of stake cryptocurrencies which have good percentage rewards and which I believe will increase in value going forward.
Cardano was created by Charles Hoskinson and came into the crypto universe in 2017. The project pursued system of peer reviewed papers in a scientific, academic way and after many delays and setbacks the blockchain went on the mainnet in August 2020 with the Shelley phase. Cardano uses a proprietary proof of stake model called ouroboros and promises a truly decentralized blockchain governed by the stakeholders. Cardano also supports DeFi, smart contracts and has an active community. Cardano was once called an “Ethereum killer” yet Charles has come out to say this is not the case and Cardano seeks to embrace interoperability with other blockchains. The future looks bright for Cardano with many possible partnerships as well as possible listing and staking available on Coinbase in the future. Cardano has a maximum supply of 45 Billion coins through its native token called ADA. Currently this coin trades at $0.94 a coin, yet I wouldn’t be surprised seeing it double by March next year. Cardano and its native toke ADA offers a staking reward of around 5% ROI a year.
2. Polka Dot
This coin literally appeared out of nowhere and climbed to top 5 cryptos within a month. I did a post about this coin earlier here https://kingofstake.com/2020/09/14/is-polka-dotdot-a-good-buy/ if you want a more detailed description of it. It has a lot of potential and offers an impressive 6.74% ROI a year. Currently Polka Dot and its native token DOT treades around $5 a coin.
Tezos came into the crypto universe through an ICO in 2017. Tezos employs a delegated proof of stake consensus through its native token XTZ or tezzies. Additional Tezos are earned by a process called baking. If you possess a certain required minimum of XTZ you can become a baker and collect additional Tezos from delegators and in return reward the delegators with more Tezos scaled to how many Tezos they bake with the baker. Tezos has no set cap on how many Tezos are to be distributed which is similar to Ethereum. Having no set cap on the amount of Tezos in existence calls into question how scarcity will effect Tezos value going forward. Nevertheless the coin offers an impressive ROI of 5.5% a year and is listed on many exchanges. Currently Tezos trades around $2.23 a coin.
Cosmos exploded into the Crypto world around 2019 through an ICO and labelled itself as the “Internet of Blockchains”. The premise behind Cosmos is that it promises interoperability which allows it to connect to other blockchains. Using Cosmos other blockchains can share data and tokens with no central party involved. Cosmos uses a delegated proof of stake consensus through its native ATOM token. There is no maximum supply of ATOM tokens and the coin currently has an impressive ROI of around 9% a year. ATOM tokens can be bought on many accredited exchanges and is definitely worth keeping an eye on.
Algorand was founded in 2017 and offers a sophisticated proof of stake system. This blockchain focuses on speed of transactions and allows developers to build apps on it through smart contracts. Although far down in the crypto rankings it could be a dark horse if it garners enough interest from investors and developers. It currently offers a 5% ROI per year and has a coin limit of 10 Billion. Its native token is ALGO and s available on many popular exchanges.
These are my five picks for the best cryptocurrencies offering good returns for coins staked in 2020. These picks also have the highest probability in my opinion to appreciate in value if we enter another bull market. Going forward there will probably be a host of new blockchains and coins that will offer proof of staking and I will update this list as needed. Happy staking!!