Crypto Investors Earn Healthy Returns via PoS Protocol Despite Pessimistic Market
While cryptocurrency market continues to be dominated by the bears, some HODLers have found a new robust way to earn money despite it. A Bloomberg report published on February 1, 2019, notes that some investors are earning interest on their crypto holdings by staking them.
PoS to the Rescue
Cryptopians are known for challenging the conventional. Staying true to this characteristic, holders of digital currencies have found a sleek way to make money in this suppressed market – all courtesy of the Proof-of-Stake (PoS) protocol.
For the uninitiated, PoS differs from PoW in that the former requires “staking” digital currencies instead of performing complex mathematical computations to add a new block to the blockchain or to validate transactions.
In exchange, these “stakers” receive rewards in the form of coins for helping validate transactions. The PoS protocol can generate returns ranging from five to 150 percent depending on the amount held and coins staked.
Kyle Samani, a managing partner at Multicoin Capital Management, said:
“Regardless of market conditions, staking provides returns denominated in the asset being staked. If you’re going to be long, you might as well stake.”
Bear Market Creates a new Offering
It takes a creative mind to identify opportunities to make money when the market sentiment is at an all-time low. Thankfully, the cryptoverse has no dearth of innovative minds.
The practice of staking coins, aka forging, has proved to be the breeding ground for an array of crypto custody startups whose sole purpose is to stake their client’s crypto holdings for healthy returns. Companies like Staked, EON Staking Inc., Figment, and Anchorage have all tested the waters of crypto forging.
While Staked successfully raised $4.5 million on January 31, 2019, from the likes of Pantera Capital and Coinbase Inc., EON is slated to launch a staking-as-a-service offering in February 2019. The company will charge a small commission of five percent on the interest its clients earn.
Similarly, Anchorage, which launched on January 23, 2019, boasts an enviable clientele which includes the likes of Andreessen Horowitz, and crypto asset investment company Paradigm. The startup aims to provide coin custody and staking services for institutional investors.
Potential Downsides to Forging
However, it’s not all hunky-dory when it comes to the practice of forging. One of the major risks involved with staking coins is that of opportunity cost borne by the investor during the time their holdings are stuck in the network. This means that investors might miss out on a mini-rally or fail to sell their holdings while it plunges in value.