How To Stake Avalanche in 2024

Launched in September 2020 as an Ethereum rival, Avalanche represents a Layer 1 blockchain with lightning-fast transactions. To achieve scalability, the project provides a unique architecture splitting its network into three different layers: X-Chain, C-Chain, and P-Chain. Each of these layers is responsible for a different set of operations. This helps to distribute the burden of transaction validation and enables the network to scale. Running on the Proof-of-Stake (PoS) consensus mechanism, Avalanche makes it possible to stake its native coin AVAX and thus make passive income. This guide aims to cover the process of AVAX staking along with its pros, cons, and the top platforms offering this service.

Top AVAX Staking Platforms

What is AVAX Staking?

In the world of crypto, staking refers to the process of locking your funds in a blockchain network for a predefined period of time.

To perform AVAX staking, token holders lock their assets in specific wallets. Thus, they bet that the validation server performs its job properly.

Such an approach is beneficial both for the Avalanche network and for stakers who support it. The more users place their coins at stake, the higher the decentralization of the network and, consequently, its security. The asset owners, in turn, get financial incentives in the form of native tokens for their contribution.

At the same time, the reward that each network participant gets directly correlates with the number of tokens at stake.

Staking vs Mining

Networks running on the Proof-of-Stake (PoS) consensus mechanism feature crypto staking. The solution has been invented as an energy-efficient alternative to those systems that rely on the Proof-of-Work (PoW) algorithm.

With PoW-based systems such as Bitcoin, nodes compete with each other by trying to solve complex mathematical puzzles. In the process, they consume high amounts of electricity which mostly goes to waste.

PoS-based networks act in a different way. All that users have to do to participate is to keep some coins on a specific wallet address.

Thus, PoS-based networks such as Avalance consume much smaller amounts of electricity. At the same time, they feature a high level of security and decentralization.

What Makes AVAX Staking Unique?

Staking AVAX tokens on the Avalanche network may be performed in two different ways.

First, users may choose to become validators themselves. For that, they need to stake 2,000 AVAX at the minimum. The staking period, in this case, ranges between 2 weeks a 1 year while the process of staking takes place on the Primary network.

Second, it is possible to delegate your tokens to an existing validator. Such an approach is easier as it doesn’t require any technical skills from stakers. Also, the minimum requirements are much lower as users have to stake only 25 AVAX at the minimum.

The simplicity comes at a cost, though. AVAX staking through delegation means paying a minimum delegation fee rate which equals 2%.

AVAX Staking – Useful Words to Know

• Delegated Proof of Stake (DPoS) – This is a variation of the Proof of Stake consensus mechanism which implies delegating your tokens to a selected number of validators or block producers.

• Validators – Selected via the voting procedure, these network participants play an important role in the blockchain ecosystem as they produce new blocks and validate transactions.

• Delegators – These are other network participants who prefer to entrust their tokens to network validators for staking through delegation.

• Primary network – On Avalanche, this is the network that validates all other built-in blockchains, namely Platform Chain, Exchange Chain, and Contracts Chain.

• Node – A node represents a device that is authorized to support the network. It holds a specific number of native tokens and is responsible for validating transactions and storing their complete history.

How to Stake AVAX

AVAX staking is a nice way of putting your idle tokens to work and there are different ways you can do this. However, you should carefully study the process first to understand which of these options meets your technical expertise.

Below, we are going to give an overview of all these methods. Also, we will provide some basic guidance to help you get started.

Staking AVAX on a Centralized Exchange – Easy

Centralized exchanges offer the simplest option for staking AVAX so far. Since they strive to meet the demands of all categories of users, they typically make their interfaces pretty simple. Thus, the staking process is intuitive and user-friendly.

However, there is also a certain risk associated with this method as you will have to entrust your funds to a third party. This may result in money losses if an exchange gets hacked or goes bankrupt.

Still, the overall simplicity combined with the possibility to deposit funds from a card or a bank account makes this option the most popular among novices.

Joining an AVAX Staking Pool – Intermediate

If you prefer to maintain full control over your own assets and do not want to entrust your funds to any third party, staking AVAX in a pool would be the best solution.

This option of making passive income enables users to stake assets within their own non-custodial wallets. However, such an approach is more complicated as it requires specific technical knowledge and relevant experience with such matters.

Delegate Tokens to an AVAX validator – Intermediate

For tech-savvy users and those who want to contribute to the Avalanche Network, delegating tokens to an existing AVAX validator may be the best option.

AVAX staking options compared

Where to Stake AVAX

Centralized exchanges are by far the easiest places to stake. Here are the top three options that support AVAX.

1. Binance – Best for Good Returns and Security

Binance is a well-known crypto platform beloved by its users worldwide for its wide selection of features, digital assets, and advanced trading tools.

The platform takes security seriously as it strengthens its reliability with compliance checks and multi-factor authentication. Apart from spot trading, Binance also offers margin, futures, and peer-to-peer trading. Also, there is a number of crypto-earning tools. In particular, Binance Earn was created for users to earn passive income on their cryptocurrency holdings.

Also, Binance offers AVAX staking as part of its Simple Earn program. As of the time of writing, Binance provides the opportunity to earn interest on over 300 coins.

For AVAX, Binance offers an interest rate of 6.39% and 9% for 30 and 120-day lock-up periods respectively. If you prefer not to lock your funds, Binance also provides flexible savings options. However, it’s worth mentioning that the rates for flexible savings tend to be lower in comparison with locked savings.

How to Stake AVAX on Binance

In case you don’t have an account on Binance, you will have to get one first. Register on the platform and submit the required documents to pass the KYC.

Buy some AVAX coins on the platform via any method that fits you best. Alternatively, if you already have AVAX somewhere else, deposit the assets to your Binance address.

Go to the Binance Earn page

Navigate to the Earn section at the top menu of the platform and select “Binance Earn” from the drop-down menu.

Select the coin for staking

Type “AVAX” in the search field. Make sure that the current APY fits your requirements. Choose for how long you want to lock up your coins for the sake of APR. Click on the “Subscribe” button on the right.

Specify the amount to stake and other details

In the next stage, specify how many AVAX coins you want to stake in the pop-up window. Pay attention to the maximum and minimum available quota. Also, check once more that you’ve selected the correct duration.

Select the “Auto-subscribe” option if you want to prolong the staking period automatically.

Read and agree with the Binance Service Agreement. Finalize the transaction by clicking on the “Stake” button.

2. Crypto.com – Best for Flexible Staking

Crypto.com is a well-known cryptocurrency trading platform suitable for all types of users, from novices to pro traders. It offers a range of cryptocurrency products, along with a staking feature, which covers more than 20 different coins, including AVAX.

Users often select the facility to take advantage of staking due to the flexibility of this feature. On Crypto.com, the staking period can be flexible, one month, or three months, while rewards are distributed on a weekly basis. This allows users to select rewards with respect to their individual preferences.

An interesting fact is that the rewards depend on the amount of CRO tokens locked, with higher amounts typically resulting in greater yields. Users with private member status can enjoy additional benefits and perks within the network.

How to Stake AVAX on Crypto.com

Install the Crypto.com app

In order to stake AVAX via Crypto.com, you should download and install its mobile app first. Navigate to the bottom of the official website, download and install the Android or iOS version depending on the type of your mobile device.

Log into your existing account or create a new one.

Select AVAX

After clicking the menu button at the bottom of the app, tap the plus button and then “Earn” and choose Avalanche from the list of cryptocurrencies available for staking.

Start staking AVAX

Choose between the flexible, 1-month, or 3-month terms, agree to the T&Cs, and enter the amount you want to stake. Then you just need to tap confirm once you’ve checked the details and finalize your transaction by entering your passcode or using your fingerprint.

3. Nexo – Best for Convenient Functionality and Competitive Interest Rates

Nexo is a crypto lending platform that enables users to earn crypto by making use of the financial potential of their cryptocurrency holdings.

Nexo allows users to leverage their digital assets as collateral for loans. Thus, it enables them to borrow against the value of their cryptocurrencies and access funds in traditional currencies. This way, users can tap into the value of their digital assets without having to sell them, providing them with immediate liquidity while still retaining ownership of their cryptocurrencies.

The alluring interest rates, flexible loan terms, and simple borrowing process are the key aspects that attract members of the system. In addition, Nexo offers opportunities for earning passive income through cryptocurrency deposits. The facility stands out for its rapid loan approvals and the option to repay loans in both crypto and fiat. The combination of these features makes Nexo quite a convenient and efficient solution.

In February 2022, Nexo started supporting AVAX. Thus, it has provided an opportunity for the members of the ecosystem to earn from 8 to 17% depending on the loyalty tier. At the time of writing, the maximum interest rate is 12%. The lock-in periods are customizable, which means that it’s possible to choose the duration of a specified period from one to 6 months.

How to stake AVAX on Nexo

To start staking with Nexo, follow these simple steps:

Register with Nexo

Sign up and complete the Know Your Customer (KYC) procedure on the platform. It involves providing some personal information and verifying your identity. Typically, the process takes only a few minutes.

Add AVAX to your account

Transfer your AVAX from an external address or buy the assets right on the platform.

Start earning interest

Once AVAX is in your Nexo account, you will start earning rewards immediately.

AVAX Staking Platforms Compared

How much can you make staking AVAX?

Upon the launch of this service, many platforms offered much higher rewards. Thus, Binance offered up to 32.79% APY for first-comers. However, since the service has been long up and running already, the current rewards are much more humble.

On average, you may earn anywhere between 4% and 20% on your AVAX investment if you stake it on a centralized exchange. Contributing your assets to a staking pool provides 7% APY on average while delegating them to another validator may give you up to 11% ROI.

Despite being the most complex solution, running your own node results only in 8.6% ROI. However, the reward could be much higher in time if you maintain a good reputation and maintain node uptime for more than 80% of the whole staking period.

Keep in mind that the size of the reward is not set in stone as well. It may change over time together with the market conditions and the state of the Avalanche network. Therefore you should keep constant track of the statistics of the method you’ve selected.

Is there a downside to staking AVAX?

While you look for a way to earn passive income in crypto, it’s important to explore the downsides as well.

Though staking AVAX is rewarding, it bears some risks as well. There are several associated dangers to consider before making an investment decision.

• The lock-up or “vesting” period. The Avalanche system doesn’t allow transferring tokens during the lock-up period to ensure network stability. The shortest lock-up period for AVAX lasts 14 days. It means that users can’t trade staked tokens even if the price shifts.

• The lack of access to staked tokens. As mentioned above, users don’t have access to AVAX during the specified period. This can be a problem when the market is particularly volatile and the value of staked tokens drops.

• Price movement. Fluctuation of AVAX price can reduce staking rewards considerably or even cause losses. Sometimes the capital loss can even turn out to be higher than the yield received. To avoid such a situation, choose the flexible saving option that allows unstaking tokens when needed.

• High entry barriers. The entry barrier that Avalanche imposes on the network validators is rather high as the platform requires staking 2,000 AVAX tokens to start the activity. Nevertheless, over 500 users submitted applications to become node validators in just the first week after the mainnet launch. Those who want to delegate their tokens should stake at least 25 AVAX. The good news is that the number of validators is not limited, so it’s possible to join the network at any time.

• Security. It’s important to exercise caution while engaging in staking activities since they involve certain risks when interacting with smart contracts or third-party platforms. These risks include potential vulnerabilities, bugs, or exploits that may result in the loss of your staked funds.

What makes the Avalanche blockchain stand out is that it eliminates the risk of slashing, which is usually a large concern for people who stake digital assets. This may occur when validators or stakers act maliciously and violate network rules, leading to a penalty in the form of a portion of their staked funds being confiscated.

Avalanche doesn’t punish incorrect validation and doesn’t confiscate staked funds when the network rules are violated. Instead, the network simply doesn’t pay rewards to such validators. Interestingly, this feature is often mentioned as a drawback of the system since it doesn’t improve discipline.

Should I stake AVAX?

At the time of writing, AVAX is one of the top 20 cryptocurrencies by market cap. It has attracted significant interest from crypto investors. At the same time, new projects unfold on the Avalanche blockchain one after another. Users take advantage of such features as low transaction costs, fast transaction speeds, and Ethereum compatibility.

The decision of whether to stake AVAX should be based on your own research and assessment of the following considerations.

• Risk vs reward. As a volatile cryptocurrency, AVAX belongs to a risky asset class. Consequently, thorough research is a must for any investment endeavor. The information provided in this article should not be regarded as financial advice, though, as investors should always rely on comprehensive information from different resources.

• Tax implications. Users should pay attention to the fact that staking rewards can be taxable. Study how you should pay taxes on crypto income according to your local legislation.

• Skill level. It is recommended to use a centralized platform for beginners, while more advanced traders can employ other more complicated tools.

• The choice of the investment strategy. Another important factor to consider before investing in AVAX is the intentions of users to either hold or trade the AVAX token. Long-term holders may find staking a useful tool to increase their investment size, while frequent traders may find the lock-up period inconvenient.

Final Thoughts

AVAX staking represents a good solution for those who want to put their idle assets to work without needing to sell them.

Different methods of staking cater to different levels of skills and rewards expectations. Thus, you may simply stake AVAX in a few clicks on a centralized exchange or you may choose to stake coins in a pool or even become a network validator.

In this guide, we have provided information about the various methods to help you get started. However, it is crucial to do your own research before you go any further.

Pay attention to all the technical aspects and, most importantly, to the security of your assets to minimize the chances of losing your funds.

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