Why you should stake your coins, and why you shouldn’t do it on an exchange

Some coins are able to be ‘staked’. Typically, these are ‘proof of stake’ coins which, rather than processing transactions through computational ‘mining’, uses percentage of ownership to reach agreement on transactions.

The upshot is that you are able to earn rewards through owning coins, just like an interest rate. ‘Staking’ your coins puts them towards this consensus and rewards you – no expensive mining required!

The ‘interest rate’ earned for a coin can vary wildly, but the higher this rate the more crucial staking becomes, as if you are missing out, you could be, in effect, significantly eroding your investment.

Some exchanges make it easy to stake or ‘earn interest’ from your crypto. But this is often a false economy – exchanges will take a large cut of the rewards. Some coins, such as ATOM, will also award stakers in other ways – like free airdrops. Exchanges keep these all to themselves, of course.

Staking via an exchange can have advantages – sometimes giving you more flexibility, if perhaps you are only planning on keeping a coin for a short period. But get your coins off an exchange to maximise your rewards, and of course, ‘not your coins, not your crypto’!

TL;DR: Staking gives you freebies, but doing it on an exchange means you will miss out on a significant portion of these.