A cryptocurrency staking pool is a pool of digital assets that have been submitted by users and entities for interest opportunities. The idea is to lend your crypto into the pool and earn lucrative yields on assets as your digital assets are used to verify the network through an activity known as staking. Staking is an environment friendly consensus style solution that is 99.95% better for the planet than Proof of Work networks such as Bitcoin.
Which is Better – Staking Solo or Staking Pools?
One can stake solo if they have enough assets, however many people do not have the minimum staking requirements to run their own node. For example, to stake ETH on your own node, you need 32 ETH, which is far out of the affordability category for much of the world. Instead, you can now join staking pools! A staking pool company pools together ETH from individuals in order to run nodes and then distribute profits back to investors in the node.
Typical staking rates on Ethereum run at 6% APY if you run your own node, but staking pool companies may reduce your staking rewards to 4-5% and keep the difference as a payment or reward for the service they are providing, which is running their own node so you do not have to worry about daily maintenance and upkeep.
If you can afford it, staking solo can be better, but it also comes with its own risks, so it is probably best to stay away from solo staking. Solo stakers as mentioned above can often make more in yield, however the risks involved are quite big. If you do not follow the directions correctly, you run the risk of losing your total ETH investment.
One additional downside to staking solo is you likely will not have enough assets to even be chosen by the network to validate blocks. If you join a massive staking pool, it has a much greater chance of selection for rewards as there are more digital assets within it. As well, if you do not have consistent access to top notch connections, you run the risk of not even receiving rewards at all on your assets.
This is why staking pools is the alpha move here. Combining digital assets increases chances of being rewarded as your computational resources are higher than one who is solo staking. Some are not a fan of staking pools as they can even grow so massive that the network becomes almost too centralized. If the same pools are raking in more rewards on a consistent basis, it does not offer much for the little guy and some could fear the combined assets of the pool could be enough to force influence on the networks market if they decided to sell, or introduce governance proposals supported by their many contributors.
How to Gain Better Rewards?
You can increase your staking rewards by making sure you are always following the rules of whatever network you are staking assets on, and also by ensuring stable internet connections at all times. Additionally, expanding into markets with higher annual yields is another way, but that has its own risks, as you must take high yields with a grain of salt as the downside could be losing your coins if the platform is malicious or has bad code.
Some platforms offer crazy yields and are great projects and are totally safe, but once you enter above 100% APY territory it is important to do your own research on development teams as well as the utility of the coin being staked, and of course the tokenomics of the project.
Additionally, be aware that the APY that is advertised is not a fixed price for good, rather a reflection of current rates. At any time, staking rewards can change to do supply and demand, which can raise or even lower rates. Nothing is a guarantee in anything, so make sure you know all the pros and cons before staking your assets so that you are well prepared for all potential scenarios! On top of this, staking may lock up your assets for a set amount of time, so liquidity is not always available if you ever needed to sell for emergency purposes, although most staking pools do have relatively liquid business models.