With the advent of the Proof-of-Stake consensus algorithm, mining has changed: users no longer need to buy expensive equipment for mining cryptocurrency, and to launch a node and receive rewards, it was enough to block the coins in the wallet. In this article, we will highlight the five best blockchain platforms for cryptocurrency staking.
What is and how staking works
Steyking ( staking ) replaces the Mining in the Proof-of-Work (PoW) , which requires a lot of computing power, the cost of equipment and maintenance. Instead of buying hardware, staking users buy cryptocurrency directly and place a bet to be eligible to add blocks and claim rewards for their stake in the network.
The first PoS blockchains set high staking limits: users had to freeze thousands or even tens of thousands of dollars in their wallets to qualify for rewards, confirm transactions, and add new blocks to the network. This problem was fixed in the next generation blockchains, which switched to the Delegated Proof-of-Stake ( DPoS ) algorithm .
In DPoS networks, the main role is played by network validators , which are responsible for validating and adding new blocks, ensuring the security of the network and maintaining its operability. Validators compete with each other to be the first to add a block and receive a reward, and in order to become a validator, it is necessary to block a large amount in the wallet, which is not available to most users. In addition, validators need to configure nodes ( nodes ) and monitor the operation of servers.
Holders who simply hold small amounts of cryptocurrencies and want to participate in staking can become delegators. This means that they delegate their coins to validators and claim rewards without directly participating in mining. But delegators pay a commission on the profit, which, as a rule, is set by the validators themselves in accordance with the protocol limits.
Note: despite the fact that in fact modern blockchain networks are based on DPoS, their characteristics are often written simply as PoS, which can confuse inexperienced users. To know for sure, you need to study in detail the description of the platform on which you want to delegate your assets.
1. Ethereum (Serenity)
Ethereum is the second largest cryptocurrency in terms of capitalization and the largest blockchain with smart contracts, with a huge infrastructure of decentralized applications. The platform is leading in the number of apps and tokens released on it, and the network is supported by a large community.
Since its inception in 2013, Ethereum has attracted the attention of crypto enthusiasts, as it has more functionality than the first cryptocurrency Bitcoin. The platform provides the Ethereum Virtual Machine ( EVM ) and Solidity language for building decentralized applications ( DApps ) based on the Ethereum blockchain.
The platform is currently working on the PoW mechanism, but Medalla’s PoS test network has already been launched, in which BETH coins are available – tokens replacing the equivalent amount of ETH. Holders can now stake Ethereum cryptocurrency and receive income up to 20% per annum to their wallet, but the coins will be blocked for almost two years.
Why Ethereum Is One Of The Best Staking Coins
The cryptocurrency is supported by a large community, and the platform itself has considerable prospects. Although the network is now significantly inferior to modern platforms in terms of performance, developers are working to improve the protocol to ensure the transition to Proof-of-Stake.
In August 2021, the London hard fork will be released, which will introduce a deflationary mechanism by burning part of the tokens that miners receive as a reward. And in the next phase of The merge, scheduled for release in late 2021 – early 2022, the current Ethereum mainnet will merge into the Beacon Chain, marking the final transition to PoS.
Disadvantages of Ethereum
This platform is one of the first in its field, so it is not devoid of key flaws, which the developers are striving to fix with the appearance of the Eth 2.0 update. The main problems with the current Ethereum network include low bandwidth, scalability issues, and slow and expensive transactions. These challenges stand out especially against the backdrop of strong demand for DeFi products and Yield Farming . Ethereum is capable of processing up to 15 transactions per second in total.
Another obvious problem with Ethereum is the highly focused SDK for application development. The platform supports the only programming language, Solidity, written specifically for this blockchain. This limits developers who work with other programming languages and prefer to write code in them.
2. Cosmos Network
Cosmos is a decentralized network or ecosystem of parallel blockchains based on the Tendermint consensus algorithm that are interconnected but can function independently of each other. The Cosmos network is also called the “Internet of blockchains”.
The Cosmos Network solves the problem of blockchain isolation by providing a unified infrastructure that allows them to interact.In other words, users can easily transfer tokens from one blockchain to another. This property is called interoperability. To ensure inter-chain communication, Inter Blockchain Communication ( IBC ) was developed – a protocol that provides strong communication between different blockchains.
What makes ATOM one of the best staking coins
Like Ethereum, the Cosmos Network has a large infrastructure supported by a large community of investors and developers who are constantly working on platform updates. For example, in early 2021, the Cosmos developers presented an update to Stargate, which improved the platform’s performance and combined blockchains based on the Cosmos SDK using the Inter Blockchain Communication protocol.
The Cosmos network can interoperate with large blockchains such as Binance Smart Chain, Band Protocol, IRISNet, Kava, Ki Chain, Oasis Protocol, OKEX Chain, Persistence, Polygon and many more.
One of the benefits of the Tendermint algorithm on which the Cosmos network is based is instant finality. This means that users can be confident in completing a transaction as soon as a new block is mined, which is not the case with PoW blockchains such as Bitcoin and Ethereum.
Another advantage of the platform is the modularity principle, which simplifies the development of applications for solving specific problems without having to write source code from scratch. It also speeds up the creation and deployment of applications.
Cosmos Network problems
The first drawback of Cosmos is the high competition among more well-known platforms such as Polkadot, Polygon, and Ethereum. Sidechains like Polygon are implementing solutions that take market share from the Cosmos network.
The second problem is related to low user activity. The Cosmos IBC protocol launched in February 2021, and the ecosystem has only about 40 zones (network validator nodes), with 95% of the activity happening in only two zones. In addition, the US Securities and Exchange Commission (SEC) has twice criticized the ICO of the project and believes that the platform does not fit the definition of security.
Cardano is the world’s first decentralized platform built on scientific research and empirical evidence. The platform is also known as the “Ethereum killer”. The protocol allows you to create and run blockchain applications and smart contracts like Ethereum.
The Cardano platform was developed back in 2014, but, unlike the Ethereum developers, the team did not quickly launch the protocol, but focused on researching and solving the problems of the blockchain industry. In 2017, ADA tokens were released, which act as a native cryptocurrency.
Network Cardano based on two levels or layers ( layers ): the first layer is responsible for handling transactions in ADA, while the second operation provides the smart contract. Cardano has become one of the main competitors of Ethereum, not only because it has high bandwidth and does not have such pronounced problems with scaling, but also because the entire ecosystem consumes only 6 GW / h of electricity, which is only 0.01% of the network Bitcoin. This makes the platform more environmentally friendly and sustainable.
Fun fact : the platform was named after the Italian polymath Gerolamo Cardano.
Benefits of Cardano
Against the background of Ethereum, the platform is distinguished by its high network bandwidth and low cost of transactions. Ethereum belongs to the second generation of blockchains while Cardano belongs to the third. The two-tier architecture makes the network more secure and provides the ability to implement scalability solutions.
The Cardano protocol has mathematically proven security, and the University of Edinburgh, the University of Connecticut, and the Tokyo Institute of Technology have contributed to the code.
Disadvantages of Cardano
One of the main drawbacks of Cardano is the low staking yield – 5.3% per annum. This is due to the fact that many users have blocked their coins, due to which the profitability has decreased.
Another significant drawback is the complexity of the development and the ambition of the team, which forces everything to be at stake. This leads to the risk that problems may appear in the future, due to which updates will not be released for a long time or even pause indefinitely. Moreover, this shortcoming is manifested now, since the developers have not yet implemented many of the projects that they conceived, and it is unclear when these projects will be ready and at what stage they are.
Multifunctional platform based on the ZRC20 standard with master contracts aimed at modernizing and digitalizing business. ZHCash provides an advanced SDK and intuitive tools to easily and quickly develop decentralized smart contract applications and create tokens. Thanks to the ZHCash SDK, developers do not need to code from scratch, and minimum requirements are set for the software.
The platform supports the third generation PoS algorithm ( Proof-of-Stake 3.0 ). This means that users’ wallets are full-fledged nodes of the network and can act as validators, receiving rewards depending on the share they own. ZHCash supports the DGP decentralized governance protocol, which defines blockchain parameters using a smart contract and seeks to keep the number of forks to a minimum. In other words, developers do not need to create a branch for a new network to change how the protocol works, which makes the ZHCash blockchain flexible for improvements.
For comparison, let’s take Ethereum as an example: even the current network is not the original blockchain, but its hard fork. The original protocol was renamed Ethereum Classic. For further changes, the developers will combine Ethereum with the Beacon Chain to form a new platform. This approach makes blockchain development tough and only complicates the process. At the same time, developers in any case have the right to create new branches if they want to create a new platform based on ZHCash.
Why ZHCash is One of the Best PoS Staking Platforms
One of the key features of ZHCash is its combined approach to networking: the platform combines the UTXO model, as well as PoW, PoS and DPoS algorithms, which sets it apart from most other staking blockchains. Blocks in the ZHCash network are formed within 2 minutes, and the block reward is 800 ZHC.
Developers can use a wide range of tools to build decentralized applications: ZHCash supports almost all popular programming languages, including Java, C / C ++ / C #, Go, Rust, Python, and Solidity.
The ZHCash platform introduced a unique Invest Proof-of-Stake ( IPoS ) algorithm , which allows holders to lease their tokens to validators, receiving income for this without having to freeze the tokens in the wallet. IPoS is no longer found on any of the well-known PoS-based platforms.
Disadvantages of ZHCash
Perhaps the only significant drawback of the platform is its small capitalization compared to the industry leaders, although in terms of characteristics ZHCash is not only not inferior to them, but also largely bypasses. The fact is that developers are focusing more on development, improving the UX and functionality of the platform, while marketing is left in the background. Despite this, the ZHCash community is actively growing, which indicates the high value and usefulness of the platform.
5. Polygon (MATIC)
The Polygon Network, formerly known as Matic, is a scalable decentralized network that provides frameworks for building a multi-chain Ethereum-compatible blockchain ecosystem. The platform is also called the “Internet of Ethereum blockchains”.
The Polygon platform solves the problems of blockchain scalability and slow and expensive transactions without compromising the security of the network. The protocol works on the principle of modular “security-as-a-service” and resembles the structure of the Cosmos Network, since it is aimed at interoperability of blockchains, but on the Ethereum network.
Why Polygon is one of the best staking blockchains
The Polygon platform is based on Ethereum, the largest DeFi ecosystem backed by a large community of crypto enthusiasts. The developers are constantly working to improve the network and strive to provide a scalable solution that will allow instant and cheap transactions.
Disadvantages of Polygon
One of the main problems is related to competition: solutions like MATIC are currently being developed and they may be a better alternative. The problem is that Polygon focuses on the Etherium ecosystem and does not use sidechains, while other new platforms target more globally and provide solutions outside of a single blockchain. Crypto enthusiasts believe Polygon is a temporary solution until new platforms emerge.
Another disadvantage is related to the large number of blocked assets. In the event that new, more efficient and flexible platforms similar to Polygon appear, the MATIC token rate may suddenly collapse.
Tron is another serious competitor to Ethereum with its own developed ecosystem, but with higher bandwidth: the Tron network is capable of processing about 2,000 transactions per second. Despite the fact that the Tron platform did not offer the blockchain community anything new after Ethereum, it has a developed infrastructure, and Ripple Labs participated in the development of the protocol.
Another difference between Tron and Ethereum is that the platform focuses on the gaming industry. A large part of the Tron ecosystem is made up of decentralized games and casinos, which makes the blockchain more focused. This allowed the creation of apps that are exempt from commissions from stores such as the App Store and Google Play.
What makes Tron one of the best staking platforms
The Tron ecosystem includes: video hosting, social network, streaming platform, gaming portal, online casino, payment platform and online publication. The platform helps the entertainment industry develop and provides advanced tools for creating and promoting blockchain games based on developer incentives.
Low profitability of TRX staking is one of the main problems of cryptocurrency. The profitability barely exceeds 1% per annum, so staking is more suitable only for Tron holders. The TRX emission is 100 billion – almost 500 times more than that of Bitcoin, which is why one should hardly expect the coin rate to rise to at least $ 10.
The second problem is that community users accuse the platform of being centralized: about 50% of the available coins are stored in only 10 addresses, which makes the course vulnerable and may alienate new investors.
In addition, many scandals have erupted around the Tron ecosystem. The creator of the project, Justin Sun, in 2107 – 2018 announced major partnerships with giants of the Chinese market, such as Alibaba and Baofeng. These partnerships could have attracted more than 200 million new users, but the claims turned out to be wrong and this only negatively affected the ecosystem. In reality, it turned out that it was about blockchain units, and not the companies themselves.
Polkadot is perhaps the main competitor to Polygon (MATIC). Like Polygon, the Polkadot platform aims to scale the Ethereum network. The ecosystem of the platform consists of subchains, also known as parachains. The main direction of Polkadot is to create a network of Ethereum-compatible blockchains that could interact with each other, exchange transactions and data.
Polkadot provides blockchain developers with a modular Parity Technologies’ Substrate framework to select the components that are best suited for developing specific applications.
Strengths of Polkadot
Polkadot, like similar platforms, is developing a solution for Ethereum, the largest protocol in the DeFi ecosystem, so it can attract a lot of users. Blockchains and applications built on the Polkadot network use a common security model, which saves developers the worry of making sure the network validators work.
Polkadot parachains serve as bridges linking the blockchain to external networks such as Bitcoin and Ethereum. The platform is one of the ten largest cryptocurrencies in terms of capitalization and is integrated with Chainlink, the largest provider of blockchain oracles in the crypto industry.
Weaknesses of Polkadot
Polkadot has many competitors with similar goals. Among them are such large platforms as Cosmos, Cardano, Tezos, and Polygon. In addition, vulnerabilities have been found in the protocol, which have already been exploited twice by hackers who have managed to withdraw several million dollars worth of cryptocurrency. The number of parachains is limited, which makes the platform scalability limited.
Tezos is an open blockchain protocol for assets and applications, as the platform’s official website suggests. The platform is based on the Proof-of-Stake consensus mechanism, which allows validators and their delegators to generate income from XTZ staking.
One of the important features of the Tezos blockchain is the ability to self-adjust and change the structure of the protocol over time. In terms of functionality, Tezos is not much different from competitors Ethereum, Tron or Cosmos: the protocol supports smart contracts and allows you to develop blockchain applications (DApps) on top of it.
Why Tezos is one of the best staking platforms
The development of the Tezos platform is supported by a large community of blockchain researchers and developers. On a token sale (ICO), the team managed to raise over $ 230 million, which makes Tezos one of the largest crowdfunding projects in the blockchain industry. However, it should be borne in mind that the public sale was carried out during the ICO boom, so one should not exclude a large speculative interest of investors.
Tezos addresses the issue of smart contract security and has a modular architecture that provides the flexibility to quickly change the protocol.
Disadvantages of Tezos
The platform’s first problem was the inflexible SDK: the native Michelson language is used to write smart contracts and applications, similar to how Ethereum uses Solidity. This limits the options for developers. In addition, to include developers in the whitelist, formal verification is required, as is done, for example, in the aerospace industry.
Independent developers have described Tezos as an “immature web” because its use is not yet widespread despite its large capitalization, and it is difficult to estimate how much transactions will cost and what problems with them may arise as the number of users grows.
EOS became the largest ICO in the history of cryptocurrencies, which raised $ 4 billion at the stage of public sales, without even having a fully working product. It was believed that EOS would bypass and even destroy Ethereum, but in reality it failed. Despite this, the platform remains one of the most advanced in its field.
To solve the problem of slow and expensive transactions, EOS proposed a fundamentally new economic model based on the use of CPU / NET resources. Users can rent computing power for a specific time during which they can make an unlimited number of transactions instead of paying for each transaction separately. This, in addition, significantly speeds up the confirmation of transactions.
The EOS protocol is designed to eliminate the risk of hard forks due to blockchain issues, as was the case with the DAI hack that brought Ethereum to the new network. In the event that vulnerabilities are found in any application (DApps) or it is hacked, the validators will simply freeze it and prevent transactions from entering the blockchain until the bug can be corrected and normal operation restored.
An interesting fact : EOS is the most popular cryptocurrency in China, having managed to bypass ETH and the “Chinese Ethereum” NEO.
Another advantage is the EOS accounts: users can create an account, a one-time paying their cryptocurrency that use Domain Name System ( Domain Name System , or the DNS ). This means that instead of complex addresses for sending tokens, account holders can use simple unique names ( nicknames ).
Thanks to powerful positioning and marketing, the creators of EOS managed to become the leader in the crypto industry in terms of the amount of funds raised. But the network problems arose from the very beginning of the mainnet launch . Given the high competition of Ethereum-like blockchains, even the slightest mistake can be disastrous for the project.
While the economic model of EOS allows users to significantly reduce transaction costs and becomes an advantage for them, delegators and validators are negatively affected, since their profitability does not exceed only 2%.
Also, the community considers EOS to be more centralized compared to other DPoS blockchains. This happens because the network consists of only 21 validators, which can easily conspire with each other and affect the operation of the network.
Terra (LUNA) is an open blockchain protocol that brings innovative concepts to the blockchain industry. In addition to smart contracts, the Terra platform provides blockchain oracles and algorithms for issuing stablecoins backed by native LUNA tokens. This makes the protocol multifunctional and flexible to use.
The Terra network is interoperable with other blockchains as it interacts with Cosmos Inter Blockchain Communication (IBC). Thanks to this, LUNA tokens are also available on the Ethereum and Solana blockchains.
Terra has introduced its own DeFi product for the Yield Farming Anchor Protocol, which provides flexible tools for profitable farming. Users can receive passive income from bLUNA tokens, and send rewards in ANC tokens to staking.
The Terra framework is designed to make it easy to develop DApps and issue your own stablecoins. Terra supports popular programming languages for building blockchain applications and platform-based smart contracts such as Rust, Go, and AssemblyScript.
Disadvantages of Terra
One of the main disadvantages of Terra is that the network is partially centralized, which, unfortunately, is often found among modern blockchain projects, including those described in this article – for example, EOS and Tron. The emission of tokens and stablecoins is managed by a small group of validators, on which all members of the ecosystem depend.
Another disadvantage of the Terra platform is serious competition from stablecoin mastodons such as Tether (USDT), Binance USD (BUSD), USD Coin (USDC) and DAI.
Elrond is a high performance and scalable blockchain platform based on chain segmentation. Elrond is yet another platform daring to challenge the Ethereum giant. While Ethereum developers are developing a sharding-based PoS network, the Elrond team has already done so.
The Elrond network consists of shards – independent and interconnected blockchain segments that process transactions in parallel, increasing the throughput of the main blockchain.
Elrond’s developers have created a new consensus mechanism called Safe Proof-of-Stake ( SPoS or Secure PoS ). In addition to the advantages of classic PoS or DPoS, the new SPoS algorithm improves the interconnection between blockchain segments ( shards ), reducing its weight and size.
What makes Elrond one of the best staking blockchains
The Elrond team has provided developers with flexible and advanced SDKs to make it easy to build useful applications. This allows developers to quickly enter the blockchain industry without having sufficient skills and knowledge about it. Powerful DeFi protocols such as the Orino Protocol are being developed on the basis of the Elrond platform.
Elrond’s throughput can reach up to 100,000 transactions per second, according to developers. However, it is not yet possible to verify this statement for truth due to the insufficient number of network users.
Elrond’s first problem is related to the overbought tokens: over the past year, their price has increased more than 100 times. The history of cryptocurrencies shows that such an active growth leads to a strong drop in the rate. Now we can observe the active withdrawal of the eGLD cryptocurrency (unlocking) from the platform, caused by the rapid fall in the rate.
Such a rapid growth of the coin was caused by a large-scale marketing campaign, as a result of which speculative growth bypassed natural: the developers announced that the test network showed a result of 263,000 transactions per second, which is an unprecedented figure for the crypto industry. It should always be remembered that the rapid growth of the exchange rate does not reflect the real value of the platform in any way.
Volatility is a key risk in cryptocurrencies.The higher the volatility, the more the price can change in a short period of time and, accordingly, the more prone to correction in the crypto market.
Each of the listed platforms is suitable for staking and sets it apart from the majority of PoS-based projects. In terms of functionality and tools, ZHCash and Cosmos Network advanced further than others. ZHCash is the youngest platform on the list and does not yet have as large a community as the others, but this is good news for holders as it allows for higher staking returns.