The Proof of Stake (PoS) consensus is opening the doors to crypto investors looking to increase their profits. With PoS, they no longer need to have the best hardware and expend massive amounts of energy to compete against other miners to be the fastest to validate a block. With PoS, investors can simply stake some of their crypto for the chance to be chosen to validate a block and gain returns for doing so.
But are crypto investors taking advantage of these new opportunities? In our newest report, “The State of Staking,” we asked 999 PoS crypto investors about their experience with staking: why they stake, how they stake, and what’s holding them back from staking if they don’t. Here are a few of their insights.
More than half of the crypto investors surveyed have already staked their crypto in the past.
The number one reason why investors stake their crypto is to earn passive income. Other popular reasons include the ability to gain more rewards while staking and to reduce transaction fees.
The preferred method for staking is through a validator node they set up themselves. But they're also staking their crypto using third-party staking services or going through an exchange. Other preferred ways of staking include through a staking pool, and through liquid staking.
For those setting up their own validator nodes, they do so because they believe it gives them more profits and higher returns. But they also set up validator nodes so they can have greater control over the technical aspects of it, like if they wanted to build a dApp or directly access blockchain data.
Having adequate internet connectivity is the biggest challenge to setting up a validator node, because having an unreliable connection could compromise the validation process. Another challenge is maintaining the security of their system and network.
If they weren't staking it, how would they put their crypto to use? The largest segment of those surveyed said they would use it in CeFi lending through BlockFi, Celsius, Ledn, or others. They'd also put it into DeFi lending as well through protocols like Aave and Compound.
What about those who haven't staked their crypto? They say the biggest reason they’re reluctant to is that they believe the minimum staking period is too long, and they don’t want to lock up their assets. They also aren't staking because they believe they can find higher returns elsewhere.
Those who haven't staked before said they may change their mind about staking if they could get higher returns for doing so, making it worth locking up their assets for a period of time. Additionally, they want to see lower minimum amounts needed to stake as well.
There's always an inherent risk in any venture, but those who stake say the biggest risk is in smart contracts, likely due to their security. Another risk is found in opportunity costs, as locking up assets can lead investors to potentially miss out on other opportunities.
Staking is on the horizon for the majority of the crypto investors surveyed. That number is made up of nearly two-thirds who have staked before and over one-third for whom it would be their first time staking.
For those who plan on staking in the next year, the largest segment is looking to stake 20% to 30% of their portfolios. Additionally, the second largest group wants to stake 61% to 70% of their portfolio, while the third largest group plans to stake between 41% and 50% of their portfolio.
However, there are still a number of those who don't plan to stake in the next year. Why? Echoing the reasons above, they don't plan on staking because of the opportunity costs due to lock-ups. They're also worried about technical risk and being hacked.
PoS is the future of blockchain, and for those hesitant to stake because of locking up their assets, liquid staking can give them the best of both worlds: staking their crypto while having the ability to use those assets while they’re locked up. Bringing down the biggest barrier to staking will clear the way for investors to step into the future of crypto.