As one of the fastest and most scalable smart contract blockchains around, Avalanche has become one of the most prominent alternatives to Ethereum, and a popular choice for crypto holders looking to generate a passive income.
As a Proof-of-Stake blockchain, Avalanche offers the chance to stake its native token, AVAX, to participate in validating transactions on its network. By staking AVAX tokens, users help to boost the security of the network, and importantly, they will be rewarded for doing it.
PoS blockchains are different from Bitcoin. Instead of having different miners compete to solve complex mathematical problems in a race to generate the next block, PoS chains select validators to process their transactions, based on the amount of tokens they have staked on the network. In doing this, they can avoid the enormous energy that’s wasted on Proof-of-Work computations.
The great thing about PoS blockchains is they open the doors for everyone to participate, as opposed to Bitcoin, which requires a serious investment in computing hardware to participate in PoW mining. It’s possible to start staking AVAX with a minimum of just 25 tokens, worth around $665 based on the current price at the time of writing.
Two options for staking AVAX
AVAX holders have two options to stake on the network, with one being more rewarding, but also more involved than the other. They can take on the role of a validator, which means running an active node on the Avalanche network and validating transactions to secure the blockchains. There’s a minimum requirement for validators to stake at least 2,000 AVAX (around $53,000 at today’s price) to participate, so it’s quite a big investment. However, validators are free to stake more than this in order to increase the frequency in which they’re selected to validate transactions and earn rewards.
The other option is to stake as a delegator, which is much more passive and has a lower minimum requirement of just 25 AVAX. Delegating means pledging your tokens to an existing validator, giving them the opportunity to process more blocks in return for a share of the rewards they earn.
So how do I actually stake AVAX?
Besides having two options, there are two basic ways to stake AVAX. Either you can do so natively using the Avalanche Wallet, which is available on mobile and the web, and is the best option for those who want to become a validator and set up a node.
The alternative and much easier way to stake AVAX is to go through a cryptocurrency exchange. At present, many of the top crypto exchanges support AVAX staking, including Binance, VALR Exchange, OKX, and Coinbase, as well as dedicated staking protocols such as Stakely.io, and hardware wallets like Ledger.
Staking AVAX on an exchange platform is much less demanding, and the steps are similar on most platforms.
What is the rate of rewards?
The rewards on offer to AVAX stakers fluctuate all of the time, and at present the average annual percentage yield is around 5.79%. That said, the exact amount of rewards stakers can earn is based on multiple factors.
First, the more AVAX you stake, the more you will earn. By delegating more AVAX to a validator, you’ll be entitled to earn a bigger portion of the rewards they generate. Second, the longer you stake your tokens, the bigger your earnings will be. Staking involves locking up your tokens in a smart contract for anywhere between two weeks and 12 months, and you won’t be able to access your AVAX until that time period expires. So, the longer you commit, the more you’ll benefit, but you won’t be able to do anything else with your capital in the meantime.
The third factor that determines the amount of AVAX staking rewards is how often the validator you have delegated your tokens to gets selected to validate transactions, while fourth, the exact delegator fee charged by each validator can vary.
Finally, the total amount of AVAX staked across the entire ecosystem also plays a key role in determining your rewards. So if there’s an excess of AVAX staked, the incentive will reduce, while if there aren’t enough, the rewards will increase to attract more stakers.
Also bear in mind that your “real” rewards, in fiat money terms, will be determined by the price of AVAX itself. Because you’re staking AVAX, your rewards will be paid out in AVAX, whose value is just as volatile as any other cryptocurrency.
Okay, but is it profitable?
So long as the crypto markets don’t crash spectacularly, staking crypto can be very profitable. In fact, the profits are guaranteed – at least in terms of the crypto itself. If you decide to stake 2,000 AVAX as a validator and play by the rules, you’re guaranteed to earn some AVAX as a reward.
If the price of AVAX drops in fiat terms, your staking venture might be less profitable than expected, but there are always other incentives available.
One of the best ways to maximize your AVAX staking rewards is to take advantage of special incentives offered by exchange platforms. For instance, VALR Exchange recently launched a limited-time promotion for AVAX staking in October 2024, giving users the chance to earn a generous 15% yield, up from the usual 5.79%, on all AVAX deposits.
The offer is capped at a maximum payout of 30 AVAX per participant, and there’s a total reward pool of 500 AVAX tokens, so it’s worth moving quickly to take advantage of it. The offer runs from Oct. 1 to Oct. 30, 2024, or until the 500 AVAX pool has been fully distributed, and it’s only open to VALR users who have fully verified accounts.
AVAX: A safe bet for staking
Overall, there’s a lot of potential for AVAX staking, with users guaranteed to earn rewards for every token they have staked. What’s more, AVAX itself is generally viewed as a decent bet, with the underlying Avalanche blockchain playing host to a thriving ecosystem of DeFi projects, NFTs, and blockchain-based games, meaning there’s a lot of potential for the price to make some big gains in the longer term.
In terms of staking AVAX versus other cryptocurrencies, it does offer some advantages. Avalanche is one of the few PoS blockchains that doesn’t implement slashing, so users won’t lose their stake in the event that the validator they delegate misbehaves. However, they will lose any rewards they have earned.
In addition, becoming a validator on Avalanche is much easier than doing so on most other blockchains, because there are minimal hardware requirements. Finally, AVAX staking rewards are generally quite competitive compared to staking many other tokens.
