Proof of Stake Coins to Invest in 2023

Proof of Stake (PoS) is one of the most widely used blockchain consensus mechanisms. Transactions on blockchains running on PoS are confirmed by validators who stake a large amount of cryptocurrency. Validators verifying transaction blocks are eligible to receive rewards.

Although not everyone can afford becoming a validator, most users can still earn passive income without setting up their own node. They simply can delegate their coins to the network validators.

In 2022, the staking industry’s market capitalization reached hundreds of millions of dollars. The top coins for staking and receiving rewards include ETH, ATOM, SOL, ADA, DOT and many others.

Key Takeaways

• Proof-of-Stake (PoS) is an energy efficient consensus mechanism which allows for fast transactions
• There are many variations of PoS adopted my a large number of emerging blockchains
• Staking Proof of Stake coins requires different amount of investment ranging from $100 up to thousands of dollars and more
• Different factors should be considered prior to staking PoS coins, such as the project’s market cap, staking requirements, ROI and yield

What Is Proof-of-Stake (PoS)?

Proof of Stake is a set of rules for governing a blockchain network and creating new coins. This consensus algorithm was proposed on July 11, 2011 at the popular then Bitcointalk cryptocurrency forum as an alternative for Bitcoin’s proof-of-work. In August 2012, PoS was implemented for the first time by PPCoin (now Peercoin).

How Does Proof-of-Stake Works

Proof of Stake allows network participants to deposit coins as collateral (i.e. stake) and receive rewards for generating blocks. The staked funds serve as an incentive to operate in the best interests of the network. Typically, the PoS mechanism semi-randomly selects users to verify blocks. It is only partly random as validators are usually picked among users with the highest stakes.

Here is how the Proof of Stake algorithm works, step-by-step:

• Participants stake coins, which are native to the network. The coins are locked up in a smart contract on blockchain for a specified amount of time;
• The algorithm semi-randomly selects a validator to create a new block. The bigger the stake, the larger the chances for a participant to be selected as a validator;
• For each generated block, the validator receives a reward, paid in the network’s native coins;
• If a validator cheats the network, a portion of his or her staked coins is reduced and burned, or distributed among other validators. This system discouraging malicious behaviour of validators is called “slashing”.

Understanding Proof-of-Stake (PoS)

There are several variations of Proof of Stake, each with its own nuances. Here are just a few of them: Leased Proof-of-Stake (lPoS), Nominated Proof-of-Stake (NPoS), Pure Proof-of-Stake (PPoS), Effective Proof-of-Stake (EPoS), Proof-of-Authority (PoA), and Delegated Proof-of-Stake (DPoS).

Created in 2013, Delegated Proof-of-Stake (DPoS), represents an important milestone in the development of the PoS algorithms. DPoS allows network participants to vote for validators and delegate them coins and the right to validate blocks. Thus, block creation on DPoS is more democratic than on the original PoS.

Elected validators receive rewards for block verification. A portion of the reward is shared with their voters. Today, the delegation function has become an industry standard and is used in almost all PoS implementations.

Proof-of-Stake vs Proof-of-Work

The Proof of Work and Proof of Stake (PoS) algorithms have some important differences and both have their pros and cons. While PoW requires a significant amount of energy and powerful equipment to mine new blocks, the validation process on PoS needs a portion of coins. Unlike PoW, PoS has minimal hardware requirements. Hence, the main difference between PoW and PoS is that the latter is more "environmentally friendly". With Proof of Stake, energy consumption is significantly reduced.

However, PoS has its disadvantages, too. Participants with a smaller amount of coins can be overpowered by those with large sums. Many Proof of Stake blockchains rely on voting to govern the network, making such participants more influential on the further development of the network. As a result, the network can become less decentralised.

Advantages of PoS Cryptocurrency

Here are the primary advantages of Proof of Stake:

1. Energy efficiency. The Proof of Stake algorithm is extremely energy efficient, since the consensus participation depends on the economic cost of staking, not on the computational power.
2. Adaptability. Proof of Stake is an extremely flexible algorithm capable of meeting most of the needs of the rapidly evolving blockchain industry.
3. Scalability. PoS does not require buying huge Mining cryptocurrency farms, expending large amounts of energy, or teaming up in mining pools. Validation on PoS networks is cheaper, easier and more accessible.
4. Lower entry threshold. PoS does not require buying expensive mining farms, expending large amounts of energy, or teaming up in mining pools. Validation on many PoS networks is cheaper, easier and more accessible.

Top Proof-of-Stake Coins 2023

The list of top Proof of Stake coins is constantly updating as the industry is rapidly developing and some projects become obsolete, fail to withstand competition or simply go bankrupt. However, we attempted to create a list of Proof of Stake coins which have already proven their sustainability.

Cardano (ADA)

Cardano is a general-purpose blockchain with the Proof of Stake protocol. It is a third-generation blockchain designed to solve the scalability problem. Cardano's development is based on a scientific philosophy and a lot of academic research.

The native currency used to perform transactions on the Cardano blockchain has a ticker ADA. Through the official Yoroi and Daedalus wallets, ADA holders can delegate their coins to node-staking pool operators who participate in a consensus algorithm. The current yield on ADA delegation is from 3.7% to 4.2% per annum.

Ethereum 2.0 (ETH)

Ethereum 2.0 is an Ethereum network update aimed at improving network scalability. After the transition to version 2.0, the speed, efficiency, and scalability of the Ethereum network should increase without security or decentralisation being compromised.

During the transition to Eth2, Ethereum's consensus algorithm was changed from PoW to PoS. Any user who holds at least 32 ETH can add them to staking, become a validator, and get paid for validating transactions. Investors with less than 32 ETH can pool capital with other participants willing to participate in creating an Ethereum 2.0 validator node.

The pooling of crypto-assets for Eth2 staking is done through staking pools, such as Ethermine pool. Staking rewards are distributed in proportion to the amounts of ETH invested in the pool.

Binance Coin (BNB)

BNB Chain is a blockchain of the Binance exchange focused on smart contracts and decentralised applications. The network uses a consensus model called Proof of Staked Authority (PoSA), which is a hybrid of the Proof of Authority (PoA) and Delegated Proof of Stake (DPoS) models.

The native coin BNB is the backbone of the entire Binance ecosystem. It can be staked or delegated through a Trust Wallet. The minimum amount for staking is 1 BNB with the lock-up period 7 days. At the time of writing the APR is 5.68%.

Solana (SOL)

Solana is a third-generation blockchain based on the Proof of Stake consensus algorithm with high transaction throughput. It has a unique way of ordering transactions to increase speed, called Proof of History.

Solana's native coin SOL is used to pay transaction fees and interact with smart contracts. SOL holders can become network validators. And regular users have an option to add SOL to staking by delegating coins to a chosen validator. This can be done through a wallet that supports staking, such as SolFlare. The annual profit from SOL staking ranges from 7% to 11%.

Avalanche (AVAX)

Avalanche is an open-source platform for launching decentralised applications and deploying public and private blockchains in a single, scalable ecosystem. The platform is based on three blockchains: the exchange chain (X-Chain), the contract chain (C-Chain) and the platform chain (P-Chain). The X-Chain is used to create assets and trade. The C-Chain is for creating smart contracts. P-Chain coordinates between validators and subnets.

Avalanche does not need a classical consensus algorithm and therefore is not a typical PoS blockchain. However, it still allows you to delegate coins to validators.

The platform's native coin AVAX has three main functions: it is used to pay for transaction fees, serves as a common unit of account for all subnets, and can be placed in a staking to become a validator, or delegated to existing validators. AVAX can be delegated through the official AVAX Wallet. Staking requires funds to be available on the Platform Chain (P-Chain). If the funds are on the Exchange Chain (X-Chain), you will need to transfer them to P-Chain by initiating a cross-chain transfer. The minimum amount for staking is 25 AVAX.

Polkadot (DOT)

The Polkadot project seeks to solve scalability problems by creating so-called "relay chains" and "parachains". The creator and the current technical director of Polkadot is Gavin Wood, one of the founders of Ethereum.

The Polkadot network's native coin has the ticker symbol DOT. In addition to paying transaction fees in the ecosystem, DOT is used for staking and management. Because Polkadot is a Proof of Stake blockchain, DOT coins are used to secure the Polkadot network. You can also delegate coins to the validator via the official Polkadot{.js} wallet.

One of the distinguishing features of the Polkadot project, is the parachain auction system. It obligates blockchain projects to stake DOT coins in order to reserve parachain slots in the Polkadot ecosystem. This helps to reduce the circulating supply of DOT coins, which has a positive effect on the coin’s price.

Algorand (ALGO)

Algorand is a high-performance blockchain running on its proprietary Pure Proof-of-Stake (PPoS) consensus algorithm. ALGO is Algorand's native coin. It is used for staking, transaction fees, relay node triggering and as a management coin.

An important feature of the Algorand blockchain is its unique staking mechanism. It allows the network participants to simply hold 1 ALGO in a wallet to receive rewards. No additional actions are required. Rewards are automatically credited with each subsequent transaction on the address. Staking has a yield of approximately 6% per annum.

Flow (FLOW)

Flow is a blockchain built specifically for NFT and gaming applications. It was created by Dapper Labs, which is famous for its blockchain game CryptoKitties.

FLOW is a native blockchain’s coin used to pay commissions, execute smart contracts and maintain the consensus algorithm. Coins can be delegated to staking through the official Flow Port portal. Staking yield on Flow is approximately 8.1% per annum.

Akash Network (AKT)

Akash is a decentralised alternative to Amazon Web Services, Google Cloud and Microsoft Azure. With its Akash Network, a blockchain built with the Cosmos SDK, the Akash platform connects decentralised providers of computing power with consumers.

Akash Network’s native Akash coin (AKT) functions as the primary means of management and blockchain security. AKT coins can be delegated to validators via the Kepler wallet. At the time of writing, the yield on staking is 10.53% per year.

Tezos (XTZ)

Tezos is a multifunctional decentralised blockchain platform. The distinctive advantage of Tezos is its built-in governance mechanisms for network updates. Tezos operates based on the Liquid Proof-of-Stake (LPoS) consensus mechanism.

Tezos' native blockchain coin is tez (XTZ). Tez coins are used for rewarding validators, voting in a decentralised management system, paying for transfers, and for paying for gas. XTZ can be staked through the Atomic Wallet with an annual yield of approximately 5.8% per annum.

Cosmos (ATOM)

Cosmos is a decentralised, scalable, interoperable ecosystem of interconnected and independent blockchains running on the Tendermint Core protocol. Cosmos aims to create "The Internet of Blockchains", a blockchain network in which participants are able to interact in a decentralised way. Cosmos Hub uses the Tendermint consensus algorithm, an evolution of PoS.

ATOM is Cosmos Hub's native coin. Users stake ATOM themselves or delegate them to validators via the Kepler wallet, receiving a portion of the profits. At the time of writing, the yield on staking is 19.98% per year.

Near Protocol (NEAR)

NEAR Protocol is a Tier 1 blockchain that uses a sharding technology called Nightshade, which allows it to scale almost infinitely.

The native protocol’s coin NEAR is used for network security as well as to pay transaction fees. NEAR coin holders can stake coins in the NEAR wallet in return for rewards or use them to vote for management proposals. At the time of writing, the annual yield on staking is 10%.

Tron (TRX)

TRON is a blockchain platform that aims to exchange free, decentralised user-generated content. The TRON blockchain uses the Delegated Proof-of-Stake (DPoS) consensus algorithm. It is currently the 20th largest cryptocurrency by market capitalization.

TRONIX (TRX) is the native coin of the main network of the TRON protocol. It is used to pay transaction fees, as well as rewards for staking and block validation done by super-representative nodes (validators). Users who delegate TRX to super-representers can earn a return of about 4%. You can use Atomic Wallet for staking coins.

Fantom (FTM)

Fantom is a high-performance and scalable decentralised blockchain platform for smart contracts based on DAG (directed acyclic graph).

The native Fantom’s coin FTM circulates in three blockchains: Ethereum, BNB Chain and Fantom. It is used to pay transaction fees, enable validator nodes and manage the project. Any FTM holder can delegate coins to a particular validator and get rewarded. Staking yields depend proportionally on the chosen lock-up period: from 4% per annum with the ability to withdraw at any time to 13% per annum with a lock-up period of 365 days. Staking is available through the official Fantom fWallet.

Mina Protocol (MINA)

The Mina Protocol is a next-generation blockchain that uses a modified Proof of Stake consensus — Ouroboros Samisika. The size of the Mina blockchain is only 22 KB, making it possible to validate the blocks even from a smartphone.

The native coin MINA is used for all kinds of transactions within the network: to pay transactions fees, to deploy smart contracts, and to secure the network. You can delegate coins to staking using Auro Wallet. All coins in the wallet are delegated at once, but they can be withdrawn at any time, as there is no lock-up period. Rewards are distributed offline, due to which they are not immediately displayed in the account. Staking yield is about 11.47% per annum.

Aptos (APT)

Aptos blockchain platform deploys a version of the Byzantine fault-tolerant Proof-of-Stake consensus called AptosBFT. Aptos’ smart contracts are created with a unique programming language called Move. The project was founded by former employees of Diem (formerly Libra), the blockchain of Meta Corporation, which closed in early 2022.

The native coin of Aptos is APT. It is used to pay transaction fees, to vote for the protocol changes, and to secure the network by staking. At the time of writing, native coin delegation to staking has not yet been launched, but it may appear in the future.

Are Proof of Stake Coins a Good Investment?

Proof-of-Stake blockchains promise a lot of benefits, but their coins are not fundamentally different from other cryptocurrency assets. Even the best PoS coins exhibit the high level of price volatility typical of the cryptocurrency market.
An important advantage of PoS coins is that they allow generating passive income through staking. It should be noted though, that the staking rewards are typically paid in the native network’s cryptocurrency, which does not always allow to compensate for price drops.

Superior Technology

The efficiency and speed of PoS have led to an increase in the number of projects using this consensus mechanism. An important indicator of the acceptance of this technology is the transition to PoS by the flagship of smart contract platforms, the Ethereum blockchain.

Future-Focused

The Proof of Stake consensus algorithm solves some of the critical problems the modern blockchains are facing. As the global demand for green technologies grows, the PoS consensus protocol is becoming the de facto standard in the blockchain industry.

Energy Efficient

As mentioned above, the main advantage of using the PoS system is its energy efficiency. Unlike PoW, it does not consume significant amounts of electricity/resources.

Growth of the Consensus

As the PoS model has a fairly high adaptability, many hybrid consensus algorithms based on the PoS concept are emerging. The original algorithm and its variations have a promising future, despite some existing shortcomings, which the new projects are actively working on to eliminate.

PoS Coins, Things to Consider

The PoS blockchain industry is extremely large and diverse. For the most part, there is no single standard or requirement for blockchains and their native coins. However, there are some common factors to consider before staking.

Market Capitalization and Trading Volume

Cryptocurrency market capitalization and trading volumes are important measures of the asset’s value and liquidity. High-capitalization coins with large trading volumes are less susceptible to speculation and less volatile. Volatility is an important factor as it may affect the outcome of staking especially if there is a lock-up period

Minimum Staking Requirements

Usually, the main requirement for staking is having the right number of coins in your wallet. The minimum depends on the specific blockchain. Some blockchains, such as Cosmos, allow staking as low as 0.05 ATOM, while Avalanche has a minimum requirement of 25 coins. In addition, extra coins should be used to pay transaction fees for depositing/withdrawing funds to/from staking.

The Simplicity of the Setup

Some blockchains pay rewards if you simply store their native coins in your wallet. Others require locking-up cryptocurrency on the platform. Consider if taking more actions may become an obstacle for you.

Staking Yield

Staking yields depend primarily on the coinomics of a particular coin. Yields can be flexible and depend on the number of coins in staking. Oftentimes the expected annual yield can be hundreds or even thousands of percent at the launch of a blockchain. But then it decreases inversely with the number of coins added by participants. Also, the yield curve can become flat over time.

ROI

When calculating staking yields, it's not the nominal yields we should be concerned with, but the actual yields. And they depend primarily on the dynamics of the coin's price.

How to calculate the actual ROI (return on investment)? — multiply the nominal yield by the change in price. Let's assume that P0 is the price of the coin at the time of staking, and P1 is the price at the time of withdrawing the coin from staking. We can express P1 as kP0, where the coefficient k=P1/P0.

Further, suppose that S0 is the initial number of coins in staking, and S1 is the number of coins at the time of withdrawal from staking (including the accumulated interest income). We can express S1 as iS0, where factor i=S1/S0. The coefficient is the nominal rate of return, expressed not as a percentage but as a decimal. For example, if the rate is 7%, i=1.07.

Our final calculation: ROI = i*k. For example if the rate of return is 10% and the price has increased by 20%, then ROI = 1.1*1.2 = 1.32 or 32%.

How to Buy Proof of Stake Crypto

So, we’ve covered different PoS coins and learnt about the main factors one should consider before staking. Now we will illustrate how to buy a PoS coin, by the example of one of the most popular coins — ETH.

Step 1: Register at Redot

Visit redot.com and click [START TRADING]. Then, on the registration page, follow the instructions on the screen and enter the email address and password you will use for your account. After reading the Terms and Conditions, click [CREATE ACCOUNT].

You will receive an email with the verification link, valid within 10 minutes. Please check your email inbox and make sure to click the link on time.

Step 2: Make a USDT Deposit

To deposit USDT into your Redot account, you must be signed in. Please click [Wallet] on the left sidebar menu. You will see the tab [Deposit/Withdrawal].

Click [Deposit/ Withdraw]. Select the coin from the list. In our case, it is USDT. Copy the USDT deposit address and paste it into the address section of the platform from which you are going to transfer your funds.

Step 3: Buy ETH

Now, after you have deposited USDT coins to the account, go to the Exchange section and select ETH/USDT among the trading pairs. Then, specify the amount of ETH you wish to purchase and select the order type (market or limit). Finally, click [BUY X ETH].

Step 4: HODL Your POS

Transfer the coins to a preferred wallet for staking.

Conclusion

PoS is a promising consensus mechanism adopted by more and more blockchains. The second-largest cryptocurrency Ethereum also has recently switched to this algorithm.

Staking, an integral part of PoS, can bring investors with different pocket sizes a stable passive income. Many PoS coins have a low entry threshold. For example, with as much as $100, coupled with a competent approach, diversification and tolerance for the possible risks of volatility, you can buy a few PoS coins and start receiving rewards.

Considering its efficiency and speed of development, PoS has all the prerequisites for further growth. Therefore, a good future awaits PoS coins, and their share in the total capitalization of the crypto-market will only increase.

Start staking ETH 2 with no fees and an annual interest rate up to 20%!

FAQ

What Is Proof-of-Stake vs. Proof-of-Work?

Both Proof of Work (PoW) and Proof of Stake (PoS) are consensus mechanisms used by blockchains to validate transactions. While PoW uses a competitive validation method based on the amount of computing power, in PoS the likelihood of block validation is determined by the number of coins in staking.

Is Proof-of-Stake a Certificate?

The Proof of Stake consensus algorithm allows those with the highest stakes to become validators. No certificates are issued at this time.

How Do You Earn from Proof-of-Stake?

You can earn from PoS by staking the native coins of the PoS blockchain. The prerequisites and terms of staking are specified on the official website of each blockchain.

What Are the Disadvantages of Proof-of-Stake?

Unfortunately, some PoS networks are subject to dominance by the most significant coin holders. Thus, early adopters and wealthy investors can heavily influence the network management.

What Happens if I Lose My Proof-of-Stake Coins?

Your coins are stored on-chain, which means they can not be lost. However, there is a risk of losing your wallet which gives access to your assets. Make sure to store the recovery phrase in a secure place. If you lose the phrase, the access to funds will be lost forever.

This communication is intended as strictly informational, and nothing herein constitutes an offer or a recommendation to buy, sell, or retain any specific product, security or investment, or to utilise or refrain from utilising any particular service. The use of the products and services referred to herein may be subject to certain limitations in specific jurisdictions. This communication does not constitute and shall under no circumstances be deemed to constitute investment advice. This communication is not intended to constitute a public offering of securities within the meaning of any applicable legislation.