Staking MINA is one of the beneficial and exciting features of Mina protocol. By staking you get rewarded for holding a certain amount of MINA tokens.
How does it work and why should you consider getting involved in Mina protocol staking? How good an investment is it, before you decide to get involved? What is this Mina protocol?
In this article we will explore these questions and make sure you understand why getting involved in Mina protocol may be a good idea for you.
Mina Protocol staking and rewards: What is Mina Protocol?
Known as the world’s lightest blockchain, Mina Protocol is a minimal succinct blockchain built to curtail computational requirements in order to run DApps more efficiently. Rebranded from Coda Protocol to Mina Protocol in October 2020, the project always maintains a balance in its decentralization and security.
When developing blockchains, trade-offs are usually made between three desirable but incompatible attributes of a protocol- scalability, security, and decentralization. Projects are usually forced to compromise as only two of the desirable attributes tend to fit together, known as the blockchain trilemma. The main cause of this dilemma is due to the fact that decentralized projects increase in size as uses increase, as noted in projects like Bitcoin.
In trying to solve this issue, Mina has its size designed in such a way it doesn’t increase regardless of usage growth, this is evident when Mina network size of just 22 KB is compared to 300 GB of Bitcoin blockchain.
Mina Protocol uses zk-SNARKs to enable users to natively verify the platform right from the genesis block, this is its major objective referred to as succinct blockchain according to the technical whitepaper.
Zero-knowledge Succinct Non-Interactive Argument of Knowledge, zk-SNARKs is a type of succinct cryptographic proof that allows someone to prove an information without revealing the information. The use of zk-SNARKS allows for verification of the Mina protocol without exposing the blockchain’s contents, thereby offering a platform that doesn’t need a third-party and contributing greatly to maintaining a constant size network- which allows scalability, security, and decentralization.
MINA is a native currency of Mina protocol which functions as a utility coin and medium of exchange. One of the use cases is staking, when staking MINA you will be able to earn interest on your holdings and get rewards in additional MINA tokens.
So, what is staking?
Staking involves delegating crypto assets to a skating pool that allows stakers to earn interest/rewards on their assets.
It helps maintain a blockchain’s infrastructure or provide trading liquidity on exchanges.
Staking is one of the best ways to earn on your crypto investments without actively trading them.
Staking MINA tokens contribute to the Mina protocol ecosystem because when a new block is created on the network, the person who staked to help produce that new block is rewarded in MINA tokens.
Mina Protocol staking and rewards: How to stake MINA
To stake MINA and start earning rewards, first you need to create an account with any cryptocurrency exchanges or brokerages supporting the protocol (if you don’t have one already). It does not take long to set up and you will normally need to show your ID and provide some personal and contact information. Once your account is set up, you will deposit some money to enable you to purchase MINA.
Then, locate the staking service on that platform, search for MINA and proceed to delegate the desired amount of token for staking. Some platforms have different staking arrangements and contracts, while some contracts are flexible others are not. So be sure to research before choosing any platform for your staking. With different reward plans, ensure you understand how staking rewards are calculated too.
For example, using Mina daemon to delegate/stake as noted in the official mina notes
First unlock your account and then delegate to stake Mina’s address (B62qjmUyv9D4GQ35RFSDrXjMqgFYW4VtDkuv1q8TnxosPqxSJcbdvzG), it will take about 1 to 2 epochs- about 2 weeks- after the command has been executed for the delegation to be active.
Where can one stake Mina protocol?
MINA is traded (and can be staked) on most cryptocurrency exchanges such as Binance, Swapzone, and BKEX. There are lots of crypto wallets out there, such as Clorio and Auro that allow one to store and stake MINA.
Mina Protocol staking and rewards: Where to earn the highest staking rewards for MINA?
Staking rewards fluctuate a lot very quickly and are never the same across different staking platforms. It is always best to choose a reliable staking platform that offers a fair interest rate.
How to choose a staking platform
Some staking platforms offer very high unrealistic APY figures in order to attract investors. These annual percentage yields are supported and paid for by high token inflation and are usually accompanied by a long lock-up period. These platforms tend to lock up your assets for longer than the actual lock-up determined by the network, it is important to compare it to the unstaking period for native staking.
Staking platforms do not always clearly state how much fees they charge when staking your crypto with them. New users may not know how to check the actual yield and may be unwilling to put in the effort to do so, therefore some staking platforms take advantage of this and charge a hefty fee for using their staking services, which users do not usually figure out. Check out for fees like Commission fees and Network fees. Paying fees for staking services is not new nor an issue, just be sure to find out what you are paying for and if you are willing to pay for it.
Centralized finance (CeFi) firms like BlockFi recently ran into liquidity problems as the market plummeted and there was lots of selloff.
Many ‘stakers’ delegate their coins on these platforms without having a true understanding of how these yields were being generated. These funds might be lent out to generate yield – which is much riskier than staking and mostly not clearly disclosed to users.
Be aware of ‘Ponzi’ staking platforms- it is common knowledge that when the source of yield on any assets is unclear, you are clearly the yield. As the crypto market continues to get exploited, it is important to understand how a staking platform yield is generated and if it is sustainable in the long run.
Do not assume that when you stake your crypto on a staking platform it is ‘safe’ from exploits or hacks. It is important to know whether it is a custodial or non-custodial staking service that you are using and understand what the risks are with each option before delegating your assets. Custodial staking is when you are staking your crypto through a centralized entity like Binance, the exchange is the custodian of your assets and you are trusting them with management of the private keys. It is convenient as there is no need to manage and store private keys, it is easy to understand for beginners. There are usually lower rewards, lack of transparency and higher security risks with this type of staking. Non-custodial staking is when you have sole control of your private keys, you have control of your crypto and you have custody of your own assets. Non-custodial staking is typically practiced using a wallet like Metamask. It has higher staking rewards, highly secure as you have control of the private keys, and contributes to network decentralization. It is not beginner friendly, storage of private keys can be a very daunting task, also assets can be illiquid.
Before choosing a staking platform, ask the following questions; Are my assets being staked or lent out? How is the yield being generated? Is the yield stated higher than what can be gotten from native staking, and if so how are they generating a higher yield? Do I understand the difference, pros and cons of custodial and non-custodial staking platforms?
Mina Protocol staking and rewards:Why stake Mina Protocol?
Mina Protocol being the first cryptocurrency with a succinct blockchain is a good investment that you might be planning to hold for a long period. Instead of just having it sit, you can choose to delegate it in a staking pool to earn rewards.
It is easy to become either a validator or a delegator with the Mina Protocol, and there is also no minimum stake amount required to participate.
Because funds staked on Mina are never ‘locked’, if your token is delegated to a validator; you can transfer, sell or donate your staked tokens at any time, undelegate at any time by re-delegating the stake back to the original account (technically, these would still be staked, but just to your own account and not a validator) and you can redelegate your already delegated Mina tokens to another validator.
To answer our very first question, yes, MINA staking is a good investment in 2022.
Staking MINA is generally safe and can be done on either a cryptocurrency exchange or a decentralized application (dApp), always research the platform itself and find out if a reputable auditing company has audited it.