You can make a lot of money in crypto and achieve your financial goals such as earning a passive income or attaining financial freedom through it. And if done correctly, passive income can translate into you leaving your 9 to 5 life and doing what you love instead. And the best part about crypto markets is that you can do so in multiple ways. One of those ways is staking crypto tokens and earning rewards on your crypto holdings. A lot of crypto tokens can be staked but one of the best token to earn passive income is through staking Stellar (XLM) tokens. And in this article, we will tell you all you need to know about how to stake XLM and start earning staking rewards.
What Is Stellar?
Before we tell you how you can start XLM staking, let us understand what Stellar (XLM) is. Stellar is a peer-to-peer decentralized network that was created by the Stellar Development Foundation in 2014 and was launched in 2015. It aims to connect the world’s financial system by becoming the protocol that is used by payment services and finance institutes globally. The Stellar Network has its own native token known as Lumens (XLM). The Stellara network can be used to send different types of crypto tokens where they are first converted into the intermediary XLM tokens and then converted back into the required currency.
The XLM network is secured by a unique Stellar Consensus Protocol which has four main features, namely, decentralized control, low latency, flexible trust, and asymptotic security. Through this mechanism, anyone can join the network and it also keeps the transaction costs as low as 0.00001 XLM per transaction. The Stellar blockchain does not work on the usual proof-of-work or proof-of-stake consensus mechanisms. Hence, Stellar Lumens (XLM) can’t be staked in a way that generally staking works. Moreover, there are no minimum balance requirements and anyone with even one XLM can participate in the Stellar Network.
What Is Staking?
In a prof-of-stake blockchain, new transactions are verified through a process called mining and the miners are given new tokens as rewards. While in a proof-of-stake blockchain, new transactions are verified through a process called staking where existing tokens of users in the network validate the transactions and users are rewarded for staking their assets. Staking can be understood as a traditional savings account in bank that gives you interest, but unlike your money in the bank, your staked tokens provide value to the blockchain network.
But as mentioned earlier, staking XLM is not possible in the way you can stake either ETH, ADA, or other proof-of-stake tokens. Given below is our detailed guide on how you can stake Stellar (XLM).
How to Stake (XLM) Stellar?
1. Pick the Platform for XLM Staking
The two of the best places where you can stake stellar (XLM) and earn rewards are Binance and Nexo. Depending upon your region, availability, and preference, you can pick either of these two get started on staking Stellar Lumens (XLM).
2. Create an Account
If you do not have an account in either of these, then create one and complete your KYC. The process should hardly take a few minutes. Transfer your XLM tokens to the exchange wallet if you already have them in aa wallet. Or you can buy XLM on Binance or Nexo.
3. Stake Stellar (XLM)
In the next step you can go to your preferred platform, and choose the amount and time period you wish to stake XLM for and start earning rewards.
How To Track Staked XLM in Your Portfolio?
If you are staking XLM or any other cryptocurrency to earn rewards, then chances are you have multiple assets across multiple networks, blockchains, and exchanges. Hence, it becomes quite difficult to keep track of your staked tokens by having to login to the exchange each time to check its performance.
The best way to overcome this is to use a crypto portfolio tracker such as the CoinStats Portfolio Tracker. It can be used to connect more than 100 different wallets across different exchanges and blockchain networks. You can simply connect your wallet to the portfolio tracker and not worry about your private keys being compromised as CoinStats would never ask you for them.
Staking XLM is one of the best methods to make money specially in bearish markets, like the ones we have been having since 2021. But it should be kept in mind that XLM rewards are correlated to the price of XLM tokens and if the price of XLM falls, then you might end up making losses even as you earn rewards.