Coinbase staking: Safety and profitability

Coinbase staking is essentially an investment opportunity for Coinbase clients. Basically, if you’re into Coinbase, you should be looking for an easy way of doing staking which may not be the best but is it safe? And if safety is guaranteed, how profitable is Coinbase staking? You can’t take a shortcut when financial matters are involved so please review the general merits of crypto staking here.

What is Staking?

Staking is a blockchain terminology that refers to the active involvement in validating transactions within a blockchain network. Often, these blockchain networks operate on a Proof of stake consensus algorithm. Validating transactions within a blockchain network is a vital security feature that ensures transactions are legitimate and no fraudulent transactions are made within the blockchain network.

Therefore, as a result, if you hold, for instance, ETH, you can stake your ETH and participate in validating transactions within the Ethereum blockchain. Therefore, as an investor, you get rewarded for participating in the blockchain transactions, and these rewards are considered interest earned.

Since crypto holders on the Coinbase platform must meet specific requirements to begin earning rewards, the platform rewards those who stake particular cryptocurrencies. Staking is essentially a financial product that allows crypto hodlers to take out interest from their crypto holdings without losing their crypto portfolio balance.

Basic requirements for Coinbase users only

Coinbase staking allows crypto holders to utilize their crypto holdings to earn more crypto by committing them to the platform. The entire process of staking involves having a certain minimum amount of cryptocurrency coins to participate in transaction validations.

As a primary rule of blockchain transactions, all transactions need to be verified by credible participants within the blockchain network. Today, Coinbase has provided its users with an opportunity to be part of the robust network, participate in crypto staking and earn staking rewards using their cryptocurrencies.

As an investment strategy, it is important to understand deeply how crypto staking works on the Coinbase platform and how it compares to other staking platforms in the market today to make an informed investment choice.

To begin staking, you’ll need to meet all the requirements set p by your platform of choice, in this case, the Coinbase platform. Before you are allowed to stake, there is a minimum balance that you need to have to validate other transactions within the blockchain.

How to stake cryptocurrency in Coinbase?

To stake cryptocurrency in Coinbase, you should follow the following steps.

• Create an Account on Coinbase.
• Purchase the relevant proof-of-stake cryptocurrency you intend to stake on Coinbase.
• A user after registering must purchase proof of stake cryptocurrencies that are available on Coinbase for staking purposes
• Stake the purchased cryptocurrency by depositing the tokens purchased on Coinbase.

What are some benefits Coinbase staking?

Image source: Coinbase

Numerous reasons exist that compel users to stake their cryptocurrencies instead of lying on exchanges or locked in their cold wallets. Staking provides an investment opportunity to earn more as you continue holding your crypto portfolio intact.

Many seasoned cryptocurrency holders do not like to sell their tokens since they anticipate future capital gains on their digital assets. The fundamental reason behind HODLing is to allow investors to gain more value as they wait for the crypto coins to gain market value over time as the demand grows.

Although holding cryptos for a prolonged time provides the chance to earn more, combining this investment strategy with Staking can lead to even better returns on investment in the long run.

So here are some benefits of staking cryptocurrencies for rewards.

• Ability to earn more assets; when you stake, for instance, 1 ETH, you’ll receive staking rewards in ETH; therefore, your earn more ETH coins. After a certain period, depending on your yield rates, you’ll have, for instance, 1.01ETH, which will undoubtedly have a higher value than 1ETH at any given moment.
• Therefore, an opportunity that allows you to earn rewards without selling off your crypto holdings helps preserve your crypto portfolio.
• Staking offers incredible crypt investment opportunities to earn passive income for Coinbase customers.

Crypto rewards through staking

Coinbase is one of the most popular crypto exchanges in the crypto market today. Therefore, many crypto holders are interested in understanding how they can earn crypto rewards on the platform. For instance, some requirements have to be met by an investor before they are allowed to participate in Coinbase crypto rewards system. Also, not all cryptocurrencies can be staked, as there are few suitable cryptocurrencies for the Staking.

For an individual to stake crypto for rewards on Coinbase, the customer has to meet the minimum balance required. After that, a node will deposit some cryptocurrency to the staking network, which can be viewed as a security deposit. So, the staking game is essentially a game of numbers in that the more you stake, the higher the chances of your node being selected to create the subsequent block on the blockchain.

When the block is completed successfully, the validator is rewarded. These terms are used on a Proof of Stake consensus mechanism that Ethereum and several other blockchains use. The staking mechanism is similar to how miners are rewarded in blockchains that utilize the proof of work consensus algorithms like Bitcoin.

So, how exactly does staking work on the Coinbase crypto exchange platform? Well, let’s find out.

Does Coinbase offer staking rewards?

Yes, the Coinbase platform offers lucrative crypto staking rates for all eligible cryptocurrencies on its platform. However, Coinbase restricts its customers to specific geo-locations and has prohibited several global users except for US customers.

Several Coinbase customers prefer staking with the Coinbase exchange platform due to its ability to offer optimal services to its users. The algorithm on the platform allows users to stack up more and more coins to benefit more from Coinbase staking system.

As discussed earlier, the Coinbase staking reward system for eligible cryptocurrency will enable users to accumulate more coins as the Coinbase algorithm optimizes staking opportunities for them.

If you have more coins, it means that Coinbase can stake more coins on your behalf, and therefore your staking rewards will undoubtedly increase significantly. To earn rewards, you have to participate in Staking, and the staking rewards on Coinbase also depend on the type of blockchain you are staking on.

Essentially, blockchain networks with higher frequencies of block creation have the potential for more rewards than networks with low block creation frequencies.

Therefore, Coinbase staking program has been known to provide greater rewards for crypto investors. But how does Coinbase manage to offer such impressive earn rewards to its customers?

Why should I stake some of my cryptos on a Coinbase account?

Since the introduction of smart contracts, the adoption of Ethereum based blockchains has undoubtedly increased. The ability to incorporate smart contracts has revolutionized crypto finance, and today, crypto holders are able to benefit from several functionalities of smarter blockchains.

Coinbase has taken a keen interest in such information and has provided its customers with a lucrative staking platform that allows users to earn interest by holding a particular amount of crypto on the platform.

Instant rewards can be achieved by staking several cryptocurrencies on the platform. According to the data from Coinbase, ETH is one of the most staked cryptocurrencies on their platform. Subsequently, ETH-based tokens are significantly popular for staking rewards within several other crypto platforms.

Financial products such as Staking cryptocurrencies are viewed as passive income opportunities. The rewards are often earned without the crypto investor putting in actual work. However, staking programs ensure that blockchain transactions are validated, and new blocks are created much faster due to the availability of tokens to be used on the network.

However, on Coinbase, several digital assets are eligible for Staking; therefore, depending on the staking terms for each digital asset, an investor may be required to accept some predefined terms and conditions to stake some cryptocurrencies on the platform.

Coinbase account earnings eligibility requirements.

Image source: Coinbase

To be able to stake your cryptocurrencies on Coinbase, you need to meet specific requirements. Your Coinbase account must be fully verified, meaning you must provide identity verification.

After the identity verification process, the Coinbase account holder must deposit or purchase cryptocurrency on Coinbase and maintain a certain minimum balance to be eligible to receive rewards.

Additionally, not all cryptocurrencies are eligible for rewards. To receive rewards, you need to hold suitable cryptocurrencies.

Remember that Coinbase staking program is only available on the Coinbase.com platform. Therefore, users must hold their cryptocurrencies on this platform since the crypto rewards are not available on Coinbase Pro.

However, not all cryptocurrencies are eligible for Coinbase rewards on the Coinbase.com staking platform. So which cryptocurrencies are negligible for staking on the platform as of today?

What cryptocurrencies can I stake on the Coinbase account?

Based on the data retrieved from the Coinbase help page, there are four major options for Coinbase staking on the platform. The option involve either Staking Tezoz (XTZ), Ethereum (ETH), Algorand (ALGO), Dai, USD Coin, and Cosmos (ATOM).

Essentially, Coinbase offers the following yield rates for the cryptocurrencies mentioned above

ETH -4.5% daily rate.

ALGO- 4% daily rate.

ATOM- 5% every week.

XTZ-4.63% every three days.

DAI- 2% per day.

USD coin – 0.15% per month.

The above cryptocurrencies are eligible for staking; however, their rewards are settled differently depending on the blockchain network involved.

For instance, for Algorand, the earned rewards are often credited within 24 hours after the transactions are made. Essentially, all rewards are recorded as transactions to your Coinbase crypto wallet. However, the ALGO team is poised to make changes to their platform this year, which will consequentially affect staking terms. After successful migration, staking rewards for ALGO will be credited to users after every three months (Quarterly).

Due to the nature of Cosmos, the initial rewards are reflected after a week to a fortnight, while all subsequent reward settlements are reflected after one week.

ETH rewards take approximately one week to reflect the first reward transaction, while subsequent rewards are earned daily, and screenshots are sent to you daily.

Notably, the Ethereum blockchain network is complete; previously, the network does not automatically credit ETH2 staking rewards to the total balance.

The Tezos rewards are known to take the longest on the Coinbase staking platform. Initial credits approximately take about a month to a month and a half. However, the network reflects and pays approximately three days after.

The Coinbase staking program also allows earning rewards for DAI and USD coin digital assets.

How does Coinbase account reward work?

On the Coinbase.com platform, investors gain crypto rewards through staking their crypto money. As earlier described, Staking is essentially committing to contribute your cryptocurrencies in blockchain validations and transaction verifications within the proof of stake consensus mechanism.

When crypto investors stake their crypto, they volunteer to use their verified crypto holdings to validate new transactions within the network, leading to new blocks. So when your cryptocurrency is involved in the validation process, the system automatically rewards you for your participation within the network. The phenomenon is similar to how the Bitcoin blockchain network rewards miners for solving complex algorithms and creating new blocks.

Similarly, on Coinbase, users must meet predefined requirements discussed above to be strat staking. However, the platform handles the details, and Coinbase often chooses what percentage to stake at any given time. Generally, the more crypto coins you stake, the more rewards you’ll receive.

Coinbase staking compared to other exchanges

When making any investment decision, it is often common to compare your options to determine the best course of action. In this case, the Coinbase staking example allows clients to increase their crypto funds by committing them for a particular period.

However, more often than not, investment vehicles are subject to fees that investors may not be aware of before investing. Other exchanges such as Kraken and Binance also offer stake programs to their users. However, there are disparities in the overall returns, fees, and the cryptocurrencies eligible for Staking and the geographical availability of the staking program.

Generally, Coinbase charges 0% staking fees and has a running promotion that rewards users with $5 worth of Bitcoin upon signing up. However, cryptocurrency exchange platforms like Kraken allow a broader range of crypto coins for staking than Coinbase. However, the ease of use of the Coinbase.com platform makes it suitable for beginners and intermediate crypto investors.

How safe is Coinbase?

Coinbase is a publicly-traded company, and most users attest that you’re not going to find a safer exchange to use. That’s why they can get away with having comparably high fees. The US-accredited crypto exchange is basically the gold standard in safety, and some trust it more than managing private keys on my own. So that accounts for the higher fees charged on security but Coinbase is notorious for poor support for a lot of coins.

Worth noting that due to the above, Coinbase has one of the highest staking fees in the space where 25% of your rewards are given to the Company. So, a huge cut on your profits for staking. They’re also FDIC backed, so you’re insured against losses, but not all of it.

Two Firefox 0-day vulnerabilities were referred to in a Coinbase blog post which took place back in May and June 2019. For a layman, Firefox 0-day vulnerability is a jargon used for a loophole in the computer software which if goes untreated allows hackers to get the system penetrated. This correspondence made way for the cyberpunk to get connected with the staff members that he/she was aiming at. Right after getting in touch with the “high-payoff targets,” the hacker then sent another email embedded with a cryptic element.