Staking cryptic is becoming increasingly popular as a consensus mechanism for several reasons.
For one thing, staking involves usage of minimal resources compared to mining. It also involves a more passive investment making it more ideal for those crypto investors that require little to no supervision of their assets.
Staking is also beneficial on a more technical level: networks utilizing it typically offer higher network speeds, cheaper transaction processing costs and it is more environmentally friendly.
Due to these and more benefits, staking is slowly replacing mining as the preferred choice for several blockchain networks.
Even Ethereum, the leading smart contract platform and the second-largest in terms of market value after Bitcoin is transitioning towards staking.
In this guide, you will learn more about staking and, in particular, how to stop staking. There are a few reasons that may lead someone to look into unstaking their crypto assets, such as realizing their investment goals or just needing to cash out.
If you are looking to unstake your crypto, read on to discover ways to do it, when is the most appropriate time to unstake, and definitions of relevant phrases.
Can you stop staking crypto?
Yes, staked crypto can be unstaked at any time if the investor desires so. However, several factors determine the process.
The blockchain is the biggest determinant and each network has its custom policies governing the staking mechanism.
Typically, most networks have periods where investors cannot access their assets. This period is referred to as a lock-up period. It varies from network to network and can be as little as a few days to several months or years.
A great example is Ethereum, whose core developers launched the much-anticipated network upgrade to shift from mining to staking consensus mechanism In December 2020.
As part of the transition, investors were encouraged to stake their Ether tokens to support the network.
However, those staked coins can not be unstaked until the core developers rollout the next upgrade version 1.5 of Ethereum 2.0, which is not expected for at least a couple of years.
Another determinant of how you can unstaked your assets is the service through which you choose to invest. There are several ways to stake, such as through a staking service, directly through a supported wallet, and by running a network node.
With the staking service option, the service provider may have its operating policies prohibiting users from unstaking their assets regularly.
Such policies are necessary because most staking networks have policies in place to discourage unstaking. Therefore, the staking services adopt these policies to encourage predictable investments.
Even though investors can stake and unstake at any time, the period between when they unstake and when they receive their tokens is often delayed to give time for unbonding the tokens.
Usually, the unbonding period varies between a few days to a few weeks, and within this period, the staked coins do not earn the owner any interest.
Can you stop staking at any time?
Whether you can stop staking your cryptocurrency at any time depends on which network you are participating in. Most blockchain networks that utilize proof of staking (PoS) allow their stakeholders to stake and unstake at any time.
A few other networks have implemented restrictive policies to deter stakeholders from unstaking to ensure the stability of the network.
Ethereum is one such example that allows its stakeholders to lock their Ether tokens for an indefinite period until the launch of Ether 2.0 version 1.5, whose launch date is uncertain.
Read how to stake ETH on Coinbase.
However, even with Ether 2.0’s restrictive policies, shrewd investors have, at their disposal, several channels to invest in that will allow them to participate in Ethereum staking and yet still be able to stake and unstake at any time.
Staking services offer such flexibility allowing their users to unstake their assets at will. Leading cryptocurrency exchange, Binance issues a new token to Ether 2.0 stakeholders using the platform called Wrapped ETH (WETH).
These tokens are issued on a 1:1 basis allowing holders to achieve liquidity with their staked tokens without having to unstake them.
How to know it is a good time to stop your staked crypto?
There are a few ways to determine the right time to get out of your staking investment. They include the following factors:
Investment goals – the biggest determinant of whether you want to stop staking a particular coin is whether you have achieved your goals.
A typical staking goal is when the network achieves maturity.
Assume that a new network is launched today and you want to support it by staking, you can do so for a period of time until it achieves maturity by having enough other stakeholders come onboard or it achieves a particular network security threshold.
In that case, you can unstake your assets.
Staking returns – most investors will join a staking network to earn returns, and that is perfectly fine since these networks use the promised potential returns as an incentive to attract more stakeholders.
As an investor, you may want to unstake your tokens if you have achieved the intended returns, or you figure out that there is little prospect of getting your intended returns in the future by keeping your stake in the network.
At this point, you might want to unstake your assets.
Project roadmap prospects – sometimes you may disagree with the core developers of a decentralized network if they intend to take the project in a direction you are uncomfortable with. If you feel that you cannot support the project any further, you can unstake your assets.
Financial obligations – you may opt to unstake your tokens if you require liquid cash, and your staked crypto is all the assets you have at your disposal. If that’s the case, you may want to liquidate the coins under bondage or find a way to use them as collateral to take out a loan.
Can you lose crypto by staking?
Yes, you can. Losing staked crypto is always a risk within most PoS staking networks. It is called ‘slashing,’ and it entails the investor losing part of or the whole amount whenever they violate operation policies within the blockchain environment.
Consider this: every blockchain network has operation rules that govern how blocks are created, and transactions are validated.
The stakeholders could be running the validation nodes, and they must adhere to these rules at all times.
An example of a rule used is the provision that node operators must ensure that their nodes maintain 99%+ uptime.
If your node goes offline more than an acceptable time limit, you will cause ineffective operations, and most networks will punish you by taking some of your staked coins. The punishment activity is often referred to as a slashing incident.
How long can you stake Crypto?
There is no time limit for staking crypto. Any investor is free to lock their coins for as long as they see fit.
However, there is a typical minimum staking duration before which the investors are able to start claiming rewards or even unstaking their assets.
Not all blockchain networks have this provision, so it is advisable to confirm with the network you are interested in before you begin the process.
Is staking crypto worth it?
Yes, staking crypto can be worth it, depending on the investor’s goals. Most investors consider staking as a passive means of getting rewarded for their digital coins or tokens.
The reward rates vary amongst the different PoS networks, but if the investor considers a given rate satisfactory and they invest, there is a chance that the end results could be worth it.
Another reason for investing in a staking network is to support that given network by contributing towards its security and stability. Small upstarts require community engagement and support to get off the ground.
Most of these networks have opted to employ staking as a consensus mechanism as it has more benefits than mining.
The more stakeholders participate in transaction validation, the more secure and decentralized the network becomes.
Staking is more environmentally-friendly than its leading competitor – mining. Plus, given that staking is less resource-intensive, it encourages more people to become stakeholders, which leads to increased network security.
Does staked crypto still increase in value?
It depends on the market action. If the price of the staked token or coin increases in the period of bondage, the value of the assets will rise. The reverse is also true, whereby if the token’s price falls, the value of the holdings will also fall.
Another consideration is that some staking services allow their users to reinvest their rewards which also contributes to an increase in value for the stakeholders.
Do you get your coins back after staking?
Yes, you do get your investment back once you unstake it, but the amount that you get back may vary depending on whether you suffered a slashing incident or whether you chose to reinvest the rewards you got from your staking activities.
If you are using a stalking service like Binance, which issues another token instead of the staked one as a placeholder, you may need to redeem it for your full tokens.
Where is the best place to stake Crypto?
There are several ways and places to stake crypto for impressive returns. The most popular and highly recommended are using staking services with a strong reputation.
Our recommendation is to use exchanges such as Binance, Coinbase, and Kraken that offer staking for several PoS coins. Coinbase, in particular, allows its users to stake more than 20 different assets effortlessly.
If you are technically minded, you may want to run a full node and participate directly in transaction validation. This is the best route with the maximum return because you won’t be sharing the proceeds with any middle-man service.
What is locked staking crypto?
Locked staking is akin to the traditional locked savings account with your banking institution. The operation terms are similar.
An investor will commit to locking their digital tokens for a predetermined period allowing a staking service to use their assets in a staking pool, and rewards are credited to the holder of the locked staking account.
Premature redemption often leads to forfeiture of earned interest, just like with a locked savings account.
Which crypto are most popular for staking?
Here is a list of the ten most popular cryptocurrencies that are currently available for staking on most staking service providers or directly by running network nodes:
- Ethereum 2.0 (ETH2)
- Cardano (ADA)
- Solana (SOL)
- Avalanche (AVAX)
- Polkadot (DOT)
- Algorand (ALGO)
- Near Protocol (NEAR)
- Polygon (MATIC)
- Cosmos (ATOM)
- Tezos (XTZ)
Staking crypto is becoming more popular as most networks utilizing PoS systems are also growing. Similarly, most investors are becoming aware of the benefits of staking as opposed to mining.
Hopefully, you have learned some of these benefits, where to stake your crypto, and how to unstake it if you have to.
The guide has been comprehensive and if you need additional information on staking, check out our other guide that delves into whether staking is worth it.