Most people invest their money to make a profit. When it comes to investing in the stock market, people begin reading passive income in the form of dividends. Such rewards serve as incentives for people to hold onto their stocks and continue earning profits in the form of dividends. Through investing, people create what is known as a passive income. In essence, passive income is simply income that comes with no effort, hence the word “passive.”
When it comes to the cryptocurrency market, people can acquire passive income from staking their cryptocurrency assets. So how is it different from the stock market? Well, staking rewards are not related to the price movements of the cryptocurrency you are staking. This is because you will get rewards in cryptocurrency, not in fiat.
Such a feature is more suitable for long-term holding rather than short-term holding. This is because the more you hold, the more you win. Throughout this article, we will present a guide on how to stake Polygon and discuss whether you should do so.
What is Polygon (MATIC)?
But first off, what is Polygon (MATIC)? To understand the role of Polygon, we should briefly explain the issues of Ethereum. The Ethereum network is the biggest smart contact-compatible blockchain network in the world. Other networks would crash if they had the traffic that Ethereum has. However, Ethereum keeps its network running smoothly by increasing its gas fees. More traffic leads to higher fees. There are instances where people had to pay more than $180 for a $30 transaction in Ethereum.
These issues will allegedly be dealt with when Ethereum 2.0 rolls out. However, we have been waiting for it for years now. Some developers came up with Polygon, a Layer-2 solution for Ethereum. In essence, Layer-2 solutions work on top of a particular blockchain to help them with the efficiency of their network. When it comes to Polygon, it operates on top of Ethereum and provides the Plasma framework. This framework helps developers create decentralized applications (DApps) off-chain. Moreover, the Plasma framework provides creators with scalability, speed, and high security.
In 2021, Polygon got popular as Ethereum began experiencing more traffic. With the boom of non-fungible tokens (NFTs), the Ethereum blockchain attracted even more traffic, leading to higher fees and a slower network. For example, when you go to OpenSea, you might stumble upon NFTs that use “Ethereum on Polygon.” This means that you can use Ethereum to purchase those NFT without paying the high fees of Layer-1 Ethereum. However, many experts believe that Layer-2 solutions could end with the launch of Ethereum 2.0.
What is Proof-of-Stake (PoS)?
Proof-of-Stake (PoS) is a mechanism that came after the famous Proof-of-Work (PoW) mechanism. PoW is also referred to as mining, and cryptocurrencies such as Bitcoin and Ethereum use it for securing their network. This consensus mechanism requires powerful computers to run the network and is usually done in a decentralized manner. People who contribute their computing power to the network get rewards in cryptocurrency in return.
On the other hand, the Proof-of-Stake mechanism does not require hundreds of thousands of computers to run 24/7. This makes it more environmentally friendly. Furthermore, in a PoS network, you can contribute to the network by not selling and locking up your assets to generate staking rewards. Elrond, Cardano, Terra, Polygon, and Solana are some cryptocurrencies that use this mechanism. However, not all of them use the same PoS mechanism. For example, Elrond uses a Secure Proof-of-Stake (SPoS) mechanism, and so forth.
Staking rewards in the crypto market are the equivalent of dividends in the stock market. Nevertheless, the staking rewards are not affected by the price movements of that specific digital asset. This is because you get your rewards in crypto, not in dollars or euros. When you stake MATIC, for example, you will get your rewards regardless of the price movements of MATIC. If MATIC’s price goes up, you will get a share of the staking rewards. If MATIC’s price goes down, you will get the same share of the staking rewards. All that matters is the number of tokens you staked at the beginning and the Annual Percentage Yield (APY).
Polygon (MATIC) Staking
Polygon is a serious project, and it has most of the elements that make a project a good, long-term investment. Therefore, staking Polygon could generate you lots of profits. The average APY for staking Polygon is 8%. More than 2.39 billion MATIC tokens are currently staked in different staking providers according to Polygon. So, how and where to stake Polygon?
Where to Stake MATIC?
Staking cryptocurrencies is usually very easy. At the time of writing, most people use centralized exchanges for buying, selling, and trading cryptocurrencies. For example, some centralized exchanges to stake MATIC are Coinbase, Kraken, Binance, FTX, Gemini, and Huobi. Which one you choose depends on your area of residence, of course. For example, people who live in the United States are likely to choose Coinbase over Binance because of the limitations Binance has on the US.
Other platforms also support Polygon staking. For example, you can stake your Polygon on validators such as Cryptonomicon, Mind Heart Soul, VK Labs, Matrix Stake, and Coinstash.
How to Stake MATIC?
Moving on, you can stake MATIC in three simple steps.
Step 1: Buy MATIC
First off, you must buy MATIC. You can buy MATIC in both centralized and decentralized exchanges. You can buy MATIC using Binance, Coinbase, Crypto.com, Kraken, KuCoin, WazirX, and other smaller exchanges. When buying MATIC through decentralized exchanges you can use Uniswap. Another way to purchase MATIC is by creating a Polygon wallet, that will allow you to buy, send and receive MATIC in your account.
Step 2: Send MATIC to a staking provider
After buying the desired amount of MATIC, you will need to transfer them to a wallet. The type of wallet you use depends on the staking provider you choose. For example, if you want to stake your MATIC in an exchange, you can use the exchange wallet. However, if you want to stake your MATIC in another staking provider such as those mentioned above, you should use a non-custodial wallet like MetaMask. Before choosing a wallet, please make sure that your staking provider supports the wallet you want to choose.
Step 3: Stake MATIC
Now that you have set up your wallet, you are all set to stake your MATIC. The last step requires choosing a staking provider and connecting your wallet with it. After doing so, simply enter the amount of MATIC you want to stake and execute the transaction. Please spend some time researching the staking provider and check the link you are using several times. We say this because thousands of people are getting scammed repeatedly because they are not careful.
Where to Buy MATIC Coin?
MATIC is one of the biggest cryptocurrency tokens right now. Therefore, you can buy MATIC in most major exchanges such as Binance, Coinbase, Kraken, Gemini, Crypto.com, Gate.io, and several other smaller exchanges.
Takeaways
- Staking is the process of holding or locking your cryptocurrencies in return for rewards.
- The way staking rewards work in the cryptocurrency market is somewhat similar to how dividends work in the stock market.
- The Ethereum network has enormous traffic, which leads to higher fees. Because of this, people created Layer-2 solutions. One such solution is the Polygon protocol.
- Polygon is a Layer-2 solution that enables people to build more scalable, efficient, and cheap DApps on the Ethereum blockchain.
- The native token of Polygon, MATIC, uses a Proof-of-Stake (PoS) mechanism. This makes it a coin that you can stake and earn rewards from.
- In conclusion, staking Polygon (MATIC) is usually worth it for the long term.