(1). Staking Fees
These third-party providers that offer soft staking do not offer such services for free; you will need to pay some fees known as staking fees. In the Crypto Market, there are no standardised staking fees; the amount being charged varies from one service provider to another.
(2). Staking Balance
Once you send your coins into the wallet provided by the third-party service provider for staking, the staking fees are instantly deducted from the total coins you’ve sent in. This is the common practise in the Crypto Market. However, some few service providers deduct their staking fees only when you want to cash out from the system.
Whichever method being used to deduct the staking fees, the most important thing you should pay attention to is your staking balance. This is the total amount of crypto coins or tokens that are left after all the charged staking fees have been subtracted.
Total Staked Coins – Staking Fees = Staking Balance
(3). Staking Reward
This is the reward of new coins or tokens you will receive for staking your coins in a POS network. The staking reward is the interest that you earn.
Note that the staking reward varies from one service provider to another.
Therefore, like every other investment, the aim here is to find a service provider who will give you a higher staking reward with lower staking fees.
It is important to realise that your staking reward is calculated based on your staking balance.
For instance, if you stake in 2 Ether, and the staking fee is 0.02 Ether, it means your staking balance will be 1.98 Ether (that is, 2 – 0.01 = 1.98). Your staking reward will be calculated based on the staking balance of 1.98 Ether and not based on the 2 Ether you have deposited.
’Hope this is well understood in order to avoid any confusion in calculating your staking reward.
(4). APR and APY
The staking reward is calculated as APR or APY.
APR stands for Annual Percentage Rate while APY refers to Annual Percentage Yield. Many service providers use APR instead of APY to calculate your staking reward.
The major difference between APR and APY is that APR does not take into account the compounding of interest within a specific year while APY is based on compounding of interest earned.
If you are mathematically inclined, here are the formulae for APR and APY:
APR = Periodic Rate x Number of Periods in a Year
APY = [(1 + Periodic Rate)Number of Periods] – 1
Example: Assume you have an APR or APY of 10%. What is your monthly interest rate, and how much will you receive or earn on 2000 coins as your crypto balance?
Solution:
(i). Convert the annual rate from a percent to a decimal by dividing by 100: 10/100 = 0.10.
(Ii). Now divide that number by 12 to get the monthly interest rate in decimal form: 0.10/12 = 0.0083.
(iii). Convert the monthly rate in decimal format back to a percentage (by multiplying by 100): 0.0083 x 100 = 0.83%.
Thus, your monthly interest rate is 0.83%.
(iv). To calculate the monthly interest on 2000 coins, multiply the 0.0083 by the total amount: 0.0083 x 2000 = 16.60 coins per month.
(v). Therefore, if you stake with 2000 coins as your staking balance, you should receive about 16.60 coins per month as your staking reward for an APR or APY of 10%.
(5). Staking Period
This is the specific duration you will be staking your cryptos. It may be a few days, a few weeks, months, or even years.
Many service providers provide you with options to choose the duration while some others have fixed durations. Therefore, always check the durations that are available to you to stake your cryptos.
Generally, the longer the staking period, the more it is profitable.