How to Stake Stablecoins in 2024: A Beginner's Guide

Stablecoins offer stability in the volatile crypto market and bring you earnings through staking. However, the entry into this process can be challenging for newcomers.

We are here to tell you the ways to get returns on your stablecoin holdings while keeping things low-risk. In this guide, we’ll cover the staking mechanics, the best tokens to stake, and indicate the potential risks.

What Is Stablecoin Staking?

If you know about staking, you're aware that you can only stake cryptocurrencies based on the Proof-of-Stake algorithm. But what about stablecoins?

Stablecoins can be staked, but it doesn't validate transactions. As they operate on a Proof-of-Reserve system, it's more like lending them to a DeFi platform or protocol. It helps to provide liquidity to the network, and you get rewarded for it.

Stablecoin lending works by depositing your tokens into DeFi platforms or Centralized exchanges. These platforms utilize your funds for various purposes and you get rewards in return. Unlike traditional staking, this method doesn’t secure the network, so you earn interest for supplying funds.

How To Stake Stablecoins?

The two main ways to stake stablecoins are through CEXs and DeFi platforms. CEXs simplify crypto lending by connecting you with borrowers and sharing a part of the profits. DeFi stablecoin staking is a way of earning income by loaning your stablecoins to DeFi platforms. It supplies liquidity to the network and you get rewarded with extra stablecoins.

But how do you pick the top stablecoin staking method? Well, it highly depends on your situation. The best platform for stablecoin staking for beginners would be a centralized exchange like Cryptomus and Binance. Such platforms are user-friendly and require minimal technical knowledge. DeFi platforms offer potentially higher returns but require more learning and carry greater risks.

If you’re a newbie, check our stablecoin guide first.

What Are Stablecoin Interest Rates?

Stablecoin staking reward is an incentive earned for locking up your stablecoin holdings. It’s called APY, and it depends on the staked amount, duration, and the chosen platform.

The highest stablecoin staking APY can currently reach over 15% on some platforms for certain stablecoins. However, these rates can fluctuate and are not guaranteed, so careful research is needed. Let’s compare APY rates for some of the most popular stablecoins:

NameInterest rate (APY)
USDTInterest rate (APY) 1%-3%
USDCInterest rate (APY) 1.5%-4%
DAIInterest rate (APY) 1%-5%
BUSDInterest rate (APY) 2%-3%
USDDInterest rate (APY) 2%-8%
FDUSDInterest rate (APY) 3%-7%
TUSDInterest rate (APY) 2%-6.7%

What Is The Best Stablecoin to Stake?

The best stablecoin for staking depends on your priorities. While choosing a stablecoin to stake, consider these factors:

  • Stability: Opt for trusted stablecoins that have consistently maintained their peg to the underlying asset.
  • Liquidity: Pick a token with high liquidity for a smooth entry and exit when staking.
  • APY Rates: Compare APYs offered by platforms and pick one with the best rate.

Stablecoin Staking2

The best stablecoin to earn interest on is DAI, due to its wide availability and high interest rates on some platforms. Being an algorithmic stablecoin, it's trickier for beginners than USDC or USDT. BUSD (Binance USD) is a solid choice, especially if you frequently use centralized exchanges.

Want to understand algorithmic stablecoins? Check out our guide.

USDT is a trusted option for many investors and the largest stablecoin by market capitalization. It was the first major stablecoin and remains a market leader.

USDC is considered the safest stablecoin to stake thanks to its focus on transparency and regulation. It's backed by $1 in reserve funds that are kept in safe and secure accounts. This minimizes the risk of the value fluctuating.

Benefits And Risks Of Stablecoin Staking

Before getting into staking, you should weigh the potential advantages against the risks. The benefits include:

  • Stable Returns: Compared with traditional cryptocurrencies, stablecoins offer more predictable returns.
  • Low Volatility: Stablecoins staking offers minimal exposure to price fluctuations.
  • Passive Income: With staking, you can grow your stablecoin holdings passively, without trading them.

Nevertheless, staking stablecoins also comes with the risks we shouldn't ignore:

  • Smart Contract Risk: DeFi staking relies on smart contracts, which are computer programs prone to bugs or exploits.
  • Liquidity Risk: Some platforms lock your tokens up for a period, delaying access to your funds.
  • Market Risk:: Even though stablecoins are pegged to fiat currencies, their value can still deviate, impacting your returns.

Overall, staking a stablecoin lets you earn interest on your crypto without major price swings. Just pick a reliable platform, know the risks, and secure your coins to see if it's right for you.

Thank you for reading! Let us know how your stablecoin staking goes in the comments!

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