Kraken is one of the few crypto exchanges out there that have shown time and again that it has what it takes to enable a secure and conducive trading environment for its users. Hence, it comes as no surprise that it has implemented staking services to provide one more means for traders to earn more coins. In this review, we will analyze the workings of Kraken’s staking program and highlight its pros and cons.
Overview of Kraken Staking
In December 2019, Kraken expanded the scope of its business by venturing into Staking as a Service. In the same month, Kraken announced that it now supports Tezos for staking and made it known that it plans to add more staking options. True to its promise, Kraken’s staking service has improved considerably with the addition of new staking iterations that lets users earn rewards from coins deposited in their Kraken account.
One of the peculiar things about Kraken is that its staking services support both cryptocurrencies and fiat currencies. While this is a given, there are technicalities involved, which classifies the staking opportunities into two unique variations, which are off-chain and on-chain staking. It is advisable to get a clear understanding of how both works before choose one.
In the crypto terrain, on-chain generally refers to activities or transactions executed on blockchains. Hence, on-chain staking is the popular concept where network participants lock funds on blockchains with Proof of Stake mechanisms to become validators and subsequently earn rewards. Note that this process is cumbersome and requires a level of technical prowess and availability on the part of interested participants. However, with services such as Kraken staking programs, it has become relatively easy to earn staking rewards.
Kraken has taken up all of the technical requirements on behalf of its users. Hence, all you need to do is deposit an amount on your Kraken account, select the staking option that you want and start earning instantly. In other words, you do not need to meet the lockup period and minimum deposit amount set by the blockchain. For now, there are three coins available for on-chain staking on the Kraken website. They include Polkadot, Cosmos, and Tezos, with yearly estimated rewards of 12%, 7%, and 6% respectively.
Kraken explained that it will continue to add more coins to this list only if they meet some criteria. For one, it will only consider coins that are popular with its community of traders. Likewise, the token’s technical sophistication and utility come to play. And lastly, it will focus on assets that are currently supported by its exchange infrastructure. Remarkably, the exchange allows users to unstake their coins at short notice. Simply put, there are no lockup periods.
Unlike on-chain staking explained above, of-chain staking does not necessarily take place on blockchain networks. Instead, it provides users with the opportunity of taking advantage of investment instruments native to the Kraken ecosystem. Off-chain staking lets users stake their funds with the platform’s margin pools. Hence, you get to earn for providing capital to traders interested in exploring margin trading. As such, it is not compulsory that the assets listed in the off-chain staking program support staking on blockchain networks.
Moreover, the current crop of assets available for off-chain staking includes Euro, US dollars, and Bitcoin (XBT), with estimated annual earnings of 1.50%, 2.00%, and 0.25% respectively. You will notice that two of these assets are fiat currencies. Herein lies the flexibility that Kraken’s staking service provides. However, note that not all Kraken users are eligible to partake in the platform’s off-chain staking. According to the information made available, the exchange uses the KYC status of users to determine their eligibility. For instance, the bitcoin staking product is only available to users with at least Starters verification. As for fiat staking, you must scale the Intermediate verification level to have access to these opportunities. Besides, Kraken restricts residents or citizens of the United States and certain countries from accessing the off-chain staking option.
How Often Does Kraken Disburse Rewards?
Once a user is cleared for either the on-chain taking or off-chain staking programs, the assets locked automatically start earning yields. Kraken pays accrued interests or rewards twice a week. It is worth noting that the off-chain staking option does not come with any additional fees. In contrast, Kraken deducts charges on rewards earned from on-chain staking.
What Are the Pros and Cons of Kraken Staking Service?
The Pros of Kraken Staking Service
It Offers A Simple Means of Staking Cryptocurrencies
One of the benefits of the emergence of exchange-based staking programs is that it enables a level playing field for blockchain participants. In other words, users can start staking without restrictions associated with independent staking. Kraken eliminates the technicalities involved in staking and provides a simple alternative.
It Supports On-Chain and Off-Chain Staking
Kraken has managed to infuse elements of flexibility into its offerings by adopting programs that expose users to both on-chain and off-chain staking opportunities.
There Are No Lockup Periods
Remarkably, Kraken has opted for a flexible staking program. There are no lockup periods imposed on participants. Therefore, users can unstake their coins whenever they feel like it.
Some of Its Products Allow the Staking of Fiat
Although fiat staking does not necessarily fit into the traditional scope of staking in the crypto industry, it does not take anything away from its viability. Being able to stake fiat is one functionality that you will not readily find on other alternatives.
Kraken Is A Secure Platform
Kraken is one of the few high-profile exchanges that is yet to suffer a security breach. Hence, it is safe to say that it is unlikely that you will encounter any security issues while using its staking services.
The On-Chain Staking Estimated Rewards Are Fair
For a staking provider that runs flexible withdrawal policies, Kraken’s estimated rewards for on-chain staking is one of the highest you will come across in the industry.
The Cons of Kraken Staking Services
Its Staking Products Is Currently Limited to A Handful of Assets
At the time of writing, the platform only supports three on-chain staking products and three off-chain programs. For individuals searching for a wide array of options, this could be a limitation