Are you wondering how to stake Stellar (XLM) and earn rewards? Here’s the truth—staking Stellar works differently compared to other cryptocurrencies. Stellar is a unique blockchain platform that focuses on fast and low-cost cross-border payments. It connects people, banks, and payment systems, making global money transfers quick and affordable. Its native token, Lumens (XLM), powers transactions on the network.
Unlike most cryptocurrencies, Stellar does not use Proof-of-Stake (PoS) or Proof-of-Work (PoW). Instead, it runs on the Stellar Consensus Protocol (SCP). This innovative system offers faster processing times, decentralised security, and low energy consumption. However, since Stellar doesn’t follow traditional staking methods, earning rewards often involves participating in liquidity pools or third-party platforms that support XLM-based programs.
In this guide, we’ll explain the best ways to “stake” Stellar and earn passive income without the need for complex setups.
How to Stake Stellar (XLM)?
Staking Stellar Lumens (XLM) is slightly different from traditional staking methods used by other cryptocurrencies. Stellar doesn’t rely on the proof-of-stake mechanism. Instead, it offers a unique way to earn rewards through inflation pools. Here’s a step-by-step guide to help you get started with staking or earning rewards on the Stellar network.
Step 1: Purchase Stellar (XLM) Tokens
The first step to staking Stellar Lumens is to acquire some XLM tokens. You can purchase XLM from well-known cryptocurrency exchanges such as Binance, Kraken, or Coinbase. Ensure that you choose a reliable exchange with good security practices to keep your funds safe.
Once you’ve bought XLM, it’s essential to transfer them to a wallet that supports participation in the Stellar ecosystem.
Step 2: Choose a Compatible Stellar Wallet
After obtaining XLM tokens, the next step is to move your funds to a Stellar wallet. Using an exchange wallet may limit your ability to participate in staking or reward programs, so transferring to a personal wallet is crucial.
Popular Stellar wallets include:
- Solar Wallet: A user-friendly wallet designed specifically for the Stellar network.
- Ledger Hardware Wallet: A secure option for storing XLM offline.
These wallets allow you to interact with the Stellar network and participate in inflation pools.
Step 3: Join an Inflation Pool
Unlike traditional staking, Stellar uses inflation pools to distribute newly created XLM tokens. These pools reward participants based on the amount of XLM they hold in their wallets.
To join an inflation pool:
- Open your Stellar wallet.
- Select the option to join an inflation pool.
- Choose a trusted pool with a good track record.
Joining an inflation pool ensures that you start receiving periodic rewards.
Step 4: Delegate Your XLM to the Pool
Once you’ve chosen an inflation pool, the next step is to delegate your XLM tokens. This process is simple and can often be completed directly within your wallet interface.
Steps to delegate XLM:
- Log into your Stellar wallet.
- Navigate to the inflation pool section.
- Enter the details of the pool you wish to join.
- Confirm the delegation.
After delegation, your XLM tokens remain in your wallet, but the pool will use them to calculate your share of rewards.
Step 5: Earn Rewards
Once you have successfully joined an inflation pool, you will begin earning rewards. These rewards are typically distributed periodically, depending on the pool’s schedule.
Rewards will accumulate directly in your wallet. You can track your rewards through your wallet interface to see how much XLM you have earned.
Also read: How to lose $14.6 billion in 6 days
Popular video guides on Staking Stellar (XLM)
Best Places to Stake Stellar (XLM)
Binance is one of the largest crypto exchanges globally, offering a robust staking platform with various options, including flexible, locked, and DeFi staking. Binance offers competitive Annual Percentage Yield (APY) rates, allowing users to earn passive income on their assets. The platform also includes features like auto-staking, which automatically reinvests rewards to maximise returns. Its user-friendly interface and transparent staking details make it a preferred choice for both beginners and advanced users.
Pros:
- Wide range of supported cryptocurrencies for staking.
- Competitive APY rates with options for higher promotional yields.
- Multiple staking options, including flexible, locked, and DeFi staking.
- Auto-staking feature for compounding returns.
- Regular updates and additions to staking products.
Cons:
- Locked staking periods can reduce liquidity.
- Regulatory concerns may impact availability in certain regions.
- Earnings can fluctuate based on market conditions.
Nebeus is a crypto-backed financial platform that offers a range of services, including lending, borrowing, and staking. As a staking platform, it provides users with an easy way to stake their crypto assets and earn consistent rewards. The platform offers fixed Reward Per Year (RPY) rates, making it ideal for users seeking predictable returns. Nebeus simplifies the staking process by consolidating everything within a single platform. Users can manage their staking activities without the hassle of switching between multiple services while enjoying flexibility in unstaking and re-staking their assets.
Pros:
- Fixed and transparent rewards (RPY) with no approximations.
- Users can unstake and re-stake their assets at any time.
- Simplified staking process through a single platform.
Cons:
- A limited selection of cryptocurrencies is available for staking.
- Monthly maintenance fees for inactive accounts.
- Requires a unique PIN for each withdrawal, which can be inconvenient for frequent users.
Nexo is a comprehensive crypto platform offering staking services through its “Earn Crypto” program. It supports over 38 cryptocurrencies, with interest rates reaching up to 16% APY. The platform features a loyalty tier system, where holding NEXO tokens can significantly boost your staking rewards. Nexo’s standout feature is Ethereum Smart Staking, allowing users to stake ETH by swapping it for NETH without paying gas fees. Users earn daily interest, which compounds automatically. The platform offers flexibility in how users receive their rewards, making it a seamless and user-friendly staking experience.
Pros:
- Earn up to 16% APY on popular assets like BTC, ETH, and USDC.
- Interest is compounded and paid out daily.
- Ethereum staking is gas-free and easy to set up.
- Users can receive rewards in NEXO tokens for higher rates.
- Stake any amount, with as little as $1 in ETH.
Cons:
- Holding NEXO tokens to boost loyalty tiers involves market risk.
- Some staking features may be unavailable in certain regions.
- The highest rates require holding a significant portion of NEXO tokens.
Benefits of Staking Stellar (XLM)
Staking Stellar is a great way to earn rewards while supporting the growth and security of the Stellar network. By locking your tokens for staking, you contribute to the decentralization of the network and receive consistent rewards in return. Staking XLM isn’t just about earning more tokens — it’s about playing an active role in the Stellar ecosystem’s success. Let’s explore the key benefits of staking Stellar and why it’s worth your consideration.
Earn Passive Income with Staking Rewards
One of the biggest advantages of staking Stellar is the opportunity to earn passive income. When you stake your XLM tokens, you receive regular rewards without having to trade or invest additional time in the market. These rewards increase your holdings over time, allowing you to grow your investment consistently. Whether you are a beginner or an experienced crypto investor, staking provides a simple way to make your XLM work for you.
Strengthen Network Security and Stability
Staking Stellar plays a crucial role in enhancing the network’s security. When you stake your tokens, you help validate transactions and keep the network running smoothly. This contribution prevents potential attacks and ensures that the network remains stable and reliable. Your participation makes the Stellar blockchain more secure for all users.
Benefit from Stellar’s Inflation Mechanism
Stellar’s network includes a built-in inflation mechanism, which distributes newly minted XLM tokens to stakers. By participating in an inflation pool, you can claim these newly created tokens as part of your staking rewards. This process ensures that your staking efforts remain profitable over time, giving you an extra incentive to keep your tokens staked.
Support the Growth of the Stellar Ecosystem
Staking Stellar doesn’t just benefit individual stakers; it also supports the entire ecosystem. Your staked tokens help fund various projects and initiatives within the Stellar network, promoting its development and innovation. By staking, you contribute to a stronger, more sustainable future for Stellar and its users.
Promote Decentralisation in the Network
Decentralization is at the core of blockchain technology, and staking Stellar helps achieve that goal. When more users stake their tokens, the network becomes less dependent on central entities and more resilient to external threats. By staking your XLM, you actively promote decentralisation and contribute to the long-term success of the Stellar blockchain.
Engage with the Stellar Community
Staking Stellar also connects you with a vibrant community of like-minded individuals. As a staker, you can participate in discussions, stay updated on the latest network developments, and explore new opportunities within the ecosystem. Engaging with the Stellar community helps you stay informed and take advantage of the best staking strategies available.
Frequently Asked Questions
What Is XLM Staking?
XLM staking allows holders of Stellar tokens to earn passive income by locking up their assets instead of selling them. It works similarly to a high-yield savings account, where you earn rewards by making funds available. Although staking rewards for XLM are relatively low compared to other assets, it remains an attractive option for investors looking to generate additional income without actively trading their tokens.
How Much Can You Earn With XLM Staking?
Your earnings from XLM staking depend on several factors, including the amount staked, the staking duration, and the annual percentage yield (APY) provided by the staking platform. Reward rates can vary, ranging from as low as 3% to as high as 8% per year. The more XLM you lock and the longer you stake it, the higher your potential returns over time.
Is XLM Staking Profitable?
The profitability of XLM staking depends on the staking rate and the amount invested. For example, with a 4.01% APY, staking $1,000 worth of XLM can generate approximately $3.30 in monthly income. Over a year, this could result in around $40.10 in interest, equivalent to earning roughly 204 XLM. While returns are moderate, staking offers a passive income stream, making it worthwhile for long-term holders.
How Does XLM Staking Work?
Staking XLM involves locking your tokens to support the Stellar blockchain’s operations, such as validating transactions and enhancing network security. In exchange, you earn staking rewards based on an annual percentage yield (APY). Many platforms require a minimum balance to start staking, and rewards are generally higher than traditional savings accounts, making staking an appealing option for investors looking to grow their holdings.
