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Litecoin (LTC) is one of the biggest cryptocurrencies today by market cap. The crypto coin is popularly regarded as the first alternative cryptocurrency (altcoin).
Like Bitcoin, Litecoin began with a proof-of-work consensus model that depended on miners to validate its blockchain transactions. However, in 2020, Litecoin launched a proof-of-stake network.
Litecoin can be mined today because of the Litecoin proof-of-stake (LTCP), which allows for various decentralized finance (DeFi) protocols, including staking. Similarly, numerous Litecoin staking pools around promising massive annual percentage yields (APYs).
This article reveals all you need to know about Litecoin staking and the best place to stake Litecoin for high rewards.
Pros and Cons of Staking Litecoin
- Passive Investment: When you stake Litecoin, you earn free crypto rewards. These rewards stack up eventually to make you more money.
- Low Barrier to Entry: Litecoin staking is more accessible than mining. The only requirement is the Litecoin token you’ll lock away – no sophisticated computers or high energy consumption.
- Security and Governance: In some cases, staking platforms allow stakers to participate in the network’s security and governance via governance tokens. Staking Litecoin on such a platform can earn you the privilege.
- Utility: Depending on the staking platform, you can use your staked coin for different purposes, even when they are locked away. For example, you can give DeFi loans by staking Litecoin on some platforms.
- Environmental-Friendly: Staking Litecoin doesn’t require high computing power to confirm transactions because it uses the proof-of-stake consensus mechanism.
- Volatility: Cryptocurrencies are unstable assets. You may lose some or all of your Litecoin investment to price swings and market volatility. You’re liable for any losses from price drops.
- Slashing Risk: Slashing is a form of punishment for bad behavior in the staking pool. When slashing occurs, affected investors lose some or all of their stakes.
- Security: Wallet hacks are common in the crypto space, and smart contracts are vulnerable to hacks that can make you lose all your crypto assets.
- Liquidity: When you stake your Litecoin tokens, you lock them away for a period and may not have access to them when you need to convert them to fiat currency.
- 1 Pros and Cons of Staking Litecoin
- 2 What is Litecoin Staking?
- 3 How to Stake Litecoin?
- 4 Litecoin Staking on eToro
- 5 Litecoin Staking Tax
- 6 Why Do People Like Staking Litecoin?
- 7 Litecoin Staking FAQs
What is Litecoin Staking?
Litecoin staking is the process of buying and investing Litecoin in a staking pool for rewards. Usually, when you stake Litecoin, you add liquidity to the blockchain network, and you get extra Litecoin rewards for your work.
As stated earlier, Litecoin staking wasn’t possible until the Litecoin proof-of-stake network was launched in 2020. With the new consensus mechanism, the network uses Validators like yourself, who stake LTCP to verify transactions. However, you must stake matured coins to become a validator.
To begin the staking process, you need to have a wallet compatible with the Litecoin network, and it must be funded with LTC tokens. You can stake your Litecoin by putting it into a staking pool on exchanges that provide staking services.
Usually, Litecoin staking is supported on cryptocurrency exchanges like Binance and eToro. The brokerages allow you to hold your Litecoin in your wallet or enter a smart contract to validate blocks or transactions and earn newly created Litecoin.
How to Stake Litecoin?
Litecoin Staking on eToro
Unlike crypto trading and mining, staking Litecoin is pretty straightforward. All you need is an exchange that offers staking services. eToro is one of the world’s largest exchanges that allow investors to stake Litecoin.
Step 1: Verify your Account
You must first register and create an eToro account before accessing its staking service. After signing up, log into the account to start the verification process.
You must enter personal information about your identity, trading history, and the purpose of trading during the verification. You must also provide proof of identity, proof of residence and verify your phone number.
Step 2: Invest in a Staking Asset
To purchase Litecoin, you must first deposit funds in your eToro wallet. Navigate the website or mobile app and tap on the “Deposit Fund” icon to do this. Enter the amount you want to deposit and select a payment method to make a deposit.
Once your wallet has been credited, select Litecoin from the cryptocurrency listing and tap “Open Trade”. Enter the quantity of Litecoin you want to purchase, click “Invest to Buy”, and complete the transaction.
Step 3: Wait For Your Payout
After the order is completed, eToro requires no further action from you. The exchange will automatically stake your Litecoin and inform you of your new Litecoin earnings monthly via email.
Upgrading Your Account Will Give You More Credits
Note that staking rewards vary by account membership type. So, you can position yourself for more profit by upgrading your eToro account.
Litecoin Staking Tax
Litecoin staking rewards taxes vary by location. Some countries do not consider earnings from staking taxable, while others have legalities around staking income and taxes.
In the United Kingdom, Her Majesty’s Revenue and Customs (HMRC) considers staking as crypto mining. So, taxes are applied to your staking profits. As a result, when you receive staking rewards from your Litecoin investment as an individual or a business, you’re expected to pay a staking tax on the total Pound Sterling value of your earned crypto assets eventually spent or disposed of.
Income made from your Litecoin mining will be taxed as miscellaneous income, and capital gains tax will be levied on it. However, the UK government expects you to pay the Litecoin staking tax when you use the staking profits. This includes selling the rewarded Litecoin, buying goods or services with it, or trading it.
Why Do People Like Staking Litecoin?
The most obvious reason people stake Litecoin is because of the additional litecoin they can generate from the process. You may liken it to having a bank savings account and holding money in it for periodic interest.
Besides the potential profit from staking Litecoin, people choose Litecoin staking because of the coin’s liquidity. Litecoin has a market cap of $3.92 billion at the time of writing, and it’s one of the top 20 cryptocurrencies by market cap. This means Litecoin has high liquidity and low volatility.
Litecoin is also more efficient and scalable compared to other cryptocurrencies like Bitcoin. Transactions on the Litecoin blockchain take only about 2.5 minutes to verify, while Bitcoin takes 10 minutes.
Finally, Litecoin is cheaper than other major coins like Bitcoin and Ethereum. At the time of writing, LTC is valued at $61.79, BTC is worth $20,206, and Ethereum is worth $1,532.46.
Litecoin Staking FAQs
Is Litecoin a proof-of-work or proof-of-stake coin?
The Litecoin blockchain started as a proof-of-work network with miners until 2020. In 2020, the Litecoin proof-of-stake network was launched, and investors have been staking LTC since then.
Who created Litecoin?
Charlie Lee founded Litecoin. The former Google Engineer and Massachusetts Institute of Technology graduate created Litecoin as the “silver to Bitcoin’s gold”. But it was launched in October 2011.
Is staking Litecoin a worthy investment?
Staking Litecoin can be rewarding to both solo investors and corporate organizations. Usually, staking pools and providers reward stakers for locking up their assets and validating transactions on the blockchain.
Should I stake Litecoin?
Litecoin has proven to be a worthy investment over time. Its investors have enjoyed massive returns from trading and staking the coin. With more technological advancements to come, Litecoin staking is a viable investment.
However, every crypto investment is volatile, so you should never invest or stake Litecoin without due diligence.
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