How to Stake NEO

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Proof of Stake (POS) blockchains use staking to reward users for validating transactions and usually prevent centralisation. 

You can earn rewards by staking your tokens on a POS blockchain if you hold them. This article will show you how to stake your NEO tokens and earn GAS that can be converted to NEO, thanks to the design of the Neo network, which uses a sophisticated version of PoS. 

Staking provides several advantages, including passive returns on your investment and contributing to the security of your cryptocurrency network. 

Before you can begin staking your NEO tokens, you must first learn what staking is and its benefits and drawbacks.

Pros & Cons of Staking NEO

In case you are holding NEO on your digital wallet, you probably want to know if staking it can generate extra revenue for you. The answer is yes, but you should be aware of some factors.

To better understand these factors, let’s consider the pros and cons of staking NEO. 

Pros
  • You will earn GAS rewards and get a stream of crypto assets.
  • By staking NEO you contribute to make the network more decentralised.
  • You don’t need to own a minimum amount of tokens to start staking NEO.
  • Staking NEO is a less risky activity than trading it.
Cons
  • Staking rewards you earn depend on the amount of NEO you stake – if you have a small NEO balance you won’t earn much.
  • When you stake NEO, you need to unstake your assets before selling them.
  • Not all crypto wallets support NEO staking.

What is NEO staking?

When you hold NEO and try to earn profit, you are said to be staking it. 

Holding NEO tokens in your wallet allows you to earn GAS tokens by locking them up. 

Actually, Neo uses a slightly different staking method than many other PoS blockchains: the network has two tokens, one for governance – NEO – and one for transactions – GAS. GAS is the token you earn as staking rewards. 

The longer you stake NEO, the higher the amount you can earn: time and amount staked are the two elements that affect your staking rewards. 

As all the other PoS blockchains, holders – or hodlers, to use a crypto world-related term – are rewarded because they help the network to be more decentralised – making it more secure. 

To have a closer look at the staking methodology used by Neo, let’s have a deeper look at how it works. 

How to stake NEO

Getting rewards doesn’t require any minimum stake – but the more NEO you stake, the higher your rewards will be. 

The first step to stake NEO is choosing an exchange. NEO is suitable for both centralised and decentralised staking. 

If you opt for the first option, you’ll need to choose a centralised exchange to register and verify your account according to the requirements of the exchange. 

Once your account is active, you’ll just have to buy NEO and stake it. To give you a practical example, if you choose a centralised exchange like Binance you’ll have the opportunities to hold your NEO and to unstake it whenever you want, or to hold them for a fixed time. 

There’s nothing else you need to do to earn rewards. 

The second option, involving decentralised exchanges, requires you to choose a decentralised wallet that supports NEO. As mentioned, not all wallets can do this – for example, a popular walle like Metamask doesn’t support NEO. 

In this case, it would be better to choose the native Neo wallet. This option will allow you to be in full control of your assets and private keys – even if this requires a higher level of responsibility and no support can be provided in case you lose your keys. 

Once you transfer NEO to your wallet, thanks to the public address associated with your wallet account, you can choose the amount to stake to earn staking rewards. 

Remember: if you want to sell your NEO assets, you’ll need to unstake them first!

To recap, there are a few steps to follow if you want to stake NEO: 

  • Choose a centralised or decentralised exchange, 
  • Open an account or activate your Neo wallet, 
  • Buy NEO or transfer NEO assets to your account, 
  • Choose the amount to stake, 
  • Start earning crypto passive income. 

The reason why users can earn staking rewards is that they not only keep the network more secure, but also because they help validate transactions. This validation process allows the blockchain to add new blocks – an advantage of the Neo ecosystem is that this process is pretty fast, and a new block is added around every 15 or 20 seconds. 

The whole ecosystem is designed to reward users, and this leads us to consider one more point. The Neo ecosystem was developed to favour the new digital economy, and it uses many of the features used by Ethereum: Neo allows developers to develop smart contracts and to tokenize any kind of asset, so keeping the whole system secure and fast is pivotal to the success of the network. 

Here’s why stakers play a major role for Neo. Its consensus mechanism is sophisticated and makes the two cryptocurrencies of the network balance each other by putting in place a mix of inflationary and deflationary mechanisms that allow the network to protect the value of its cryptocurrencies while keeping the system relatively inexpensive for developers. 

Developers need to spend NEO GAS every time they develop smart contracts, as well as users need to spend this token to propagate any transaction to the blockchain. NEO GAS are then used to reward stakers that allow the whole mechanism to work properly: this is the whole mechanism that produces the tokens you can receive when staking NEO. 

Something must be pointed out: as mentioned, the system is designed to be inexpensive, so the returns for staking NEO are not very high. To give you practical examples, flexible holding on Binance can make you earn 0.44% of your staked balance – to a maximum 13.56% if you choose to stake your assets for at least 120 days. But a higher percentage of fees is given to stakers that use their NEO to be a part of the governance process designed by Neo. 

NEO Staking Tax

In a world where everything is becoming more digital, the taxation process has not changed much.

When it comes to cryptocurrency, taxation is a topic that raises many doubts in investors, traders and holders.

This happens not only because, of course, different countries have different taxes, but also because there is still uncertainty in many countries. This has led to much confusion among the public regarding how to report and pay taxes on profits from cryptocurrency investments. 

The UK makes no exception, and also here people need to keep many points in mind when calculating taxes on their crypto assets. Moreover, many are the exceptions that should be considered. 

There are several pivotal points to clarify when it comes to the taxation of crypto staking.

In spite of the fact that cryptocurrencies are not as common in the world as fiat currencies, they are always considered to be financial assets, so they are taxed as such. Cryptocurrencies, to be more precise, are subject to the same treatment that shares are subject to. 

In the case of crypto staking rewards, however, there is one exception that should be noted. It is possible to consider them as capital gains or as savings, depending on whether they are owned by individuals, in order to reduce taxes – their value in GBP will be taken into account to determine the amount to be paid. 

If users just hold their cryptos, without withdrawing them, they’ll be treated like airdrops, sort of gifts, and won’t be subject to taxation. 

Being that said, it’s important to keep in mind that the rules can change in the future as the crypto market changes and governments around the world decide to take action concerning cryptocurrencies.

Why do people like Staking NEO?

Staking NEO tokens is popular because it’s a simple process that doesn’t require special technical knowledge or equipment. There are many other reasons why staking NEO is popular: 

  • The team behind NEO developed wallets for desktop, mobiles and in the form of browser extensions – this makes it very easy to use and stake NEO. 
  • The Neo ecosystem is designed to protect the value of this token. To consider just one of the features of NEO’s tokenomics, it has a maximum supply set at 100,000,000 units. 
  • Despite its fixed supply, NEO and GAS can be used in countless ways to code smart contracts and develop decentralised applications in an environment that is less expensive and faster than Ethereum. So, the use cases of NEO positively affect the value of the asset.  

Conclusion

By staking NEO tokens, you are not only able to earn extra income, you are also supporting the security of your network by keeping it decentralised, thereby contributing to its safeness.

Getting started with NEO staking is easy. You can start earning GAS tokens right away, which can then be exchanged for NEO or used in the Neo ecosystem. You can stake NEO with your computer or mobile device as long as you have an internet connection. Compared to trading, this activity involves less risk, and there is no need for any particular skill for it to be successful. 

Of course, there are also some disadvantages involved in NEO staking, like the fact that NEO is not supported by many crypto wallets and the fact that the system wasn’t designed to make stakers earn very high returns. 

Nevertheless, the whole Neo ecosystem allows investors and developers to find many use cases, and to earn according to the different activities performed. This protects the value of the token and, of course, of the staking rewards linked to this token. 

Also for what concerns NEO taxation, traders can benefit from tax reductions and even tax-free scenarios.

NEO Staking FAQ’s

  1. How can I stake NEO?

    Choose a centralised exchange or create a new account with a wallet that supports NEO,
    Buy or transfer some NEO to your wallet,
    Choose the amount of NEO to stake and earn staking rewards according to the amount of tokens and time you plan to stake your assets. 

  2. How does NEO staking work?

    NEO staking is not very different from the process used by PoS blockchains. Stakers are rewarded for keeping the network more decentralised and secured and for favouring the verification of transactions. 
    The particularity of Neo is that it uses two different cryptocurrencies to manage its ecosystem – and also staking: NEO and GAS.

  3. What are the pros of staking NEO? 

    NEO has proven to be a trustworthy crypto project, able to offer users all the opportunities offered by Ethereum, but in a faster and less expensive environment. This is for sure a benefit in terms of value. We can also list other pros of staking NEO – for example, the fact that it’s an intuitive process that doesn’t require technical skills, its low level of risk – when compared to activities like trading, and the absence of a minimum amount to stake.

  4. Can you stake NEO with Metamask?

    No, NEO is not compatible with Metamask and Neo cannot be added to the wallet as a custom network.

  5. What’s the difference between NEO and GAS?

    NEO is the crypto used for governance purposes and to require a corresponding amount of GAS; GAS is the crypto asset that actually fuels the network – it is used to make transactions, to develop smart contracts and to distribute the right amount of staking rewards according to the amount of NEO hold by each staker.

Risk Disclaimer

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