Are you looking to stake XRP and earn a yield? Staking is a popular way for crypto investors to earn a yield, although it is only possible for tokens on Proof of Stake blockchains.
How to stake Ripple XRP
Ripple is not a proof-of-stake blockchain, so its native token XRP cannot be staked. However, you can still earn rewards by lending or locking XRP on a centralized exchange or lending platform.
Before we dive deeper on how to lend your XRP, let’s take a brief look at why Ripple XRP cannot be staked.
Why Can’t I Stake Ripple XRP?
As of September 2023, Ripple does not have any native staking feature on its blockchain.
Ripple does not use a proof-of-stake consensus mechanism to validate transactions on its network. Instead Ripple uses an entirely different form of consensus to confirm transactions.
If you are looking to earn passive income from your XRP, then lending XRP on a centralized exchange or lending platform is a viable option. However, it’s important to note that lending is not staking.
The Difference Between Ripple XRP Staking and Ripple XRP Lending
Both staking and lending are ways for crypto asset holders to generate passive income. Yet, fundamentally they serve very different purposes, each providing a different function to the network.
Staking is the process of delegating assets to a proof-of-stake blockchain, to help validate transactions on the network. In return, participants or “stakers” are rewarded for helping to secure the network and aid in the creation of new “blocks”. These rewards accrue over time and come in the form of the native token that is staked.
Staking is only possible on proof-of-stake blockchains such as Ethereum, Cardano or Polkadot.
While XRP holders cannot “stake” their assets, they can still earn an interest by “lending” their holdings. Lending is very different from staking, as you are not contributing to the security of the PoS network, you are instead giving a loan of your crypto assets.
Where Can I Earn Rewards on Ripple XRP?
You can earn rewards by lending XRP on various centralized exchanges such as Binance, Nexo and Crypto.com.
With such services, the XRP you lend is generally used to provide liquidity on their platform, which can then be accessed by borrowers who provide collateral assets. These borrowers take out loans by borrowing against the collateral assets they have deposited. In exchange for the loan, borrowers pay an annual percentage rate (APR) to the token holders (i.e. lenders) who have added their XRP to the liquidity pools.
How to choose an XRP lending platform
Do not fall for high APR %: When you lend your crypto, you will usually be quoted an APR for your investment. Some lending platforms may offer very high APRs as a way to attract investors, but these high APRs may be unrealistic and involve additional risk.
Stick to well-known custodial lending platforms: Look for platforms that have liquid markets.
What are the Risks of Lending XRP?
By lending XRP, the user custody of your assets is typically transferred to a third party, whether it be the platform itself or the borrowers.This itself presents a counterparty risk, as you will no longer be a custodian of your assets and you are relying on the other party to fulfill their obligations and default on the contract.
There are also Protocol security risks: The collateral for XRP may drop below the market value of XRP lent out, which implies a collateral risk. There is also a risk of unknown bugs in the Ripple Ledger protocol and the XRP investment in general.
Keep in mind that this is not a comprehensive list of all potential risks associated with lending.
Explore Crypto Assets You Can Stake
See a full list of crypto assets you can stake and earn passive income via the Proof of Stake Asset Explorer.