An analysis of actual staking returns
This article is written by Madoza316, a contributor to the Staking Rewards Journal.
Proof-of-Stake terminology has been very popular with cryptocurrencies. The main reason is that the concept is not only easy to understand but also easy to implement as a staker.
Proof of stake coins have also been very popular as being “PROFITABLE”. People describe STAKING cryptocurrency:
1. As profitable as mining
2. As profitable as trading
3. Not risky
But is it really true?
I feel that the way staking information is presented is incomplete. It needs to be presented with previous performance numbers or a general guidance relative to the strength of project. Running a one-year analysis on some of THE MOST POPULAR staking coins reveals that staking can also result in huge losses of capital which as far as I have seen, no article discusses.
Generally speaking, if the decline in price of token exceeds the rate of reward for staking, the worth of your investment in $$$ will decrease.
But this is not the only risk involved. If the team behind the coin is not strong, and it fails to compete with other projects, the price can decline much faster as compared to rest of the market. Also, if the coin fails to maintain a reasonable daily volume, it might get delisted from exchanges (example Bean Cash delisted from Bittrex) and your whole investment can go to zero. I will do a follow-up article listing the important factors to look for when choosing a PoS coin.
I strongly disagree with the narrative that comes up if you Google “Best staking coins”. The information provided in the resulting pages is incomplete and can mislead the readers. If you had jumped the hype train last year too and bought some PoS coins, would they really been profitable in one year? As you will see by the numbers, mostly NO.
Lets have a look at the performance of some of the popular PoS coins you will find while searching on the internet.
Metrics adopted for this article:
1. Round up and use the approximate staking rewards. For example, round up 9.5% to 10
2. As staking depends on multiple factors such as the block reward, amount of supply locked and many others, use very generous or highest possible reward rate.
3. Use daily compounding effect on stake.
Using these matrices results in a conservative estimate and maximum possible profit that could be gained.
In the graphs, blue lines represent your Net worth in $$$ and red line represents the balance of coins in your possession.
You will see that as the coin balance increases (red line), your net worth (blue line) may go up or down as the price fluctuates.
Price values taken are daily close values (source Coinmarketcap). The first price or price for initial capital is taken on 1st May 2019 and last value is taken on 30th April 2020, thus representing a one-year period. Initial capital is $1000 for all the coins. Assume you stake for the whole year from 1st May 2019 to 30th April 2020. So, let’s have a look.
Phore
Phore’s staking model projects a reward rate of 25%-30% per year. Just a year ago Phore’s price was $0.184. if you had invested a $1000 in Phore, you would have bought 5434 PHR coins. At a rate of 30% per annum and compound staking, the number of coins in your wallet would be 6923 worth $1544 at a price of $0.2231 after one year.
Net: Profit — 54.4%
LivePeer
Livepeer’s staking model projects a reward rate of close to 90% per year at peak. It has dropped now close to 30%. Just a year ago LPT price was $7.85. if you had invested a $1000 in LPT, you would have bought 127.38 LPT coins. At a rate of 90% per annum and compound staking, the number of coins in your wallet would be 312.97 worth $230 at a price of $0.735 after one year.
Net: Loss — 77%
QTUM
QTUM’s staking model projects a reward rate of close to 8% per year. Just a year ago QTUM price was $2.44. if you had invested a $1000 in QTUM, you would have bought 409.83 QTUM coins. At a rate of 8% per annum and compound staking, the number of coins in your wallet would be 439.55 worth $676 at a price of $1.54 after one year.
Net: Loss — 32%
WAVES
WAVES’s staking model projects a reward rate of close to 7% per year. Just a year ago WAVES price was $2.17. if you had invested a $1000 in WAVES, you would have bought 460.82 WAVES coins. At a rate of 8% per annum and compound staking, the number of coins in your wallet would be 494.24 worth $523 at a price of $1.06 after one year.
Net: Loss — 47%
IOST
IOST’s staking model projects a reward rate of maximum 12% per year. Just a year ago IOST price was $0.011365. if you had invested a $1000 in IOST, you would have bought 87,989 IOST coins. At a rate of 12% per annum and compound staking, the number of coins in your wallet would be 99,205 worth $364 at a price of $0.003673 after one year.
Net: Loss — 63%
STRATIS
STRATIS’s staking model projects a reward rate of around 8% per year. Just a year ago STRATIS price was $0.837. if you had invested a $1000 in STRATIS, you would have bought 1194.27 STRATIS coins. At a rate of 8% per annum and compound staking, the number of coins in your wallet would be 1293.72 worth $412 at a price of $0.318 after one year.
Net: Loss — 59%
Tezos (XTZ)
XTZ’s staking model projects a reward rate of around 7% per year. Just a year ago XTZ price was $1.2. if you had invested a $1000 in XTZ, you would have bought 833.33 XTZ coins. At a rate of 7% per annum and compound staking, the number of coins in your wallet would be 893.75 worth $2,466 at a price of $2.76 after one year.
Net: Profit — 146%
Now for some coins like DASH or PIVX, you need to run a masternode and a minimum number of coins in order to get rewards. This needs more capital and might incur some extra cost of hosting a masternode. But the loss or profit in PERCENTAGE remains the same for a capital of $1000 or $10,000. So, let us ignore these factors and see the result for same criteria we followed above.
PIVX
PIVX’s staking model projects a reward rate of around 8% per year. Just a year ago PIVX price was $0.628. if you had invested a $1000 in PIVX, you would have bought 1591 PIVX coins. At a rate of 8% per annum and compound staking, the number of coins in your wallet would be 1723.5 worth $509 at a price of $0.295 after one year.
Net: Loss — 49%
DASH
DASH’s staking model projects a reward rate of around 7% per year. Just a year ago DASH price was $117.19. if you had invested a $1000 in DASH, you would have bought 8.533 DASH coins. At a rate of 7% per annum and compound staking, the number of coins in your wallet would be 9.152 worth $743 at a price of $81.25 after one year.
Net: Loss — 25%
As you see that most of the staking coins have resulted in net loss in last year. In a nutshell, always look for coins that have a strong team, good volume, an excellent project, and are listed on good exchanges, even if the reward is low. There are only a few coins which fulfill this criteria but it is good to look at these matrices and not just percentage of reward. One such project is Harmony (ONE). The staking function is soon going live. Another good one is Tezos (XTZ).
Stay safe with your investments. See you with another article soon.
Disclaimer: The information shared is not to be taken as investment advice, financial advice, or trading advice. Please conduct your due diligence before making any investment decisions. I have personally invested in a number of cryptocurrencies but not related to any cryptocurrency team in any way at all. The above article is just for information purposes.