Neo is an Ethereum-like blockchain focused on the deployment of smart contracts and the digitization of assets. It was created by Chinese developers, Da Hongfei and Erik Zhang. The blockchain works on a dual-token system and has 2 native cryptocurrencies: NEO and GAS.
While GAS is the utility token of the network and is used for all computations, the NEO token is used for governance. By holding NEO, users can participate in the development decisions of the blockchain. NEO can also provide token holders with rewards, which are paid in GAS.
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What is NEO staking?
Staking is a term often used when describing a proof-of-stake (PoS) blockchain. It is a process that involves depositing native cryptocurrencies into a blockchain so that they can be used to secure the network and validate transactions. In return for locking up tokens and supporting the network, stakers are rewarded. However, the NEO blockchain is slightly different.
The Neo blockchain implements a similar consensus mechanism to PoS, but it is called Delegated Byzantine Fault Tolerance (dBFT). All NEO token holders vote for a select group of validators within the network. It is the chosen validators, known as Consensus Nodes, that validate transactions and add new blocks to the blockchain.
In some delegated blockchains, users are required to vote to earn rewards. However, Neo allows users to begin earning rewards simply by holding NEO tokens in a compatible cryptocurrency wallet. A token holder can then choose to participate in the voting process for the selection of validators. If a token holder participates in the governance of the platform their rewards increase.
A user's right to participate in the consensus mechanism is determined by how many coins are locked inside the wallet. The more coins staked, the more voting power obtained and the more rewards are earned.
Unlike other blockchains that implement a single-token model, Neo utilises 2 tokens. As a result, instead of receiving rewards in NEO, stakers are rewarded with the utility token GAS. As previously mentioned, GAS is used as the "fuel" for the Neo blockchain and is required for all transactions. Whenever using the Neo network, GAS is required as a fee. In theory, staked NEO tokens can be used to pay for all transaction fees required on the network. Alternatively, it can be converted to the equivalent dollar value or another cryptocurrency.
Earning GAS requires very little input from a NEO token holder, which makes the staking process one of the easiest in the cryptocurrency markets. By simply holding NEO tokens in a locked wallet and voting, users can generate a passive income. The process can be less risky than trading and, thanks to the dBFT mechanism, more energy-efficient than mining.
NEO token holders interested in staking have various options to choose from. One of your options is to stake on the Neo platform itself by becoming a node or a validator. If you choose this method, you will compete with other nodes on the platform to validate transactions and add new blocks. Alternatively, a user can earn rewards passively through a cryptocurrency wallet.
How to stake NEO
Before staking NEO tokens, there are 2 things that are required. The first is a cryptocurrency wallet. For those that are keen to remain within the Neo ecosystem, Neon Wallet is a native wallet that supports all Neo-based tokens. It works on several operating systems including Linux, Mac OS and Windows.
Alternatively, third-party wallets that are compatible with NEO and GAS include Exodus, Atomic, Ledger Nano S, Guarda Wallet, ANSY wallet, NEO tracker and NEO GUI wallet.
Secondly, a user will need to own some NEO cryptocurrency. The easiest way to acquire NEO is by purchasing it directly through a dedicated cryptocurrency exchange.
Once an investor has NEO coins and a crypto wallet that is compatible with NEO and GAS, they can begin the staking process.
How to stake NEO using a crypto wallet
As previously mentioned, staking NEO tokens in a crypto wallet is the easiest method for generating rewards. Apart from the initial set-up, the process can be completed passively. If you would like to gain more rewards by participating in the NEO governance process, make sure you select a cryptocurrency wallet that allows this.
Most wallets that allow users to stake NEO coins work in a similar manner, and we have outlined the basic steps below:
- Download your chosen cryptocurrency wallet from the relevant site.
- Go to settings. Under NEO, look for an option to earn rewards or claim GAS. By enabling rewards, you will begin accumulating GAS simply for holding NEO tokens.
- Send NEO to your wallet.
- Any NEO held inside the wallet will automatically start generating GAS. Keep checking your wallet to see your GAS holdings increase.
- If possible through your chosen crypto wallet, opt into the NEO voting system to earn more GAS rewards. This is described in detail on Neo's website.
Most wallets allow staking while assets remain offline (cold) and, unless you would like to vote for validators, there is no need to play an active role within the Neo blockchain to earn GAS. This means the process of staking NEO is easier than staking on similar blockchains. It means easy passive rewards can be earned from otherwise idle assets.
How to stake NEO on the Neo platform
According to Neo's website, a user does not have to stake NEO coins directly in the Neo blockchain and become a validator to earn rewards. As long as a user has NEO in their wallet, they should automatically begin receiving GAS. However, a token holder should ensure that the wallet used allows them to collect GAS because not all wallets have that provision.
How to stake NEO on an exchange
As cryptocurrency popularity has grown and crypto exchanges have progressed, many now offer the ability to stake cryptocurrencies in return for rewards. However, not every exchange will allow users to stake NEO, so it is worth shopping around to find the best opportunity.
Binance is one exchange that does offer users the opportunity to earn rewards on NEO holdings.
Both options are quick and easy to implement:
- Log in to Binance or sign up for an account.
- Head over to Binance Earn webpage and type NEO into the search bar.
- Select the product you would like to use and click either "Stake" or "Subscribe".
- Type the amount of NEO tokens you would like to lock up and click "Confirm".
Users can withdraw NEO from a flexible savings product at any time; however, many staking products require a set lock-up period. The interest is calculated and distributed into a user's account daily.
Read our full review of Binance and learn about the different ways you can earn interest on your holdings.
Platforms that offer staking
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How much can I earn with NEO staking?
A user can estimate potential GAS earnings by visiting the Neo website. There, Neo provides a NEO and GAS calculator for those interested in potential earnings.
Ultimately, the equivalent dollar value will vary depending on the price of GAS at the time.
Is staking NEO safe?
NEO staking is a relatively safe passive income-generating activity. However, as with any investment, it is not risk-free.
NEO is a cryptocurrency and is affected by price volatility. If NEO depreciates, the value of GAS is also likely to depreciate, and a user may lose the equivalent of what they earned from the staking process.
Pros and cons of staking NEO
While offering the opportunity to earn passive income, the process of staking may not be for everyone. Cryptocurrencies are highly volatile assets. Therefore, it is always useful to analyse the pros and cons and determine if staking NEO is the right decision for your investment portfolio.
Pros of staking NEO
- There is no minimum amount required to stake NEO. Any amount of NEO tokens can begin generating rewards.
- Staking NEO is a straightforward process that beginners in the cryptocurrency space can follow.
- Staking NEO is cheap relative to other blockchains. A user does not have to invest in expensive equipment such as graphic processing units (GPUs) or utilise significant energy resources, such as those required by proof-of-work mining. All a token holder needs is a supported crypto wallet and NEO coins.
- There is no "lock-up" period for NEO assets. They can be withdrawn from a wallet at any time, which means a user can still react to changing market conditions.
Cons of stalking NEO
- If the value of NEO falls, it may affect the value of GAS and how much profit a user can make.
- Staking rewards can be lower relative to other blockchain protocols.
Bottom line
Staking NEO involves holding NEO coins in a supported wallet and waiting for those coins to generate rewards. Rewards are gifted in the form of GAS, the second coin of the Neo ecosystem.
NEO is one of the easiest cryptocurrencies to stake. All a user requires is a compatible cryptocurrency wallet. After adding NEO to the wallet, GAS begins to accumulate automatically. To earn higher rewards, token holders can participate in the governance of the platform. The process is easy to implement, cheap and a solid way to earn passive income from idle NEO assets.
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Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly
volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of
future performance. Consider your own circumstances, and obtain your own advice, before relying on this information.
You should also verify the nature of any product or service (including its legal status and relevant regulatory
requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
