4 Reasons Why Staking is Inaccessible
Crypto and DeFi is set to change the payments landscape forever. With the huge range of benefits that it offers, including cheaper, faster and more transparent transactions, adoption has grown threefold in recent years. Nevertheless, many of these features are inaccessible to the average user. Wirex’s newly-launched X-Accounts feature is set to change this.
What is Staking?
One of the most popular DeFi tools is staking. In short, staking involves users lending and locking up their crypto funds into a protocol. Using what’s called the Proof-of-Stake mechanism that’s used to mine cryptocurrencies such as Ethereum, the protocol then randomly selects the funds staked to use in validating the next block on the chain, which are rewarded with more crypto assets. The higher the amount staked, and the longer it is staked for, the more likely they are to get picked by the protocol, and thus the higher the rewards.
Yield farming is a more intensive, short-term form of staking offering higher rewards, but with considerably more risk. It involves incredibly complex processes, with users lending and locking up their crypto funds into liquidity pools, which are essentially smart contracts (computer programs on the blockchain). Over time, this generates interest for the users, often in the form of reward tokens, which may then be redeposited into more liquidity pools to maximise returns.
The Benefits of Staking
Staking has become popular for allowing users to earn passive income, and the potential returns are huge when compared to that of savings accounts with traditional high-street banks.
For HODLers that like to hold onto their crypto assets, staking your crypto assets or putting your money into a yield farm is a great way to make the most of out of it, and leaving it there to grow.
The Problems with Staking
This sounds simple, right? Unfortunately not; there’s a reason staking and yield farming are scarcely used right now, and limited to crypto experts with plenty of money to invest.
Enter, Wirex’s X-Accounts. This new feature on the Wirex app has solved some of the biggest problems that make staking inaccessible, and in case you didn’t know, here’s the reasons why:
1. Difficult user journey
To begin with, users must own a non-custodial wallet. Not only are they difficult to use and understand, but they can only be accessed by a private key held by that user, which risks being lost or stolen. If it’s Ethereum-based tokens you’re wanting to stake, users must convert their tokens into these before sending them to their wallet. Next, they’ll need to connect their wallet with a DeFi app (Dapp) and depositing the funds in it, and vice versa when they want to withdraw and convert to fiat currency – it's certainly not an easy process, and sure to be time-consuming.
2. High fees
The large number of steps involved in the process results in astronomical fees. Each conversion and transfer has a cost, which could cost several hundred pounds each time. In fact, many argue that it’s not worth staking unless you have a considerable amount of money to invest in the first place, meaning it’s not cost-effective for smaller, casual investors. This has only been intensified by congestion on the Ethereum network, with gas fees having hit an all-time high recently.
3. Lack of security
Many applications involved in this process only have retail-grade security standards, meaning that they lack security and governance controls. Given the decentralised nature of much of the blockchain, there are often poor governance controls over this and it’s difficult to limit access to them. This makes them vulnerable to hacking, and given that many of these Dapps are not insured, there is little protection for users.
4. Lack of control
During the staking process, a lot of users have little control over their funds. Many staking and yield farming Dapps require users to lock up their funds for a given amount of time, and you may be charged a fee for withdrawing before that. Similarly, there may be a minimum or maximum limit on the amount they can deposit.
What are X-Accounts?
If you haven’t already heard of Wirex’s X-Accounts feature, it’s set to revolutionise the banking and crypto industry. Addressing the downsides of staking, yield farming and interest-earning accounts in general, it’s set to become one of the world’s most accessible interest-paying accounts by allowing users to earn up to 16% back on their crypto and fiat funds*.
Users simply need to sign up for a Wirex account, where they can simply move funds across into an account on the app and start earning interest. They’ll have the ultimate control over their funds, with instant access, no minimum holdings and no maintenance fees for each pot. Robust technology and state-of-the-art security features ensure that Wirex users funds are safe. So what are you waiting for – add to your X Account today and start earning!
*Earnings apply to fiat converted to stablecoins. Subject to T&Cs.