What is Qtum?
Qtum, pronounced 'quantum', is described by its founders as an 'an open-sourced public blockchain platform'.
Its goal is to empower business users to easily create, deploy and deliver dApps, smart contracts, and the virtual machines that can be used to build them.
Founded in Singapore in 2016, the blockchain combines the decentralisation of Bitcoin with the functionality of Ethereum, while promising to overcome the scaling issues that have plagued both forebears.
QTUM is the native cryptocurrency of the Qtum blockchain. It is used for the execution of all smart contracts in the network and provides token holders with the eligibility to vote on network upgrades. Users can also stake QTUM coins within the network to earn rewards.
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific
provider, service or offering. It is not a recommendation to trade.
What is Qtum staking?
Staking is when a user deposits a certain quantity of cryptocurrency coins into a digital wallet, which can then be used to validate transactions and secure the associated blockchain. Or, more commonly, the validations and security procedures are completed on your behalf by a network of nodes or validators. Staking is a process usually associated with a Proof-of-Stake (PoS) consensus blockchain. For locking away cryptocurrency and contributing to the security of the blockchain stakers are rewarded.
This consensus mechanism is a refinement of Proof-of-Work (PoW), which was made famous by the Bitcoin blockchain. PoW requires miners (validators) to race to solve a mathematical puzzle. The solution is determined by raw computing power. PoS was designed as a more efficient, and environmentally-friendly, alternative. It was intended to unlock the full potential of blockchain technology.
Instead of beating others to solve a mathematical problem, in PoS the next block of transactions is added to the blockchain by a randomly selected node (validator) in the network. The probability of being chosen is commonly weighted by how many coins a user has staked.
In return for staking coins, users receive rewards – in this case, QTUM coins.
To improve the efficiency of the network, Qtum implements a Delegated-Proof-of-Stake (DPoS) consensus mechanism. The DPoS means that token holders that wish to stake in the network don't need to validate transactions. Instead, token holders can 'delegate' their tokens to Superstakers, who then validate the transactions of the network. Rewards collected by the Superstakers are then distributed to all those supporting them. The process of delegating will be the focus of this article.
There are two ways of staking QTUM:
- Through a QTUM-compatible cryptocurrency wallet.
- Through a cryptocurrency exchange, where a user participates in a staking pool.
Both approaches have their strengths and weakness. Staking on an exchange requires a user to hold fewer coins, as participants can pool resources. It increases the likelihood of the exchange node being selected to validate transactions. However, storing cryptocurrencies on an exchange comes with increased security risks.
On the other hand, running a node from a personal crypto wallet may require some extra technical knowledge, but it offers more control, fewer fees, and far greater security in comparison.
How to stake QTUM
When considering staking QTUM coins through a personal crypto wallet, there are a few key points to consider.
Qtum provides two proprietary options for staking QTUM tokens. These include the Qtum Web Wallet and Qtum Core. Qtum Web Wallet is a beginner-friendly option and Qtum Core is for more experienced users. Unlike other blockchains, the staking process cannot be completed via third-party mobile and hardware wallets.
While there is no minimum quantity of coins a user needs to stake, the more coins staked, the higher the rewards will be.
The odds of a Superstaker being selected are a function of the number of coins in their wallet plus the number of coins delegated to them by other token holders. The proportion of those coins against the total coins being staked in the network will determine how often a Superstaker is chosen to validate transactions.
As a delegator, a user should also be aware that a small fee is required to stake offline. This goes to the Superstaker for the services provided.
It's possible to stake with the server wallet via a command line, but this is highly technical and we would only recommend this for users with a large amount of technical experience.
Staking via the Qtum Web Wallet
This is the most user-friendly option and is the option we recommend for beginners.
- Go to the Qtum Web Wallet site. Read and accept the risk warning.
- Click on 'Generate new wallet'.
- Create a password – we recommend using one of the many solutions online to generate a secure password. Make sure the password is kept secure.
- A green button will appear – click on this to save the relevant data to your local device.
- Send QTUM coins from your existing holdings to your new wallet address.
To find the QTUM wallet address click on 'View wallet info'.
- Once the transaction has cleared, click 'Offline staking' within the dashboard. Add your chosen Superstaker's address where it says 'Add Delegation'.
Choose the fee you want to pay – this is usually offered as 10%. You can pay less, but that can lead to a slower rate of income for staking rewards.
There will be options to set a gas limit and gas price – if you're a beginner, it's best to leave these at their default settings.
- Click 'Confirm'. Your QTUM tokens will now be used by your chosen Superstaker to increase their chances of being selected to validate transactions. Once a Superstaker receives rewards, a proportion of these rewards will be passed on to you.
Staking via Qtum Core
Using Qtum Core is a slightly more elaborate process that involves downloading the complete Qtum blockchain to your computer.
- Download and install the Qtum Core Mainnet Ignition desktop wallet.
The full Qtum blockchain will need approximately 7GB of space, and you'll need to synchronise with the network on launch. This can take several hours.
- Once you have synced, a wallet will open.
To stake QTUM coins, you will first need to send them to the Qtum Core wallet – you can either click 'Receive' to acquire the information you need to send coins into the wallet or click 'Request payment' to send the information to move coins from another wallet.
- To begin staking, click on the 'Stake' button in the menu. This should be located on the left side of the screen.
Click 'Delegate', then 'Add new delegates'. This is where you identify and pay the Superstaker whose umbrella you will work under.
- Add the ID information of your chosen Superstaker and set the fee you want to send.
The fee is pre-set to a level that will deliver the ideal speed – as previously mentioned this is usually set at 10%. More experienced users can cut this down – with the trade-off being a slower transaction time for earnings.
- Once you have completed this transaction, you will have delegated your QTUM coins to your chosen Superstaker. You should now automatically begin to receive staking rewards.
Staking via a cryptocurrency exchange
With the advancements of cryptocurrency adoption, many cryptocurrency exchanges have grown rapidly. These advancements have led to an increase in features, with many tapping into staking opportunities.
Many exchanges now offer users an easy platform on which they can deposit cryptocurrencies, contribute to a staking pool, and earn rewards. With regards to Qtum, the exchange acts as the Superstaker node and takes care of all of the technical aspects.
In return for depositing and staking coins through an exchange, a user can earn rewards. Binance, the most popular cryptocurrency exchange in the world offers users the ability to stake QTUM.
How to stake QTUM with the Binance exchange:
- Binance. Create a Binance account.
- QTUM Staking. Navigate through to QTUM's staking products. This can be accessed via Finance>Binance Earn, and then typing in QTUM.
- Choose locking period. Select 'Stake' and choose your locking period (30, 60 or 90 days).
- Enter amount. Deposit the desired number of QTUM coins., If you do not have QTUM coins in your Binance wallet they can be purchased with fiat, or transferred from an external wallet.
- Earn. Once deposited you will start passively earning QTUM rewards. At the time of writing, the current estimated APY for QTUM is 4.19% for a 90-day locking period. Yield is paid daily.
How much can I earn with Qtum staking?
It is impossible to say accurately how much a user can earn from staking QTUM. Relatively, the more QTUM coins that a user can stake, the more rewards will be received when delegating. The more coins a user can provide to a Superstaker, the greater the chances of that Superstaker being selected to earn rewards.
According to Qtum, delegators can expect returns of between five and six per cent a year. The team at Qtum even provide a handy stake calculator to calculate potential earnings.
Is staking Qtum safe?
Cryptocurrency assets are only as safe as the security measures implemented.
Make sure all key files are backed up, including seed phrases. Never share private keys or a seed phrase and always try to ensure the use of an encrypted crypto wallet. It is good practice to keep a hard copy of your key identity validation data stored in a safe place.
If you can, it is a good idea to stake on a computer that you don't use for general online activities – especially email – as these are a common vector for malicious actors trying to get access to private data.
Overall, if you follow the basics of crypto security, you can be relatively confident that your digital assets will be kept secure.
Pros and cons of staking Qtum
- Staking QTUM coins results in almost passive returns.
- Staking QTUM gives users the opportunity to support the Qtum blockchain.
- As one of the first Proof-of-Stake projects to reach maturity, there is real momentum behind this project, which may result in good long-term prospects.
- Qtum has a high number of nodes for an altcoin, suggesting that the community behind the project is strong.
- Offline and online options are available. Offline staking is considerably more secure and eliminates the need to lock up coins for weeks at a time.
- Staking is not possible via third-party cryptocurrency wallets. A user is limited to Qtum's proprietary wallets.
- If a user wishes to become a validator in the network, they will need to be online 24/7, which means it is a significantly higher security risk.
- There is no upper limit to the amount of QTUM that will be created. This may open the door to inflationary pressures down the line.
- Only 51% of the Qtum created so far have gone to users. As of April 2020, 49% has gone to the developer team and other stakeholders. The blockchain is not as decentralised as it could be.
- Qtum is heavily focused on Asia, with implications for the service going forward for users outside that region.
The bottom line
There's no such thing as free money, even in crypto. However, the Qtum project offers the opportunity of near-passive income from other idle cryptocurrency assets. It also provides token holders with the chance to participate in the next generation of cryptocurrency development.
Qtum has a real chance of retaining all of the strengths of Bitcoin and Ethereum while taking functionality to the next level. If it can solve the persistent issues that have dogged crypto's major players, it may become the go-to blockchain for dApp development.
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.