Staking PoS coins like Tezos is one of the most popular ways to make money with crypto, but what about stablecoin staking? So far only a couple of platforms offer this service. Earning 12% a year off USDT seems like an attractive opportunity, so we decided to test the offer for ourselves.
Crypto exchanges are quick to jump onto new trends – be it IEOs, derivatives, or interest accounts. The same happened with staking: as soon as exchanges realized they could do the same thing that staking platforms like Staked.Fish did, they were on it at once. Nowadays you can stake up to 20 different PoS coins on the same exchange.
Why try stablecoin staking?
As we all know, regular staking coins are very volatile. Take Kava, for example: it lost over 50% of its value between February and May 2020. So, if you had staked KAVA a few months ago, you’d have lost a lot of money even though the nominal staking interest is 14%.
Is there a way to stake crypto and avoid that your interest is destroyed by price volatility? The best solution would be to stake stablecoins, but almost nobody is offering this service yet. Until recently, the only offer we knew about was USDC staking on Staked.US. But since it only yields 1%, we weren’t very interested.
Finally, a couple of weeks ago, we found out that you can now stake USDT (yes, Tether!) on the Tidex exchange… at 12%! That sounded very interesting, so we decided to give it a try.
How does USDT staking work?
As you probably know, USDT in its most popular ERC20 incarnation is not a Proof-of-Stake coin. Therefore, you can’t stake it directly on a smart contract like you would ATOM or XTZ. Instead, Tidex used a very workaround.
You stake Tether on the exchange, but the actual stake is made in Neutrino (USDN). It’s a USD stablecoin issued on the Waves blockchain and fully backed by WAVES. Now, Waves uses a consensus protocol called Leased Proof-of-Stake, with daily leasing rewards. In the end, the chain looks like this: rewards are generated in WAVES and automatically converted into USDN, after which Tidex converts them into USDT for you.
The big advantage is that you don’t have to deal with another stablecoin (Neutrino). If you are into rick hedging, you probably already hold Tether anyway and don’t want to convert it into something else without necessity. Staking is very convenient: you just have to hold USDT on the exchange, and the rest is done for you.
The most interesting part of the deal is that you earn a fixed staking interest rate of 12%. The actual ROI generated by USDN could be even higher if the price of WAVES grows, but you’ll probably feel safer getting a guaranteed reward rate.
12% is the highest ROI you can get on your Tether anywhere right now. Lending platforms don’t offer more than 8.5%.
To test the offer, we staked $10k in USDT on Tidex on May 13. The minimum stake is 100 USDT, and the shortest staking period is 24 hours. By the way, you can’t trade with your USDT coins while they are staked, and after you withdraw the stake you’ll need to wait for another 24h for the funds to be unblocked.
The process was completely painless and took us less than 15 minutes. All you need to do is register, send USDT to the exchange, and deposit them in the Stake USD section. You can also stake WAVES and the exchange’s own Tidex token, but the rates are lower:
24 hours after creating the stake, we received the first interest payout: 3.28 USDT. In the following days the payouts kept coming on schedule:
We plan to continue the staking experiment for at least a month. By the way, Tidex was launched in 2017, so it’s a well-established exchange. It also has a USDT lending program.
While the volatility risks in the market remain high, USDT staking is a clever way to hedge your risks and earn a good ROI at the same time. We wouldn’t be surprised if other exchanges soon started to offer a similar service. For now, staking on Tidex remains the most profitable way to make your Tether work.