Many of today’s leading blockchains use Proof-of-Stake (PoS) to validate transactions and secure the chain. Staking involves locking up tokens for a period to contribute to the network’s security. In return, these protocols reward stakers with a yield paid in the same type of token. Binance is one of the most popular platforms for staking to earn passive income and yields. In this Binance staking review, we’ll explore how Binance crypto staking works.
Every platform brings its pros and cons, so we’ll also compare Binance to some alternatives, giving users additional options. To start, let’s spotlight some key takeaways before we get into the full Binance staking review.
Key Takeaways on Binance Staking
- Binance provides principal-protected yield products for 19 cryptocurrencies. However, yields may come from staking or other activities, such as lending or use in decentralized finance.
- Only two of the current offerings (ETH and SOL) provide an option to stake for yields without using lending or other means to generate returns.
- Traders based in the US can use Binance.us to stake crypto. Supported assets and yields vary compared to Binance.com, and Binance.us is a crypto-only exchange (no cash deposits).
- Newer staking platforms, such as Best Wallet, offer a way to compare staking yields and stake crypto directly from a wallet you control rather than using a cryptocurrency exchange.
What Cryptocurrencies Can You Stake on Binance?
Binance.com supports two cryptocurrencies for staking, although the platform offers yields on 19 cryptocurrencies. These yields come from various strategies, which may include staking, lending, or providing liquidity on decentralized exchanges.
This Simple Earn structure creates additional ways to earn a return on cryptocurrencies that do not support staking. For example, Binance provides “Simple Earn” yields on 19 cryptocurrencies, including BTC and three popular stablecoins (USDC, USDT, and FUSD). Yields only from staking are currently limited to ETH and SOL. In both cases, Binance now provides liquid staking tokens that accrue yields. Liquid staking allows users to stake cryptocurrency assets while keeping them liquid and usable.
Notably, Binance staking offers more choices than Coinbase’s staking platform — which only supports staking for seven tokens — in addition to offering a yield on USDC balances. However, the source of yields on Binance is less clear at a glance. A few clicks away from the prominent Subscribe button, you’ll find a bit more detail on the source of yields. Binance may lend your tokens to support its leverage trading markets.
Although Binance states that it offers yields on more than 300 digital assets, we found only 19 that offer principal protection. Another grouping, called Dual Investment, offers eight assets, all of which are also available as Simple Earn products. While this falls well short of 300, Binance does offer yields on many of today’s most popular assets. Many of these yield products require users to lock their crypto for a prescribed amount of time to earn yields.
This structure can work well for more experienced investors who understand the potential risks. However, it could be confusing for newer investors. Dual Investment, in particular, leaves room for error, given the locking requirements and volatility of crypto assets.
Cryptocurrencies Supported by Binance Earn
Let’s explore Binance’s current selection of yield-bearing products to learn which cryptocurrencies are supported and where the yields are derived.
Crypto Asset | Supported Binance Earn Products |
---|---|
USDC |
|
USDT |
|
FUSD |
|
BNB |
|
BTC |
|
ETH |
|
SOL |
|
EURI |
|
HIVE |
|
SPELL |
|
VANA |
|
TRUMP |
|
ACH |
|
BB |
|
COS |
|
POND |
|
SLF |
|
OM |
|
CADI |
|
- Simple Earn: Binance protects your principal and assures investors that they will retain at least the same number of coins or tokens when using the Simple Earn product. However, asset prices can fluctuate.
- Staking: PoS staking through Binance now uses liquid staking tokens that can be sold or used as collateral. However, there are some situations where you could lose money through staking. We’ll discuss risks in a later section of this Binance staking review.
- Dual Investment: Binance Dual Investment products let you make long-term bets on the price of two tokens. This option requires users to lock their cryptocurrency and does not protect your principal.
Binance now provides liquid staking tokens for ETH and SOL staking balances. These tokens (WBETH and BNSOL) accrue yields and allow you to exit your staking position by selling the tokens.
Binance Staking Rates
As discussed earlier, yields on Binance can be obtained in various ways. Let’s focus on yields from staking and compare them to those on Coinbase.
Binance offers a higher yield on staking for ETH and SOL than Coinbase. The difference comes from the commission each platform takes. For example, Coinbase generally takes a 25% commission on ETH staking rewards, whereas Binance typically takes 10% off the top. Users receive the remainder of the staking rewards after the platform receives its commission.
Asset | Binance Commission | APY Yield after Commission |
---|---|---|
ETH (WBETH) | 10% | 3.02% |
SOL (BNSOL) | 10% | 11.7% |
By comparison, Coinbase keeps 35% of SOL staking revenue and 25% of ETH staking revenue, although Coinbase One subscribers benefit from lower commissions on staking. These larger fees result in lower yields, currently 2.23% for ETH and 7.05% for SOL for standard Coinbase users.
Validator fees are part of the process with many proof-of-stake protocols, and the structure makes staking more accessible. For example, anyone technically inclined can build an Ethereum validator, but the cost requires a significant investment in hardware and high-speed internet access. In addition, an ETH validator must stake 32 ETH, currently priced at over $3,000 per ETH. Platforms like Binance simplify the process and let you stake small amounts of ETH. In exchange, staking platforms take a commission.
How Competitive is Binance Staking APY?
Binance’s commission structure puts it on par with DeFi staking options like Lido when staking ETH. Similarly, SOL staking commissions often run 10% on other platforms, making Binance staking yields on SOL competitive with decentralized options as well. As mentioned, Coinbase’s staking commission is much higher, leading to lower yields for ETH and SOL stakers on Coinbase.
Let’s compare the current staking yields on Binance versus Coinbase for ETH and SOL.
Staking Asset | Coinbase | Binance |
---|---|---|
ETH | 2.23% | 3.02% |
SOL | 7.05% | 11.7% |
Staking yields vary based on the amount of supply staked, so expect returns to fluctuate. Binance also offers Simple Earn yields on 19 cryptocurrencies and Dual Investment products for eight crypto assets. However, the risks for these products differ from those for staking. Dual Investment offers the highest potential yields but also the most risk.
Is Staking on Binance Safe?
Staking involves several risks, ranging from smart contract risk to price risk when you commit assets. However, staking through a centralized platform introduces new risks, including the possibility of hacks or breaches and the solvency of the platform itself.
Although Binance is the largest crypto exchange in the world by trading volume, it has also had its share of run-ins with regulators. This includes a French judicial probe into Binance that alleges money laundering and tax fraud. Staking on Binance or any centralized platform means trusting that entity with your cryptocurrency, often for an extended period. Always assess your risk tolerance before making any investment decisions.
Let’s examine some of the risks associated with staking and those specifically related to using a centralized exchange like Binance.
Frozen Accounts or Compromised Credentials
Binance uses a user ID and a password to secure your account. The platform also offers its own two-factor authentication (2FA) app for another layer of protection. However, authentication via a separate app is optional, and many users don’t have this option enabled. Although Binance makes additional security available for users, the risk of account breaches can still put your funds at risk. In 2022, Binance suffered a $570 million hack.
Binance can also freeze accounts due to suspicious activity, a breach of the company’s terms of service, or other reasons. Getting access to a frozen account can take months, and some users have reportedly never been able to regain access. This risk isn’t unique to Binance, but users should be aware of the possibility.
Loss of Capital
Although Binance assures users that Simple Earn products protect their principal, there are still some risks associated with staking and lending. Popular proof-of-stake protocols like Ethereum use a mechanism called slashing to ensure that validators follow the rules. Staked funds act as collateral on these validator nodes, which means they could be at risk if a validator breaks protocol. Binance’s use of WBETH tokens socializes this risk.
Capital used in lending may also be at risk. These funds may be used to support leverage trading on the platform, which can be as high as 125x. Rapid price moves could prevent efficient liquidation of underwater positions, leaving a gap between the amount lent to borrowers and the amount collected. It’s assumed that Binance will cover this difference if it occurs.
Platform Risks
Hackers and scammers target both Binance users and the platform itself. Users can take steps such as enabling 2FA to make their accounts more secure. However, this does not address potential vulnerabilities for the platform. Cold storage can be a better way to store the majority of your assets when not using them for staking.
Additionally, users have little transparency regarding the Binance’s health. In 2022, the well-known FTX exchange collapsed, pausing withdrawals and creating chaos in crypto markets. A similar incident at Binance could put staked funds or funds used in Simple Earn products at risk.
Asset Price Risk
Binance offers flexible and locked Earn products. Funds in flexible products can be withdrawn as needed with little or no delay. However, funds deposited into 30, 60, or 90-day products create more price risk. If the market moves dramatically, you may not be able to withdraw or may need to forfeit your Binance staking rewards or interest earned. This limits your ability to respond to market moves. Read the disclosures carefully before making a commitment.
How to Stake on Binance
Binance makes staking easy, although it’s important to choose the right Binance Earn product for your needs. Currently, only ETH and SOL are available for staking exclusively, with yields available on 17 other cryptocurrencies through Simple Earn products. Next, in our Binance staking review, let’s learn how to stake SOL on Binance.
Whether using the web application or mobile app, the process involves similar steps. However, US residents should use Binance.us, which is a crypto-only exchange (cash deposits not supported).
1) Open a Binance Account
To open an account on Binance, visit Binance.com and click on “Sign Up.” Provide an email address and choose a strong password. You can also select a 2FA method to secure access to your account.
In many jurisdictions, Binance requires Know Your Customer (KYC) identity verification. To complete KYC, you must provide a government-issued ID.
2) Connect a Funding Source
Binance supports several deposit methods, including SWIFT deposits from bank accounts and debit cards. If you already have crypto in a crypto wallet, you can also transfer popular cryptocurrencies to the platform.
There are no fees to deposit via SWIFT or other direct bank deposits. Network fees apply to crypto deposits. Binance displays the total cost when buying via credit or debit card.
3) Purchase an Eligible Cryptocurrency
You have two options if you want to buy a crypto for staking. Because Binance uses liquid staking tokens, you can purchase those tokens directly, saving several steps. Alternatively, you can purchase ETH or SOL and follow the instructions in the next step.
First, let’s look at how to buy Binance staking crypto or tokens you can deploy in any of the Binance Earn products.
Click on Buy and Sell, and then choose an amount to invest. Review the fees and confirm your order if you approve. The process is the same if you want to buy ETH or another asset.
Notably, you can reduce your trading costs by using Binance advanced trading, which offers trading fees as low as 0.1% for standard users. By contrast, quick-trade widgets, like the one above, use a spread to lock in price quotes, which adds to transaction costs.
4) Stake Your Cryptocurrency
To stake directly rather than purchase liquid staking tokens, navigate to the Earn section. Next, search for the asset you want to stake and click on Subscribe. You can then choose the amount you want to stake. Binance will send the corresponding amount of liquid staking tokens to your Binance exchange account wallet.
Binance Staking Pros & Cons
The Binance exchange offers an attractive option if you want to stake ETH or SOL. In both cases, the platform issues liquid staking tokens that represent your staked crypto and accrue staking rewards. However, the limited selection of assets for staking and the room for confusion between various Binance Earn products are notable disadvantages.
Pros
- Liquid staking tokens that can be traded or used as collateral
- Higher staking rewards compared to Coinbase
- Low advanced trading fees
Cons
- Staking listed alongside riskier Earn products
- Not available in the US (Binance.us only)
- Staking only available for ETH and SOL
Is Binance the Best Platform for Staking?
Binance’s use of liquid staking tokens allows users to exit a staking position easily without having to wait until the end of the staking period. However, the limited selection and risks associated with keeping assets on an exchange invite comparison with other options.
Best Wallet, a popular self-custody wallet, is building out its feature set, including an upcoming staking aggregator. This feature will allow users to compare yields and stake tokens directly from a wallet they control. Best Wallet also lets you buy popular liquid staking tokens like Lido Staked Ether (STETH), which had much wider adoption than Binance’s liquid staking tokens.
The staking aggregator is slated for Phase 3 of development. Currently, the app is in Phase 2, which includes a rollout to support more than 60 blockchains. Phase 3 will also include additional features, such as derivatives trading and a browser extension, to supplement the existing iOS and Android apps.
Best Wallet also offers a new token launchpad that offers more frequent launches than Binance Launchpad, and the Best Wallet token is now in presale. Owners of the token will benefit from lower-cost swaps and can participate in governance to shape the future of the platform.
Advanced fraud protection and upcoming support for the most popular chains make Best Wallet a compelling option. Currently, Best Wallet supports Ethereum, BNB, and Polygon networks, with additional blockchain support in the works.
The ability to stake and swap without using a centralized exchange enhances safety. For many users, a full-featured self-custody wallet like Best Wallet offers a better solution for staking and bypasses many of the risks associated with using a centralized exchange.
Conclusion
Binance staking uses liquid staking tokens that accrue earnings for ETH and SOL staking. While this approach works well for those specific assets, other Binance Earn products are less user-friendly because the source of yields is more difficult to understand. Geographic restrictions also make Binance off-limits for some larger markets, like the US.
Users who value self-custody of their crypto assets can consider Best Wallet as an alternative to Binance Staking. The wallet supports direct purchases of liquid staking tokens, and a planned staking aggregator will allow users to compare rates to deploy capital effectively. Those who prefer a non-custodial solution and the freedom to choose a wide range of assets, including presales, may be best served with Best Wallet.
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FAQs
Is Binance staking risk-free?
How to make money by staking on Binance?
Can I lose my ETH if I stake it?
References
- Earn rewards while securing Ethereum (ethereum.org)
- French investigators open fraud probe against crypto platform Binance (reuters.com)
- Binance Blockchain Hit by $570 Million Hack, Exposing Crypto Vulnerabilities (nytimes.com)
- A timeline of the collapse at FTX (apnews.com)
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