Choosing a staking approach can be a trade-off between trust and convenience. Depending on what you prefer, you can choose between custodial and non-custodial staking. In this video, we’ll dive into the potential pros and cons of both approaches.

But first, we need to understand what “custodial” means. A custodian in this context is a company that has physical possession of users’ financial assets. So custodial staking is the process by which a certain third party stakes coins on users’ behalf.

For example, a crypto exchange. When you stake coins with a custodian, it looks like a delegation. The custodian stakes your assets and then distributes staking rewards, skimming a certain percentage for its service.

In turn, the custodian selects the validator, or stakes coins on its own node. This means custodial staking is more about convenience, as users don’t need to do much to earn staking rewards. But it also requires that you trust the custodian, since it owns private keys and distributes staking rewards.

If you don’t want to rely on third parties while staking, then you can take one of the non-custodial ways. There are two of them: running your own node, or delegating tokens to validators. Running a node allows you to contribute to the blockchain network directly, becoming a validator and providing services to delegators.

But this approach often requires a significant number of tokens, specific technical knowledge, and a lot of effort to remain a proper validator. A much easier option could be to choose validators on your own and delegate tokens to them. It requires managing your funds between validators, assessing validators’ performance, and paying attention to network conditions.

In this case, your own strategy and analysis determine what staking rewards you will earn. It’s important to note that there is no best way to stake coins. Custodial staking can be much easier but requires you to trust custodians.

Non-custodial staking offers more independence but requires you to make more of an effort to earn staking rewards. Choose the path suits your needs and goals, and expand your crypto experience with staking services. If you liked this video, and want to learn more about staking and other CEX.

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Custodial and Non-Custodial Crypto Staking Explained