Higher APY Staking Returns - Are they Sustainable?

In Cryptoverse you will get used to things like Yield Farming and Staking and investors jump into these so as to earn extra passive income. As for Yield Farming i am not a big farm doe to the impermanent losses involved, so i am going yo be focusing more on the delegation/Staking option.

Staking Overview

Crypto Staking is when an investor delegate his idle crypto assets to a validator node so as to complete the block mining and verification process. In return the delegator is offered a reward percentage know as the Annual Percentage Yield or Annual Percentage Rate and these rewards percentage differs with validator.

Back in the days proof of Work was mainly used but the problem its associated with higher computing power and higher fees. These day most tokens are now on the proof of stake, whereby investors stake their tokens and they are used to validate a block and they get rewards depending with the blocks verified.

Annual Percentage Rate

We talked about the APY being offered by the validator will let the delegate chose if he wants to stake with them or not. Mostly when the validator is still new and the the delegates are few the Validator will offer a higher APR so as to attract new delegates. When the number of delegates increase and the number of staked amounts increase the Validator will then reduce the APR.

APR Sustainability

Depending on the goals of the Validator this will determine if the APR rates will be sustainable or not. If the validator has higher long-term goals then they will have to use low APR percentage so as to survive long. If the APR is higher then the validator will be valid for a short term period because the coffers will deplete soon and also the commissions he charges will determine if he will be able to meet the operational costs involved.

On another case Higher APR's might be used by scammers so as to lure the investors to jump into the ship so that they rip more. When the scammers see that the victims have deposited more and enough to runaway with, they will varnish with the money. Always remember that "Not everything that glitters is Gold". So when staking and considering APR's make sure you check things like bonded, jailed, voting power and the likes.

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