Key Takeaways

A look at the power of compounding

Re-staking rewards offers an excellent way to compound wealth

A simple example to illustrate the effect of compounding

Maximizing compounding with MATIC, ATOM, and KAVA

For links to resources within the article and to see the FAQs, please read this article on our blog.

You are well on your way to controlling your financial future by exploring crypto staking. In this article, we will dive deeper into the compounding power of staking rewards and how staking ATOM, KAVA, and MATIC can help you build long-term wealth.

Should I stake my tokens?

Staking is not for those who need their money liquid. If you might need to access your funds next week or next month, do not stake them.

For those with a medium to long-term time horizon, staking is something to seriously consider.

Not only does staking provide passive income for supporting the network, but those who choose not to stake get diluted by inflation.

You see, new tokens are issued to incentivize people to build on and use the network. The rate of new token issuance is called, inflation.

Those who stake gobble up the new token supply, while those who don’t stake own a decreasing percentage of the overall pie.

As of January 2024 ATOM staking APR is 14% and ATOM inflation is 10%. That means that your real yield is 4%.

Understanding compounding

Compounding is the process of earning interest on the principal amount of an investment and any accumulated interest or rewards over time.

Compounding is a powerful wealth-building strategy. Reinvesting your earnings/staking rewards results in faster portfolio growth.

At Blocks United we have chosen to run infrastructure for and support Polygon, the Cosmos Hub, Kava, and HydraDX.

By staking ATOM, KAVA, and MATIC, you can harness the power of compounding to increase your passive income and accelerate your journey toward financial independence.

How staking rewards compound

Staking ATOM, KAVA, and MATIC tokens helps secure those networks and pays you additional tokens as rewards. These rewards can be reinvested or “re-staked” to increase your overall staking balance.

As your balance grows, so do the rewards you earn. That creates a compounding effect that can significantly enhance your long-term returns.

Staking crypto to compound wealth

Imagine you start staking 1000 ATOM tokens with an annual percentage yield (APY) of 14%. Please know that staking yields fluctuate, but we will use 14% for this example.

After one year, you would earn 140 ATOM rewards (1000 * 14%). If you restake those rewards, your new staking balance would be 1140 ATOM.

In year two, you would earn 159.6 ATOM rewards (1140 * 14%). Restaking your 159 ATOM rewards would give you a staked balance of 1299 ATOM tokens.

In year three, you would earn 181.86 ATOM rewards (1299 * 14%) and after reinvesting your 181 tokens you would have a new balance of 1480 ATOM earning staking rewards.

By continually restaking your rewards, your balance and earnings would grow much faster over time and that’s without investing any additional cash.

Maximizing compounding with ATOM, KAVA, and MATIC

To take advantage of compounding it is essential to choose tokens with strong fundamentals, like ATOM, KAVA, and MATIC.

ATOM’s tokenomics will drastically improve with the ATOM Economic Zone.

The most widely used stable coin in crypto, USDT just launched natively on Kava.

And, Polygon’s 2.0 vision for taking advantage of zk architecture should help to infinitely scale Ethereum.

These projects offer attractive staking rewards and have the potential for long-term growth. Those factors increase the likelihood of sustained returns.

ATOM: Staking ATOM offers attractive rewards, with APY historically around 14%. That high yield has attracted developers and users, but is likely to come down over time. Cosmos focuses on blockchain interoperability, which positions it well for future growth.

Rather than a single L1 blockchain dominating web3, we believe there will be many blockchains and they will all want to communicate with each other. As more projects adopt the Inter-Blockchain Communication (IBC) protocol, ATOM stakers will collect some of that value.

KAVA: Staking KAVA can also yield rewards ranging from 10% to 20%, depending on network activity and inflation. KAVA’s DeFi platform and multi-chain architecture give it a competitive edge in the rapidly growing DeFi space. That supports its potential for long-term appreciation.

MATIC: Polygon’s MATIC staking rewards range from 4% to 6% APY. As a Layer 2 scaling solution for Ethereum, MATIC benefits from the growth of the Ethereum ecosystem, making it an attractive choice for long-term staking. Polygon’s 2.0 vision and roadmap make it even more compelling.