The worst after-pandemic economic crisis is on the edge as according to economists in Morgan Stanley there is a 35% chance of recession happening in the USA by 2023.
In this dispersed economy, decentralized finance holds its demand in the market tight because of recent innovations that it involves like yield farming, staking, reflections, etc.
In this article, we cover Staking vs Reflection for majorly two reasons that are first there is a lot of confusion because they both look quite similar, and second is because it is high time to invest in cryptocurrency due to low prices as almost the whole world is suffering from the economic crisis.
One must not forget that decentralized finance is the reason that changes the downward journey of cryptocurrency during lockdown to an all-time high in November 2020 and this time too the innovations around decentralized finance are more promising.
Let’s understand Staking vs reflection in detail to grab the early investment opportunities in these concepts of decentralized finance.
Overview of Staking
As a broad outlook, Staking is a functional concept of Decentralised finance which simply means the holding of certain cryptocurrencies within your crypto wallet that becomes a means of earning rewards on held cryptocurrencies.
For some investors or in general, it is the major takeaway that indeed is true except here we are comparing Staking vs reflection which can be confusing as they both are quite similar hence we need to dig deep for better investment perspectives.
How Does Staking Works?
The closest resemblance of Staking working is similar to interest one can earn on a savings account. Interest in saving accounts generates because the banks use that money to lend to borrowers and earn interest on it which is divided in respective percentages between bank and account owner.
One might wonder then Is held cryptocurrencies in my wallet also lending to borrowers or else how does it generate rewards for me?
Well, the cryptocurrencies that allowed staking use a consensus mechanism called proof of stake that ensures that all transactions happening with the involvement of staked cryptocurrency are verified and secured without a middle layer or bank or any payment processing authority.
For the working of this consensus mechanism, the blockchain technology uses your staked cryptocurrencies hence being able to reward the crypto currency’s owner for their held Cryptocurrencies.
Overview of Reflection
Again as a broad outlook, Reflection is quite a recent concept of Decentralised finance where the cryptocurrencies in the wallet enable an opportunity to earn a percentage reward accessible to investors on every transaction that is being done with the use of the held cryptocurrency.
The thing to note here is that the happening transaction is crucial here because without the use of held cryptocurrency there is no reward system applicable.
The major reason for the concept consideration is to control the uncertain fluctuations that happen in the cryptocurrencies where because of the buy or sell pressure created in the market for any rando reason impact on particular crypto with a sudden loss of investing capital.
WIth reflection tokens, these uncertain fluctuations minimize, and with stable capital to invest, the cryptocurrency can earn well by performing better in their respective domains.
For more depth on the concept as it is crucial to understand certain terminologies before moving on to head-to-head comparison between Staking vs Reflection, let’s see how reflection tokens work,
How Does Reflection Work?
The underlying work depends on a consensus mechanism that is purely based on proof of stake methodology. In this, there are three major regulatory reward systems that Reflection tokens use that are liquidity pool, collected transaction tax, and often with coin burn wallet.
These reward system functionalities are static means that there are fixed taxable amounts per transaction and some percentage went to the liquidity pool for the maintenance of the system and other percentages went straight away to the investors.
Sometimes the additional rewards are also distributed through the means of coin burn wallet as it is a transparent system and extra profit margins get redistributed to the investors.
Read: Algorand vs Cardano
Key differences between Staking vs reflection
This point is programmable cryptocurrency space is such a crucial thing for investors because currently, decentralized finance is generating various investment opportunities that are quite a new means is lesser in competition and secondly the companies to attract investors or userbase provide various rewards on investing schemes to spread them for more capital gains from the market.
Of all those concepts two quite popular ones are Staking vs reflections, which we separately see in the above sections of this article. Let’s now compare them with each other covering every minute detail.
| Staking | Reflection |
| Staking a particular amount in a cryptocurrency means directly locking up that amount that acts as a validator for the transactions for security, integrity, and continuity within the blockchain network and in return gets rewards with minted cryptocurrency. | Reflection tokens are the rewards an investor gets when the transactions in the investor wallet are done with the means of an offering crypto currency blockchain network. Although some taxed amount deducts each time the transaction occurs and that same taxed amount is redistributed as rewards. |
| In Staking the major risk an investor bear is the severe fluctuations that happen in the price movement of held cryptocurrency. As an example, the rewards from staking a crypto coin is 15% but if the prices get down to 50% on an annual term then it still is a loss of 35%. Hence not advised to purely depend on APY figures. | In the case of Reflection tokens, there is no obligation of holding a particular cryptocurrency amount within your wallet to avail the benefits of reflection tokens as it is directly linked to transaction occurrences and the extra taxable amount hence no related risks of price movements. |
| Staking of a low liquidity-based cryptocurrency like a micro-cap coin that doesn’t have enough exchange liquidity might give a hard time while selling the held cryptocurrencies assets. | Although Reflections creates no barrier to earning the reward of holding a particular crypto coin, the lack of liquidity on exchange is equally possible in this case too due to the lack of transaction leads quantity or promised/expected performance. |
| In Staking there are no additional fees required as it is the purchased crypto currency that stays in your wallet and earns rewards for you. Also, the transaction with STaking of selected crypto currency is quite cheap and fast with more energy efficiency. | In reflection, the additional taxable amount required is quite high and during this whole procedure the complexity also increases with a loaded distribution network hence the transaction latency is also high which results in reward delays. |
| In terms of rewards distribution, the staking of a selected cryptocurrency might not be compulsorily returned rewards each day and investors need to wait to receive their rewards. Now holding the stakes does not affect APY if one holds the stake for entire years but it reduces the chances of repetitive earning through re-investing the earned cryptocurrency as rewards yielding. | The reflection token rewards system revolves around the three major functionalities that are the distribution of collected tax, liquidity pool, and sometimes the burn wallet coins. These three ways help earn profit margins if used a selected cryptocurrency for any kind of transaction. |
| In Staking the amount that is needed to hold the particular quantity of crypto currency is predecided hence helps to preplan of overall investments of the portfolio. | In reflection tokens, the amount varies as such the rewards earned are eligible on several transactions done with that selected cryptocurrency. Hence in the case of larger transactions, it might cause a lack of funds which creates the overall wallet image of ambiguity resulting in lesser reward earnings. |
| Various crypto currencies come with a locking period when it comes to staking and during that time selling is not an option hence might affect the portfolio in case of a substantial price drop. Tron and Cosmos are the few examples of locking period-based cryptocurrency. | Reflections do not demand the staking of a particular cryptocurrency in return for an applicable reflection token on a transaction directly but indirectly decrease the distribution margin if an investor does not come as a loyal customer for their cryptocurrency. The generation of more reward profits is directly proportional to more investments in the selected cryptocurrency. |
| The very fact that one is staking a particular cryptocurrency for creating a larger liquidity pool for a smoother transaction is involved in the process of a smart contract because liquidity pool is a kind of smart contract where the transactions are validated with utmost security and transparency. | The yield generation in reflections is quite efficient because the distribution is easy with maintaining appropriate security and transparency within the blockchain network via smart contracts. |
With this head-to-head comparison, we hope that you get a fair idea of both the concepts that are Staking vs reflection.
Examples of Staking or Reflection Applicable Cryptocurrencies
Staking vs reflection is the two popular concepts of decentralized finances along with some other functionalities combined that might change the current understandings cryptocurrency world because they majorly focused on innovations around crypto’s real-life use cases.
Hence for the first mover advantage to investors in both of these concepts of decentralized finance, we thought to provide you best-performing cryptocurrencies so that one might not get stuck with a bad or gimmicky crypto startup.
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Examples of Staking
- Ethereum
Ethereum as blockchain technology is probably the first one that supports both mining and staking of their coins. It shows the evolution of Ethereum from proof of work to proof of stake functionality. It is because proof of stake is a far better consensus mechanism technique than proof of work. After all, it has low rates, high speed, and more energy efficiency as compared to proof of stake.
For staking Ethereum one needs 32 Ethereum coins actively participating in the blockchain network.
- Cardano
Cardano which is quite a popular cryptocurrency that is recently in news for higher returns to their investors and directly giving competition to one of the largest programmable space cryptocurrencies that is Ethereum, in functionalities like faster transaction speed, Smart contract based cheaper transactions, etc.
ADA the coin of the Cardano blockchain also supports the staking feature and boosts the transaction speed to 250 TPS(Transactions per second) because of their proprietary consensus mechanism algorithm called Ouroboros.
With Ouroboros, the cost of gas fees also declines to 0.17 ADA coin which is equivalent to 0.91 USD in comparison to Ethereum.
- Polkadot
Polkadot is also one among the various groundbreaking innovations that we come across during past years that is a protocol that allows different blockchain networks to connect and work efficiently with one another.
A common example of this can be the use of Algorand(ALGO) with Cardano(ADA) where one is efficient in lesser transaction fees while the other has more innovative development functionalities.
This innovative blockchain’s crypto coin DOT also supports a staking feature that adds more feasibility to the system and also a chance for investors to yield potentially greater profit margins.
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Examples of Reflection
- Evergrow Coin
Evergrow coin or EGC has touched an exceptional mark of constant returns in the Binance Smart chain ecosystem. The taxed transaction fee is 14% which is quite high but the constant returns it provides make investors deal in it.
The unique selling point of this coin’s concept is that it does not return the newly minted EGC as a return but stablecoin Binance USD(BUSD) that is quite high in price and has a more stable trustworthy userbase.
- Safemoon
The safe moon is one of the earliest cryptocurrencies that implements the functionalities of reflection within their blockchain network.
The popularity of Safemoon can be estimated through its market cap which is above 2 billion dollars where the total holder base is 2.5 million and 585 trillion coins currently in circulation.
Also, it is one of the cryptocurrencies which charges the bare minimum taxable amount of 10% per transaction.
- Reflection finance(RFI)
Reflection finance is a token based on the Ethereum blockchain network itself that provides a pure transparent way to earn passive income. Reflection finance is another great effort that s quite an exception majorly for two reasons that are:
- Tax fees charged per transaction are exceptionally low which is only 1%.
- All the collected taxable amount is directly distributed to the holder of the coin without deducting any collected amount percentage for maintenance or any other purposes.
Not only are these popular examples mentioned here help an active crypto investor with a deeper insight into some trustworthy crypto currency’s blockchain network but also help to determine the investing cost while opting between staking vs reflection as the investing means to earn higher profit margins.
Conclusion
One can notice that there are lots of cryptocurrency innovations that are continuously happening around the decentralized finance space majorly focusing on building functionalities to create real-world use cases of cryptocurrency consumption.
If you are an investor looking for the latest opportunities, decentralized finance is your best bet. This article provides in-depth details about Staking vs reflection which are quite popular decentralized finance concepts to earn exponential profit margins on your investments.
