What is AVAX staking and why are so many investors using it to earn passive income in crypto? In this video, we break down how Avalanche staking works, how you can stake your AVAX tokens, and what kind of rewards you can expect in 2025. Whether youβre a beginner or a seasoned trader, understanding staking is key to maximizing returns.
By staking AVAX, you help secure the Avalanche blockchain while earning staking rewards in return. Weβll cover the risks, benefits, and strategies so you can decide if AVAX staking is right for you. Is this the best way to generate crypto passive income, or are there better DeFi opportunities? Watch until the end to find out.
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By staking AVAX, you help secure the Avalanche blockchain while earning staking rewards in return. Weβll cover the risks, benefits, and strategies so you can decide if AVAX staking is right for you. Is this the best way to generate crypto passive income, or are there better DeFi opportunities? Watch until the end to find out.
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LearningTranscript
00:00welcome back everyone to the deep dive this is where we take all that source material you send
00:10us the articles the data the research and really break it down into something uh actionable knowledge
00:15you can actually use today we are well strapping in i guess for a pretty deep look at avx staking
00:22it comes up a lot right as a way to earn passive income in crypto especially in the layer one space
00:27it does and it's definitely more than just chasing yield right it's about understanding
00:32the kind of nuts and bolts that secure a major blockchain competitor exactly avx the native
00:38token for avalanche staking it is just fundamental to how the whole thing works and why it has value
00:44so yeah our mission today is really to get past the simple definitions okay we're unpacking the
00:49you know the technical side the economic strategy behind it the why and also the risks which are
00:53very real liquidity risk volatility sure and looking at what it means for bigger players
01:00like institutions getting involved it's not just an investment thing it's the security layer for a
01:05high-speed network i think that framing is spot on because avalanche isn't just you know another chain
01:10it consistently gets mentioned for its speed it's low costs it's really aiming for a serious enterprise
01:17use cases isn't it absolutely so the big question the hook for today is how does this proof of stake
01:23system actually function and maybe more importantly why are these big financial institutions suddenly
01:29looking at avx staking as like a real part of their digital asset strategy that's what we need to dig into
01:36let's do it okay so before we get lost in staking details let's just set the stage for anyone maybe
01:40less familiar what is avalanche fundamentally right context is key so avalanche is a layer one
01:47blockchain think of it like the base infrastructure layer like ethereum or solana exactly but its big
01:53selling point its whole competitive angle is being really fast and really cheap to use that combination
01:59speed and low cost that's the magic formula they're chasing pretty much compared to some older chains
02:04avalanche transactions can become final like irreversible in just a couple of seconds not minutes okay
02:10and that speed is absolutely critical if you want to attract those enterprise applications you know
02:16things that need instant reliable settlement right you can't have a business waiting minutes for
02:20confirmation exactly well what makes that speed possible and what actually holds the whole system
02:25together reliably is the native token avx you really can't grasp staking without understanding what avx does
02:33okay so let's break that down what are the core jobs of the avx token within the ecosystem
02:39why is it valuable enough that people would lock it up it basically has three main jobs
02:43all interconnected first it's used for transaction fees like gas on ethereum precisely anytime you do
02:50anything on the network swap tokens use a defy app launch a smart contract you pay a small fee in avx
02:57okay and importantly a lot of these fees are actually burned meaning destroyed taken out of circulation
03:02forever correct permanently removed which is a key point it adds a deflationary aspect to the tokens
03:08economics yeah definitely circle back to that yeah that seems important okay so fees are number one
03:13what else second avx is used for governance so voting on changes to the network exactly holding avx gives
03:21you a say in future decisions upgrades how the network evolves it's crucial for keeping it decentralized
03:28over time makes sense and the third function i'm guessing this is where staking comes in got it the third and
03:33most critical for our deep dive today is securing the network through staking okay so ebix isn't just
03:39the gas money it's also the the collateral the guarantee for the network's integrity that's a great way to
03:46put it avalanche uses a proof of stake system and to participate in validating transactions and securing
03:53the network you need to put up avx tokens as collateral economic skin in the game so if you try to cheat
03:59the system your staked avx is at risk it aligns the incentives act honestly secure the network get
04:05rewarded act maliciously lose your stake you mentioned speed and reliability earlier tied to consensus
04:11this is where avalanche gets technical and maybe differs from other proof of stake chains right
04:15can we touch on why it's potentially faster yeah this is where the secret sauce is sort of avalanche
04:22doesn't use the same consensus methods as many older chains like traditional bft
04:26it uses the avalanche consensus protocol it's actually a family of protocols
04:31often called snowman snowman okay yeah the key difference is how nodes reach agreement
04:36instead of needing all participating nodes to agree on everything which takes time right like getting
04:42everyone in a huge room to vote yes exactly instead validators in avalanche quickly and repeatedly
04:48poll a small random group of other validators ah okay so it's like asking a few neighbors their opinion
04:54really fast over and over instead of waiting for a global announcement that's a perfect analogy
04:59actually this rapid subsampling lets the network reach finality confirming transactions so they can't
05:04be reversed extremely quickly and it uses less computing power than traditional methods which
05:08translates to speed and lower costs for the user precisely yeah and that brings us back to staking for
05:15the individual by staking your avx you're participating in this fast consensus system you're helping secure the
05:22network and you get rewarded for doing that validation work okay so we know why staking is needed for this
05:28consensus now how do people actually do it the sources make it clear there are two main ways to participate
05:34and they're really different in terms of like commitment risk technical know-how got it let's start
05:42with the heavy hitters the ones actually running the infrastructure right those are the validators
05:46they're the absolute backbone they have to run a full avalanche node which means dedicated hardware
05:52software staying online constantly exactly maintaining the hardware keeping the software updated ensuring
05:57really high uptime ideally 2047 they're actively confirming transactions participating in that rapid polling
06:03we talked about sounds like a serious commitment it is and because they're taking on that operational
06:08cost and technical responsibility the sources say they need to stake a significant minimum amount
06:13of avx i believe currently it's around 2000 avx wow okay so that's a pretty high barrier to entry not
06:19just the money but the tech skills and the time definitely it ensures that only serious well capitalized
06:25participants are running the core infrastructure so what about everyone else the average person holding
06:30some avx who just wants to earn yield without setting up a server in their basement ah that's the second
06:36role the delegator this is the path for most people okay if you hold avx but don't want the tech
06:42headache the hardware costs or needing that huge 2000 avx minimum you can simply delegate your avx
06:51meaning you lend your stake to an existing validator exactly you choose a validator that looks reliable
06:57has a good track record and you entrust your stake to them your avx gets added to their total stake
07:02making them and the network more secure and you get a share of the rewards they earn without needing
07:08any technical expertise yourself none at all you're essentially using your capital to support their
07:12infrastructure and the big draw the immediate reason people do this is that reward rate the
07:18sources consistently mention around 7 10 apy seems pretty good why that range is it fixed that's a
07:24really important question that 7 10 isn't just pulled out of thin air it's heavily influenced by avalanche's
07:30own monetary policy how so well avalanche has a maximum total supply of avx it's capped staking rewards
07:38come from new issuance but that issuance rate is managed by the network's governance they try to
07:43keep it high enough to incentivize people to stake because more staking equals more security exactly
07:48but they also need to control inflation so they can't just print infinite avx so it's a balancing act
07:53okay so the network itself adjusts the reward rate to keep staking attractive but sustainable
07:58while also burning transaction fees to counteract some of that inflation that's the mechanism in a nutshell
08:03it's a constant calibration and remember that seven ten percent is the potential apy your actual return
08:10also depends heavily on the validator you choose right you mentioned performance how does that work
08:15validators charge a small commission like a fee for their service taken from the rewards earned by
08:20the avx delegated to them and more importantly if a validator has poor uptime if their note is offline
08:26a lot and misses chances to validate transactions they simply earn fewer rewards from the network overall
08:33and since your rewards are proportional if they earn less you earn less precisely so that headline
08:39seven ten percent apy is really the maximum you could get before you factor in the validator's
08:44commission and crucially their performance record choosing a good validator is key so the mechanics
08:50are directly tied to the reward the yield is basically the network paying people to lock up capital and
08:55behave honestly ensuring the whole system stays secure and decentralized couldn't have said it better
09:00myself okay we've covered the what validators zelligators and the how staking for rewards now let's
09:05zoom out to the so what done strategically why is the staking participation so important beyond just
09:12individuals earning yield why does it matter for avalanche's long-term health and its competition with
09:17other big layer ones this is where we shift from thinking about individual returns to thinking about the
09:22network's architecture and its economic design fundamentally the number one reason is security
09:29we touched on this with the consensus mechanism right avalanche's unique consensus relies on that economic
09:35alignment by making people lock up valuable avx tokens to participate the network makes sure there's a
09:42massive economic incentive to act honestly because cheating could cost you your stake exactly attacking the
09:48network like trying to double spend or censor transactions would require controlling a huge amount of the
09:54state aviacs way more than 50 percent this makes attacking prohibitively expensive the more avx is staked the more
10:02expensive an attack becomes and that high level of security directly tied to how much avx is staked is presumably what gives big
10:09companies like deloitte the confidence to build on it absolutely you wouldn't build critical infrastructure on a network you
10:14thought could be easily compromised financially that security underpins enterprise trust and that trust is also bolstered by the second
10:22strategic element supply dynamics okay what do you mean by supply dynamics when someone stakes avx whether
10:27as a validator or a delegator those tokens are locked up they're taken out of the active liquid supply that's readily available for trading on
10:35exchanges right so just basic economics if you reduce the available supply of something it creates scarcity
10:41exactly this mechanism naturally encourages long-term holding if a significant chunk of the total avx supply is staked
10:49and the data shows this percentage has grown a lot over time it reduces the selling pressure on the
10:54open market creates a kind of supply squeeze precisely fewer tokens are readily available to be sold this
11:01reduction in liquid supply can act as a stabilizing force on the price potentially providing a bit of a floor or
11:07support for the value of the avx that is still trading interesting so staking is doing double duty it's securing the
11:13network itself and acting like a monetary policy lever to reduce sell pressure and reward long-term
11:19believers that's the core strategic idea it aligns incentives beautifully secure the network reduce
11:24available supply potentially support the price and reward those providing the security but let's play
11:29devil's advocate like you said earlier does locking up supply guarantee the price goes up that sounds
11:34a bit too easy that's a really fair point right no absolutely not nothing guarantees price appreciation
11:40in crypto especially during major mark downturn right but what reducing the liquid supply does do
11:46is make the asset potentially less vulnerable to sharp short-term sell-offs driven by panic or
11:52manipulation it just costs more to push the price down significantly if there are fewer tokens readily
11:58available to buy up and dump think of it as a mechanism contributing to stability not a magic price
12:04pump button that's a crucial distinction okay so it's about resilience rather than guaranteed gains exactly
12:10and bring you back to the individual saker this whole strategic picture ultimately circles back to benefit
12:16them directly staking provides that tangible passive income stream paid out in more avx right that yield
12:23combined with the potential stability from the reduced supply becomes the core incentive for people to stick
12:29with it long-term locking in the community members who have the most conviction in the project's future all right we've
12:34we've really laid the groundwork here the fundamentals of avalanche the mechanics of staking and why it's
12:40strategically vital for both security and economics it's clear why it matters to the network and why
12:46it's attractive to holders but uh before we pivot to the really practical stuff like the different ways
12:52you listening can actually start staking we just need to take a really quick moment here because honestly
12:58your engagement is what makes these deep dives possible it really is yeah so if you're finding this kind of
13:03detailed breakdown valuable if drilling down into the why and the how helps you navigate this often
13:09confusing crypto space then please take just a second to hit like subscribe maybe ring that notification
13:16bell it helps a lot it truly does it's genuinely the number one way you can support the channel it tells
13:21the algorithms that this content is useful which helps more people find it and frankly it allows us to
13:27keep dedicating the time and resources to researching and putting together these in-depth sessions so uh yeah
13:33thank you for being part of this we really appreciate it we absolutely do and that support lets us
13:38transition right back into the practical side because now that we've got the strategic why covered
13:44security supply yield let's tackle the tactical how how can you actually start staking your avx because
13:51the method you pick really changes things okay so for someone wanting to become a delegator and not run
13:56their own node but stake their avx our sources point to basically three main routes and they seem to
14:02range from like fully hands-on to super simple that's right first up there's the most direct way
14:09using the official avalanche wallet yeah this is often seen as the gold standard especially for people
14:14who really value decentralization and controlling their own keys self-custody exactly with the official
14:19wallet you hold your own private keys nobody else you connect directly to the network you browse the list of
14:24validators check their stats uptime fees and choose who you want to delegate to full control but also
14:30full responsibility right lose your keys lose your crypto that's the trade-off it's great for experienced
14:36web3 users who prioritize that control but you need to be comfortable managing your own security okay so
14:42that's option one option two seems to be the one that really kicked off wider adoption according to
14:47the sources the retail staking growth trend between 2022 and 2024 that's staking through centralized
14:53exchanges cx absolutely this was huge platforms like binance coinbase kraken and others started
15:01offering avx staking directly on their exchange why was that such a game changer for retail simplicity
15:08pure ease of use if you already had avx on one of these exchanges staking became literally just a few
15:14clicks in their interface the exchange handled all the back-end stuff managing the delegation interacting
15:19with the validator secure the keys ah but securing the keys that's the catch isn't it that is the major
15:24trade-off yes when you stake on a cex it's custodial staking the exchange holds your avx for you
15:29you don't have the private keys meaning you're trusting the exchange not to get hacked go bankrupt or
15:34restrict your access counterparty risk exactly plus the exchange isn't doing this for free they act as
15:40a middleman and they typically take a cut of those staking rewards sometimes a significant chunk for
15:45providing the service and convenience so you get less than the full seven ten percent apy potential often
15:52yes but for millions of users the sheer convenience and lower barrier to entry outweighed those risks and
15:59lower returns that's why it drove so much growth okay so official wallet for
16:04control cex for convenience what's the third pass sounds like it's for more advanced users
16:09defy protocols yeah this is more cutting edge staking through defy opens up different possibilities
16:14mainly around liquid staking liquid staking what's that so instead of just locking up your avx directly
16:20you use a defy protocol you deposit your avx and in return you get a different token like a receipt
16:25token that represents your staked avx okay why would i want a receipt token because that receipt token is
16:31liquid you can freight it use it as collateral and other defy applications like lending protocols or
16:35liquidity pools ah so you're still earning the base avx staking reward but you can also use the value
16:42of your stake position elsewhere in defy to potentially earn additional yield double dipping kind of that's
16:48the idea it makes your state capital more efficient but it's always a bud always it's much more complex
16:54you're now exposed to smart contract risk the risk that the defy protocol itself has a bug or gets
16:59exploited so higher potential reward but definitely higher complexity and additional layers of risk
17:06yeah it's an advanced strategy got it so three paths direct control via the wallet easy but custodial
17:14via cex's or complex but potentially higher yield via defy liquid staking exactly and the key thing from
17:21the network's perspective is that no matter which path people choose they are all contributing to
17:26increasing the total amount of avx being staked right more participation overall and that participation that
17:31growth in the number of validators and delegators across all these methods that's a really important
17:36metric we watch it signals growing decentralization and security for the entire ecosystem that seven
17:42ten percent apy sounds great and the tech is interesting but we absolutely have to hammer this point home
17:48staking is not risk free it's not like putting money in a savings account what are the real downsides
17:54the risks someone needs to seriously weigh up before jumping in this is maybe the most critical
17:59part for anyone considering it the first big one the unavoidable trade-off is lock-up periods meaning
18:04your avx is stuck pretty much unlike holding avx in your exchange wallet where you can sell it instantly
18:11when you stake your tokens become illiquid for a defined period yeah you commit them how long are we
18:17talking the sources mentioned a range yeah the typical range is usually somewhere between a
18:21minimum of two weeks up to a maximum of one year the specific duration depends on the terms set by the
18:27validator you delegate to and you agree to that when you start okay two weeks isn't too bad maybe but
18:32a year in crypto time that's like a decade exactly if the market takes a sudden nosedive or some major news
18:38breaks your staked avx is locked you can't sell it you just have to write it out that's significant
18:43liquidity risk you lose the ability to react quickly that's the core opportunity cost you had
18:48to ask yourself is that potential seven ten percent yield worth giving up the flexibility to trade or
18:56protect your capital if the market moves against you dramatically a crucial calculation okay lock-up
19:01periods and liquidity risk what's next the second major risk area is validator risk choosing the wrong
19:06person to delegate to essentially yes as a delegator you need to do your homework you're trusting a
19:13third party to run their node reliably and honestly if you pick a validator who is technically incompetent
19:20or just unreliable the main consequence is reduced rewards reduced reward okay let's clarify this because
19:26it's different from some other chains on networks like say ethereum 2.0 validators can face slashing right
19:32where if they misbehave badly a chunk of their staked capital and potentially their delegators capital
19:36is actually destroyed as a penalty does that happen on avalanche this is a really important distinction
19:41the sources highlight avalanche's system is generally designed to be less punitive especially for
19:46delegators instead of severe slashing of your principal stake for validator misbehavior the primary
19:51penalty is economic inefficiency or reward reduction if your chosen validator has terrible uptime
19:58their node crashes frequently they miss validation opportunities the network simply pays them fewer
20:04rewards and because your rewards are tied to theirs you get less than the advertised apy so the risk is
20:10more about earning less than you expected rather than losing your initial investment due to validator
20:14penalties your due diligence is focused on finding validators with great uptime and a solid track record
20:20not necessarily fearing catastrophic loss from their mistakes that feels like a significant difference
20:26arguably much less scary especially for institutions perhaps less risk of sudden capital destruction it
20:32definitely lowers one type of risk profile which could be appealing institutionally yes but that
20:36brings us to the third and honestly the biggest risk for most people the one that can wipe out any yield
20:42you earn market volatility ah the value of avx itself exactly you have to perform the coldest hardest
20:49analysis here let's say you stake your avx for a year and diligently earn that eight percent apy paid in
20:55more avx tokens sounds good so far but if during that same year the price of avx drops by say 30
21:03against the dollar whatever your base currency is then even with eight percent more tokens your total
21:07stash is worth significantly less in fiat terms than when you started precisely your nice apy gets
21:13completely overwhelmed by the drop in the underlying assets price staking rewards are paid in the native
21:19token so you are always exposed to the price risk of that token it doesn't guarantee profit and dollar
21:24terms staking is fundamentally a bet that the value of avx will at minimum remain stable or ideally
21:32appreciate over your lockup period so lockup risk validator performance risk and underlying asset price
21:37risk anything else maybe broader risks well there's always the overarching regulatory uncertainty
21:42this isn't specific to avalanche's mechanism but it affects all staking how governments will treat
21:47staking rewards for tax purposes for example exactly is it income capital gains something else
21:54how will exchanges offering staking services be regulated as institutional interest grows
21:59so does regulatory scrutiny this lack of clarity is a background risk factor that affects the long-term
22:05attractiveness especially for those big players it's something everyone involved needs to keep an eye on
22:10okay let's zoom out again we've talked risks mechanics how does avax staking fit into the bigger picture
22:17this fierce competition between layer one blockchains and why is staking specifically such a telling
22:24sign of institutional confidence it comes back to avalanche's core goal competing directly with ethereum
22:30particularly on speed and cost right the enterprise focus exactly staking isn't just a side feature it's
22:36the engine ensuring the network can actually deliver on that promise of high speed and stability reliably
22:41without a robust highly participatory staking system securing its consensus avalanche wouldn't have
22:47the credibility or the performance to attract serious high value applications so the health of
22:52the staking system is a direct indicator of the network's ability to compete for that enterprise market share
22:57precisely and we've seen some really strong signals mentioned in the sources that suggest this
23:03approach is gaining traction with institutions let's talk about those first there was that big internal
23:08push right the avalanche rush program back in 2021 yeah that was huge 180 million dollar liquidity mining
23:15initiative that money was specifically earmarked to incentivize developers to build on avalanche
23:21users to bridge assets over and critically for people to stake aviagex so they were directly paying people
23:28to stake and secure the network early on in effect yes it was an aggressive strategy to bootstrap activity
23:34liquidity and security all at once pump prime the ecosystem and it largely worked in attracting initial
23:40attention and locking up a significant amount of aviacs early on okay that shows confidence from the
23:44inside but the external validation is maybe even more powerful the sources highlight the deloitte and avalabs
23:50partnership also in 2021 that was a landmark moment deloitte one of the biggest professional
23:55services firms in the world yeah household name and business they chose avalanche to build a new disaster
24:00recovery platform think about what that requires speed sure but absolute rock solid security reliability
24:08data integrity for government related applications no less fema i think exactly the fact that deloitte
24:15deemed avalanche's staking secured consensus robust enough for that kind of critical real world
24:21infrastructure was a massive vote of confidence it signaled that this wasn't just theoretical crypto tech
24:26it was ready for serious demanding use cases when a company like the light trusts your security model
24:32built on staking for something like that yeah that's a different league than justify yield farming
24:37totally different league and the sources suggest this institutional interest is continuing and deepening
24:42we're seeing traditional financial institutions exploring avax staking as part of their actual treasury
24:47management strategies meaning holding avax as an asset and staking it for yield exactly instead of just
24:53letting digital assets sit idle on their balance sheets they're looking at ways to put them to work
24:58productively staking avax through secure possibly regulated custodians allows them to earn yield on
25:06their holdings while also contributing to the security of a network they might potentially use or build on in
25:11the future that's fascinating it makes the asset productive for them it aligns their financial incentives
25:17with the network's health so if someone listening wants to track this growing confidence this
25:22institutional story what are the key things they should watch i'd look at a few things definitely
25:28keep an eye on the correlation between the avax price and the overall staking rate the percentage
25:33of total avax locked up history suggests big price run-ups tend to pull in more retail staking later
25:39but perhaps more importantly watch for new institutional partnership announcements any more news like the
25:44deloitte deal or major tradfi players publicly disclosing avx staking strategies those would be very strong
25:51signals each major adoption like that should theoretically lead to more avax being staked
25:56long-term further strengthening that security narrative hashtag tactic outro
26:01so if we were to boil down this whole deep dive adax staking it's really doing several jumps at once
26:07isn't it it's the core consensus mechanism that secures a major layer one blockchain aiming for high
26:11performance it's also a pretty clever economic tool designed to reduce circulating supply and encourage
26:16long-term holding and yes for the individual it offers a real path to passive income with that
26:22quite attractive seven ten percent apy range but it's a big but actually succeeding with it comes down
26:27to carefully weighing those risks we discussed the lock-up period is meaning you lose liquidity and the
26:32ever-present risk that the market value of avx itself could drop absolutely the strategy has to fit
26:37your personal outlook and risk tolerance like everything in crypto which brings us nicely to some final
26:43questions for you the listener to mull over as you think about your own approach yeah first off where
26:50do you stand on the trade-off would you lock up your avax long-term earning that yield and helping secure
26:55the network or do you value liquidity more wanting the freedom to trade quickly even if it means missing
27:00out on staking rewards second thinking about the risk profile given that avalanche focuses more on reward
27:06reduction for validator issues rather than the potentially harsh capital slashing scene on chains like ethereum
27:13does that make avx staking feel safer to you more institution friendly or does avalanche's relative
27:19newness compared to ethereum still make it feel riskier overall and finally just fundamentally what's
27:24your primary crypto strategy right now are you mostly focused on short-term training trying to catch
27:29market swings or are you more of a long-term holder and staker betting on the fundamental value and
27:33security of the assets you choose and maybe one last thought building on that institutional angle we
27:39explored we know retail staking often follows price momentum but what if avalanche really cracks the
27:46code on those big institutional partnerships more deloitte banks actively using it for treasury
27:51maybe even for settlement yeah if that happens at scale does avx staking stop being this sort of
27:58niche strategy for crypto savvy folks and does it actually become well maybe the next big mainstream
28:04passive income source in the broader world of finance something for everyone to think about a
28:08really interesting potential future to consider that's definitely something to keep an eye on
28:12thank you for joining us on this deep dive into the world of avx staking we hope it was valuable
28:17catch you on the next one
28:34see you on the next one
28:40you
28:45you
28:47you
28:49you
28:53you
28:56you
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