What is staking?

Meaning of crypto staking (Proof of Stake)

Crypto assets that support staking, use a consensus mechanism called Proof of Stake (PoS), which ensures that all transactions on the blockchain are verified and secured without relying on intermediaries like banks or payment processors. This process helps secure the network and validate transactions, and the more people who participate in staking, the more secure the network becomes.

Similar to how a bank pays you interest for holding your money, staking rewards you with additional crypto assets. Once you’ve staked your crypto, you can passively earn rewards without any further action.

Staking and ETPs

At Virtune, we integrate staking into our ETPs where “staked” is included in the name, to offer additional returns thanks to staking rewards while maintaining liquidity. Our staked ETPs allow investors to benefit from staking rewards, while the ETPs can be bought and sold freely without any lock-up periods.

The underlying crypto assets are staked directly from our custodian, Coinbase, in so-called cold storage. Staking rewards are paid out in the underlying crypto asset and are continuously added to the ETP. This ensures that the additional returns from staking are reflected in the ETP's daily price.

Our staking process is non-custodial, which means we only stake crypto assets directly from cold storage. Under no circumstances are the crypto assets transferred to a third party outside our control or lent out.

Staking usually involves a lock-up or 'vesting' period, during which the staked crypto assets cannot be transferred. In our staking products, a significant portion of the underlying crypto asset remains unstaked, ensuring that the product can always be traded freely without lock-up periods.

Spot staking vs Virtune’s staked ETPs

Property	Spot staking	Virtune's staked ETPs
Bonding period	Yes	No - rewards are immediate (daily)
Unbonding period	Yes	No - ETPs are not locked and are liquid at all times (open market hours)
Minimum amount	Yes	No - amounts as small as 1 ETP (1 share) receive rewards
Waiting time for receiving rewards	Yes	No - rewards are added to the value of ETPs on a daily basis

Bonding period

- Spot staking of crypto assets usually has a bonding period (warm up period) where crypto assets are being prepared for staking and receiving rewards. During this period, which can be between 1-10 days depending on the protocol, the crypto assets are locked and not withdrawable, and no rewards are being received.

- Virtune’s Staked ETPs receive rewards immediately after purchase.

Unbonding period

- Spot staking of crypto assets usually has an unbonding period where staked crypto assets are being prepared for unstaking. This period can take up to 28 days or longer, depending on the protocol. Crypto assets do not receive any rewards and are locked for withdrawals until fully unstaked.

- Virtune’s staked ETPs do not have any lock-up periods and are always liquid for selling, rewards are added to the ETPs until as long as the investment is held.

Minimum amount

- Depending on the blockchain, there can be different minimum amounts of crypto assets needed to be able to participate in staking. For example Ethereum (ETH) requires at least 32 ETH.

- Virtune’s staked ETPs receive rewards regardless of the invested amount. Investors receive a return (staking rewards) on amounts small as 1 ETP (1 share).

Waiting time for receiving rewards

-The waiting time for receiving the first rewards on staked crypto via spot staking can take days or weeks, depending on the protocol, for example ADA’s first staking rewards take 21-25 days. Next rewards can also take multiple days until they are earned and received.

- Virtune’s staked ETPs have the staking yield reflected in the value of the ETPs from day 1 and from then receive rewards on a recurring basis.

Frequently asked questions

What is staking?

Staking enables crypto asset owners to earn passive income by participating in the validation and confirmation of transactions on a blockchain through a process known as Proof of Stake. This mechanism is a fundamental component of Proof of Stake blockchains, like Ethereum and Solana, and plays a vital role in ensuring the security and authenticity of blockchain transactions. To facilitate a transaction on the blockchain securely and accurately, a validator must stake a certain amount of crypto asset as a guarantee of the transaction's legitimacy. The validator aims to stake as much crypto assets as possible to increase the likelihood of receiving rewards, which are paid out in the same type of crypto asset that was staked. For instance, if you stake Ethereum, you receive additional Ethereum as a reward. The annual reward percentage for staking can vary and may range from 0-14% or higher for some blockchains. Most crypto asset holders cannot act as validators themselves, as it requires significant amounts of crypto assets. Therefore, many choose to stake their assets through an established and trusted validator. Virtune includes staking rewards in its products that have 'staking' included in their names.

What are the benefits for me as an investor with staking?

Staking enables investors to earn additional returns on a crypto asset beyond its potential value growth. This is achieved by contributing to the blockchain through transaction validation, a core function of crypto asset blockchains that utilize Proof of Stake. Staking a crypto asset also helps avoid dilution caused by inflation in the blockchain network. The annual reward rate varies between different crypto assets, typically ranging from 2% to 14%. Virtune offers a fixed annual staking yield of 2-4% for several ETPs. In Virtune Staked Ethereum ETP, the annual staking yield varies where 75% of the annual staking rewards are returned to investors, potentially increasing the Net Asset Value (NAV) over time through these rewards. The remaining 25% is allocated to the custodian, staking provider, and Virtune for managing and maintaining the staking operations of the ETP. The additional return from staking rewards is reflected in the daily NAV of Virtune's staked ETPs.

What are the risks with staking?

There are two main risks associated with staking: lockup periods and slashing.

Lockup periods in staking refer to a timeframe during which staked crypto assets are locked and cannot be readily moved or sold. This is similar to an interest savings account where your assets are tied up for a specific period. The length of the lockup period can vary, ranging from 0 to 28 days, depending on the specific staking protocol or platform. During this period, you won't have immediate access to your staked crypto assets, meaning you cannot quickly sell or move your investment, even if market conditions are unfavorable. To mitigate this risk, Virtune diligently monitors and analyzes the market to ensure that the staked portion of Virtune's staked ETPs (Exchange Traded Products) maintains adequate liquidity, allowing the ETP to be traded normally at all times.

Slashing is a penalty imposed on crypto assets that are staked with a validator, which can affect the staked funds. This penalty is incurred when a validator engages in actions such as validating incorrect transactions or going offline. The specific reasons and conditions for slashing vary across different crypto assets and blockchain networks. Generally, the penalty involves a reduction of a small percentage of the staked assets. It is important to note that the exact percentage and consequences of slashing can vary depending on the protocol. When engaging in staking, it is crucial to choose a trustworthy and reputable validator. Virtune takes this seriously and exclusively selects established, regulated, and leading staking providers to ensure minimal risk. We ensure minimal slashing risk by partnering with reputable and regulated staking providers such as Coinbase and Figment.

What is slashing?

Slashing is a penalty imposed on crypto assets that are staked with a validator, which can affect the staked funds. This penalty is incurred when a validator engages in actions such as validating incorrect transactions or going offline. The specific reasons and conditions for slashing vary across different crypto assets and blockchain networks. Generally, the penalty involves a reduction of a small percentage of the staked assets. It is important to note that the exact percentage and consequences of slashing can vary depending on the protocol. When engaging in staking, it is crucial to choose a trustworthy and reputable validator. Virtune takes this seriously and exclusively selects established, regulated, and leading staking providers to ensure minimal risk. We ensure minimal slashing risk by partnering with reputable and regulated staking providers such as Coinbase and Figment.

Does staking involve you lending or sending crypto assets to third parties?

What is the difference between custodian and non-custodial staking?

Virtune exclusively uses non-custodial staking. This approach ensures that crypto assets being staked remain securely stored in cold-storage (offline) within our custodian, minimizing theft risks and eliminating reliance on third-party services. The staking process is conducted directly from digital wallets, enhancing security and control. All crypto assets staked by Virtune are consistently kept in cold storage, which is widely recognized as one of the safest methods for crypto assets storage.

Conversely, custodial staking involves users transferring their crypto assets to another entity for staking purposes. This method carries risks such as potential theft, since the crypto assets are managed and stored by someone else. For these reasons, along with regulatory considerations, Virtune does not engage in custodial staking.

How are staking rewards paid out?

How much additional yield does staking generate, and what determines this?

Staking rewards for Proof of Stake crypto assets continuously fluctuate and can be tracked on websites like stakingrewards.com. These rewards vary based on the proportion of all staked crypto assets and other factors. Virtune offers a fixed annual staking yield of 2-4% for several ETPs. In Virtune Staked Ethereum ETP, we stake up to 70% of our ETH holdings and guarantee that at least 75% of these rewards are reinvested in the product and returned to investors.

Can your staked products be bought and sold freely without any lock up periods?

Yes, all our staked products can be freely traded on the market without any lock up period. This is made possible by employing a flexible staking strategy where a portion of the holdings, which varies from 40%-80%, is actively staked, while the remaining part is kept unstaked. This strategy ensures that the products remain liquid and available for trading, while also allowing investors to benefit from the additional returns that staking offers.

Single asset ETPs

Staked ETPs

Index ETPs

Product Facts

Crypto and Market Insights

What is staking?

Meaning of crypto staking (Proof of Stake)

Staking and ETPs

Spot staking vs Virtune’s staked ETPs

Frequently asked questions