Staking BNB on Binance Smart Chain for 20% APY

by CalculatedLuck

PREFACE

This is NOT through binance.com so this method DOES work for US residents!

I call it a “secret” because I see lots of posts and comments that discuss different staking options omit BNB for some reason, which is one of the best of them all.

Plus, many people still seem to think that BNB is JUST an exchange token for trading fee discounts. As you’ll learn from this post, this is not the case.

BINANCE CHAIN & BINANCE SMART CHAIN

Binance Chain (BC) is a blockchain project that was initiated by Binance and launched in April 2019.

It uses the BEP2 token standard and its primary focus is to facilitate fast, non-custodial trading, such as on Binance DEX.

Binance Smart Chain (BSC) is a completely separate blockchain that runs in parallel to BC and uses a consensus model called Proof of Staked Authority (PoSA) with the BEP20 token standard.

Unlike BC, BSC boasts smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM).

The design goal was to leave the high throughput of BC intact while introducing smart contracts into its ecosystem.

For staking, the rewards (fees) are collected on BSC while the staking info is stored on BC.

HOW TO STAKE

NOTE: For staking, you must use BEP2 BNB (Binance Chain), NOT BEP20 BNB (Binance Smart Chain).

1) Binance Chain Wallet Chrome Extension

  • Acquire BNB (Buy on Binance.com, Binance.us, or swap on a defi exchange like PancakeSwap)
  • Download the Binance Chain Wallet chrome extension in the chrome web store.
  • Create a BNB wallet. (Or import if you already have one)
  • Transfer BNB to BEP2 wallet
  • Go to https://www.binance.org/en/staking
  • Connect your wallet (button in top right corner)
  • Choose a validator and delegate.

2) Trust Wallet

NOTE: This method does not show all the available validators for you to choose from.

  • Acquire BNB (Buy on Binance.com, Binance.us, or swap on a defi exchange like PancakeSwap)
  • Create a BNB wallet. (Or import if you already have one)
  • Transfer BNB to BEP2 wallet
  • Click “More”, then “Stake”
  • Choose a validator and delegate.

STAKING BASICS

  • Delegate or Redelegate: You’ll start receiving rewards the 2nd day after you have delegated.
  • Undelegate: Your BNB are locked for 7 days during the unbonding period before you receive your BNB. NOTE: You do NOT receive rewards during the unbonding period.
  • Minimum staking amount: 1 BNB
  • Awards aren’t automatically staked but deposited into your BNB wallet. Once you’ve earned 1 BNB, you can delegate that to compound your returns.

FEES

  • Delegate: 0.001 BNB
  • Redelegate: 0.003 BNB
  • Undelegate: 0.002 BNB

CHOOSING A VALIDATOR

Binance Smart Chain uses Proof of Staked Authorory (PoSA) consensus and relies on a system of 21 validators.

The validator candidates with the most BNB staked to them will be active validators and produce blocks.

  • Voting Power – Total delegated BNB (self stake + delegators’ stake).
  • Self Stake – How much BNB the validator has self-bonded. Minimum is 10,000 BNB.
  • Commission Rate – How much the validator keeps from the daily rewards before paying out to delegators.
  • Max Rate – The max commission rate that a validator can ever charge.
  • Max Change Rate – The max that the validator can change the commission rate per day.
  • APR – The annual rate of interest paid to delegators based on the income of the validator 2 days ago.
  • Bump Risk – Only the top 21 validators by Voting Power will be active. So the higher the voting power and the more favorable the commission rate, max rate, and change rate, the less likely that validator will fall to inactive status. If your validator falls out of the top 21, you will stop receiving rewards until that validator rises back into the top 21 OR you redelegate to another validator and wait another 2 days.

Ideally, you want self stake, commission, max, & change rates to be as low as possible, with Voting Power near the top to reduce bump risk.

REWARDS DISTRIBUTION

Rewards come from transaction fees that the validator collects and are split and paid out amongst its delegators every day at 00:00 UTC.

EXAMPLE:

  • Let’s assume that a validator has 10% Self Stake with a 10% Commission Rate and they collect 200 BNB as fees on a given day
  • Commission: 200 x 90% x 10% = 18 BNB
  • Validator gets: 200 x 10% + Commission. = 38 BNB
  • Delegators get: 200 x 90% – Commission = 162 BNB
  • If there are 300,000 BNB from delegators, each BNB staked would receive:
  • 162/300,000 = 0.00054 BNB
  • If you had 10 BNB staked, you would receive 0.0054 BNB that day (1.971 BNB annualized).
  • So with commission constant, the lower the voting power, the higher the APR, but also the higher the chance of that validator getting bumped.

RETURNS

APRs range from 16.96% – 22.56% as of writing.

Rewards/returns can fluctuate based on many factors. (See calculation example above)

BNB BULL CASE

  • BC/BSC Growing Ecosystem – As more useful dApps and use cases are built utilizing BC & BSC’s low costs and scalability, transactions will continue to pick up. You can track daily transactions using BSC Scan at https://bscscan.com/chart/tx
  • Trade Fee Discounts at Top Exchange – Binance is the most used and one of the most trusted crypto exchanges in the world offering a healthy selection of coins and tokens with some of the lowest trading fees available. Holding BNB actually reduces trading fees further so it would be foolish for anyone who uses the platform to not hold at least a bit.
  • Token Burn – Every quarter, Binance burns a portion of the BNB that it collects from trading fees, which reduces the supply, and as a result increases the value of remaining BNB. The plan is to continue burning BNB until the initial 200mil supply is cut in half to 100mil. CZ himself has stated that he wants to accelerate the burning process to get to 100mil total supply within the next 5-8 years.
  • Leadership – Do not just invest in great ideas, but more importantly, invest in great leaders. Despite criticisms of Binance, there is no question that CZ is one of the greatest minds, innovators, and leaders in the crypto space. The accomplishments of Binance, with his leadership, have pushed crypto progress and adoption forward in great strides. CZ is definitely someone I would not want to bet against.

TL;DR: Send BNB (BEP2) to your Binance Chain Chrome Extension Wallet or Trust Wallet, delegate your BNB to a validator, wait the 2 day holding period, then start earning BNB every day. :)

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