Disclosure: I may earn affiliate revenue or commissions if you purchase products from links on my website. The prospect of compensation does not influence what I write about or how my posts are structured. The vast majority of articles on my website do not contain any affiliate links.
Extra disclosure: I was a volunteer contributor to Reddcoin. I was never compensated for my work, and this post was just meant to summarize my findings up to a certain point in time. I am no longer a contributor to Reddcoin, and I think the project is an abject failure (though not a “scam”). I would strongly advise against spending any of your time attempting to understand or extract a profit from this cryptocurrency.
Reddcoin is a unique name in the crypto-sphere. It’s been around for a long time, emerging as a Litecoin fork back in 2014. The project spent a lot of time in flux, was abandoned, and was ultimately labeled a shitcoin. Most of its price moves over the last few years have been completely detached from Bitcoin’s. When I started seriously researching cryptocurrencies in late 2020, I was drawn to the growing community of contributors involved with Reddcoin as well as the outsized staking rewards.
It’s a cryptocurrency with a promising future and a present-day ROI that will incentivize investors, speculators, and those who believe in the overarching mission of Project Redd.
Why I Like Staking Reddcoin
Reddcoin is Proof of Stake (officially, PoSV v2) which provides an inflationary model for supply, rewarding stakers while expending minimal computing power and energy. Comparing this to Algorand, which uses a Pure Proof of Stake (PPoS) protocol, Reddcoin experiences less theoretical inflation. With Algorand, every address automatically receives a “return” of something like 5% or 6% annually. That’s attractive… or is it? As the coin matures and everyone including those with dead wallets continue to receive those rewards, the steadily increasing supply of the coin will–in theory–depress prices.
Reddcoin is a very mature coin that takes some effort to stake. Current estimates show about 20% of the supply actively staking. PoSV v2 will boost staking rewards as if the whole supply was staking in order to reach 5% annual growth. This means that the average person staking today along with 20% of the network can expect to receive up to 25% ROI annually. The inflation isn’t as high as other coins because it requires more energy to stake. Further, if being used for its intended purpose–social tipping–there will be a little less hoarding and average coin age will be lower.
In PoS, incentives can increase linearly with coin age, which means that being “late to the party” has consequences. You’ll never reach the same ROI as early adopters (while holding the same amount of coins) and you’re incentivized to hoard your coins and never spend them. With Reddcoin, there is a weighting formula which means that the curve largely levels off after just 30 days, meaning that there aren’t major benefits to long-term staking commitments and that those newly staking can enjoy an excellent reward rate relatively quickly.
What You Must Consider When Staking
There are plenty of options for staking Reddcoin that are also applicable to staking in general. Some of them involve fixed or variable costs. Other considerations include safety, ease of setup, and ownership. To start this guide, I’ll outline these considerations.
Fixed / Capital Expense Costs
If a staking method involves buying equipment, that’s an example of a fixed cost. Whether you’re talking about the cost of your primary laptop, a server, or a Raspberry Pi, these costs shouldn’t be ignored.
Recurring Costs & Fees
Self-hosted or cloud-based staking will incur electricity costs and internet costs. It’s also likely that you’ll want to consider compute costs, storage costs, and network bandwidth fees, however small.
Staking in a pool may incur fees that eat away at your return.
Uptime & Continuity
Traditionally, staking depends on a user being connected to the blockchain which requires internet access and enough (though minimal) processing power. Though these things seem trivial and are even taken for granted in today’s world, you’ll start to think twice about powering off your laptop. You’ll become concerned when you have a local internet blip. Elongated service interruptions can eat into your expected return.
Safety & Security
Remember, if you don’t own your keys, you don’t really own your crypto. There are pros and cons to staking locally on your main computer, locally on a dedicated device, in the cloud, or through a staking service.
Options for Staking Reddcoin
Locally on Your Computer
This is where any beginner should start. Download the ReddWallet, set it up using the graphical interface, and start staking your coins.
Benefits: Easy graphical startup, compatible with basically any modern computer, safe, tons of support if you encounter an issue.
Drawbacks: Will become unwieldy over time as you must be connected to the internet and have your computer powered on for it to continually stake. Also, it’s inefficient to keep a powerful computer awake just to stake.
Using the Telegram Tip Bot
Reddcoin has a unique Telegram Tip Bot that generates staking rewards. In addition, it makes you eligible for some “faucet” features which will allow you to collect RDD when others share them in the chat. Many people in the community use or at least have tested the tip bot because much of the Reddcoin discussion occurs on Telegram. Setting up a wallet with the bot allows you to tip others using Telegram, a fundamental proof of concept for Redd’s intended purpose.
Here’s a full description of how to set the bot up and how it works. I encourage tipping the contributor who put together that guide–I think tips are more deserved by the pioneers, not by me.
Benefits of the Telegram Bot: 24/7 always-on staking, other useful features true to the purpose of Reddcoin
Drawbacks of the Telegram Bot: You don’t own the private keys, so there is a safety concern. I do not personally think it’s unsafe, but it’s a risk you must be comfortable with especially if you can’t verify that the bot you’re interacting with matches what’s in the source code.
Locally on a Raspberry Pi or Other Device with Low Power Draw
The Raspberry Pi is a modular low-power computing device that enjoys a lot of use. From hobbyists to IoT people to programmers, the use cases seem endless. The Raspberry Pi is a great choice for running PoS protocol because it provides just enough compute power while drawing very little electricity. After accounting for the initial expense of $50-100, the little unit essentially runs for free.
As you can imagine, there are tons of other cool use cases, so even if you give up staking one day or decide to move your operation to the cloud or a different managed provider, it’s highly likely you’ll be able to find another use for your Pi.
Benefits: Extremely low recurring cost, safe since you own your private keys, plenty of literature and guides around how to use it.
Drawbacks: Non-trivial upfront cost, exposure to your home’s power/internet reliability, physical security issues in your home, requires some technical background to set up, troubleshoot, and access.
Locally on a StakeBox
Buying a Reddcoin StakeBox is an option for those who aren’t as technically savvy. Essentially, you’re paying tens of dollars more for a fully-loaded Raspberry Pi. There are a few guides on the StakeBox site, but it’s unclear whether there is any ongoing support offering from the StakeBox team. They offer a pretty wide array of products including for some quasi-dead cryptos–I’d love to see a more active blog by the StakeBox team. Once you’re all set up, your rewards will be the same and the risk profile is more-or-less the same as if you set everything up yourself on a Raspberry Pi. See the above entry for more information.
In the Cloud
First of all, it’s worth mentioning that Amazon Web Services apparently forbids Proof of Work (PoW) mining on their platform. Your guess is as good as mine regarding why this is or why there are so many mixed messages on the internet regarding it. My best guess is that allowing PoW mining provides more incentive for people to steal AWS keys and maliciously mine crypto on the most-powerful hosts Amazon offers.
Anyway, AWS has no official policy on this and I don’t think PoS would fall under the same guidance since it uses comparatively little power and CPU cycles. Nobody is going to hijack your server to stake.
Benefits of staking in the cloud: No upfront cost, extremely high reliability/uptime, highly-customizable security features.
Drawbacks of staking in the cloud: Consistent recurring usage costs, higher technical knowledge requirement
There are very few cases where running PoS in the cloud makes sense. Even on the most inexpensive host, a t3a.nano, which I doubt can even run Reddcoin’s staking protocol, you’re still paying a few dollars every month in technology costs. This is likely to be an order of magnitude more expensive than a local Raspberry Pi. Further, to get roughly the same specs as a Raspberry Pi, it’s going to cost you roughly $10-20 per month.
This only becomes remotely worth it as you stake incredibly high amounts of coins (say, $30,000 USD worth). I know that some people like to use calculators but you can’t calculate how much you value a safe cloud-based setup compared to something running in your own home. Anything under $10,000 and just $100 per year in cloud costs will shave a full percentage point off your gains.
Using a 3rd-Party Staking Pool
As long as there’s the developer-supported Telegram bot, this option isn’t particularly attractive, but it’s worth mentioning. You can hold your coins at a site like BTCPOP and automatically earn staking rewards. BTCPOP takes a 2% fee and fees of this magnitude are going to be pretty commonplace.
Benefits: Very little upfront work for the user, it’s convenient to stake the coins in a location from which they can be exchanged, in some cases the “average weight” may be very high thus resulting in extra rewards that outpace the fees.
Drawbacks: Fees are high, perpetual scam risk, ever-present withdrawal difficulties, pooling defeats the purpose of decentralization.
When I first became involved with Reddcoin, the staking options seemed obvious. As time has gone on and I’ve performed further analysis, I’ve discovered several workable options. Still, my recommendation is:
1. Install Reddcoin core on your main computer and get a feel for how it works, stake until you get your first reward and are comfortable using the software.
2. Install Reddcoin core on a dedicated computer with a minimal power cost to maximize uptime and ROI.
3. If your holdings become significant and you have the technical expertise, move to a cloud-based computing provider, where you have better security and uptime though at a higher recurring cost.
Thanks for reading! Let me know if you have any questions about staking or Reddcoin in general.