How Much Can You Make Baking Tezos in 2020?
Make money while you sleep.
Make money while on vacation.
Make money while walking the dog.
Most people dream of a life where they can do these things.
While there are a lot of ways to achieve the holy grail of “passive income”, cryptocurrency staking has emerged as one of the hottest ways to do so thanks to its usually hands-off approach to earning residual income (e.g. not having to collect rent from tenants!).
Of the various staking opportunities, Tezos (XTZ) is one of the leaders - if not the leader - of the pack. Called baking in the Tezos community, Tezos staking (baking) promises solid returns and investment in a project with high potential.
But how much can you make baking Tezos? Let’s take a look.
What is Tezos Baking? (Quick Overview)
(If you already know what Tezos baking is, feel free to skip to the next section).
In a nutshell, Tezos baking is the act of validating Tezos network transactions. This is usually called mining for Proof of Work blockchains like Bitcoin and validating for Proof of Stake blockchains like EOS.
For their efforts in validating transactions and securing the network, bakers earn tez (XTZ tokens).
How Much Can You Make Baking Tezos?
As for how much you can make baking XTZ, the annual return varies but is at least ~5.51%. However, this assumes that 100% of XTZ holders are baking (very unlikely), so the annual return is usually higher. The less people that bake, the higher the rewards, and vice versa.
If you’d like a better estimate of your personal, potential baking returns, check this spreadsheet created by Tezzigator, a Tezos baking service. (To edit the spreadsheet, make your own copy by clicking File > Make a copy).
Tezos Roll Size
In order to start baking, you need at least one “roll” of Tezos.
Originally, a roll was equal to 10,000 XTZ, but the Tezos community voted to lower this number to 8,000 XTZ. This makes baking more accessible and the Tezos network more decentralized.
Tezos Baking vs. Delegating
Though Tezos baking might seem like a great opportunity, you should be warned. Unlike other staking opportunities, it isn’t super easy and requires some technical knowledge.
You need to run a Tezos node, baker, and endorser client. Not to mention that you need good Internet, solid server uptime, and can get punished (lose XTZ) for doing a bad job.
If that flew over your head and/or sounds like a lot of work, don’t worry. You can still earn Tezos passive income thanks to delegating, which is when you get someone else to bake for you. The baker you choose (your “delegate”) takes a fee for providing this service.
Don’t worry; delegating doesn’t mean you lose control over your XTZ. It’s comparable to “voting” for someone using your XTZ and doesn’t require sending XTZ or anything like that.
Also, bakers are incentivized to do a good job because the more that users delegate their XTZ to a baker, the greater the chance the baker has to validate transactions and earn XTZ rewards.
In addition, rewards from baking and delegating aren’t vastly different (less than a percentage point according to StakingRewards.com), but delegating is vastly easier. So it’s not a bad option if you want Tezos rewards without the headache of being a baker.
If you’re excited by the Tezos baking or delegating opportunity and want to buy some XTZ to get started, here’s how you can do that.
If you don’t have crypto, you can buy Tezos with government currencies like the US dollar or euro on centralized exchanges like Coinbase and Kraken.
On the other hand, if you want to sell Tezos rewards for income or to trade for other crypto assets, you can follow the same instructions as above: Exodus for crypto to crypto, and Coinbase or Kraken for crypto to government money.
Tezos Baking Taxes
Wondering how Tezos baking might affect your tax situation? Our cryptocurrency taxes guide for people in the US might help.
Disclaimer: Exodus does not provide tax, accounting, or legal advice. The information in the cryptocurrency taxes article linked above is for informational purposes only and should not be used as tax, accounting, or legal advice. Consult with tax, accounting, and legal advisors before making any decisions regarding taxes.
Tezos Baking Stats
For Tezos baking and general network statistics, check TzStats.
As with the rest of crypto, Tezos moves fast! To stay up to date on the latest developments, our Tezos page regularly posts the latest Tezos stories near the bottom of the page.
Conclusion: Is Tezos Baking Worth It?
So while you can make money baking Tezos, it’s better if you’re more technical. If you’re not, you might actually lose XTZ for doing a bad job of baking.
Delegating is an easier option if you’d like to earn Tezos rewards without having to bake. Exodus is an example of a service that lets you delegate in just a few simple steps.
Information provided is for informational purposes only and should not be considered financial advice. Investing in crypto assets is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Past performance is not indicative of future results.