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.

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 our staked Solana, Polkadot, Cardano, and Polygon 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.

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.

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.

No, we never lend or send crypto assets to any third party. We exclusively utilize non-custodial staking, which means all staking is done directly from cold storage (offline) at our custodian.

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.

Staking rewards are continuously added to our staked ETPs, increasing the coin entitlement, which means the amount of crypto assets per ETP grows over time. This results in additional returns from staking being reflected in the daily price and Net Asset Value (NAV) of the product.

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 our staked Solana, Polkadot, Cardano, and Polygon 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.

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.