Crypto investors hear the term staking a lot. The term is synonymous with passive income in crypto. People hold their cryptocurrency and get rewarded as it supports the overall network.
But what is staking crypto? Many of us are confused about the exact term. So we’re digging and reaching the depths of crypto concepts to find the exact meaning. Here’s what we found.
Crypto stalking is a way to strengthen the network by validating newly added blocks to the chain. This is done by holding crypto. You validate the block by locking up your crypto. If the added block is as described, you will be rewarded for staking your crypto and helping the network stay safe.
Staking takes advantage of the proof of stake (POS). That is staking up a part of your crypto to ensure the network’s security. This is different than proof of work (POW), which requires participants to mint the coin and work for it. POW rewarded a few participants and was extremely power intensive.
POS is cutting power consumption down –a major drawback of cryptocurrencies. Further innovations and methods will help reduce consumption to new lows.
Staking Saves from Frauds
Without staking; the crypto world would be full of fraud. Staking prevents that by incentivizing people to stick to the rules. These incentives include newly minted cryptocurrencies or certain percentages on the amount you’ve staked.
Staking isn’t without its risks, however. If you stake for a fraudulent block, it could lead to a penalty. You may lose some of your cryptocurrency, called slashing in crypto.
So if you play by the rules, you should be safe, as crypto staking can give returns of 10-15% or even more.
How to Stake Crypto?
You will find several ways to stake your crypto if you’re a technical person who knows how to validate new blocks. You will need to download the entire chain’s transaction history and stake your coins. You’ll be doing most of the legwork; well, your machine will be. And as a result, you will not be sharing rewards or giving out commissions.
If you just want to get rewarded without working, then you can ask others to stake on your behalf. Many networks allow you to provide tokens to others for staking. You will pay a certain commission when someone else stakes for you.
You can find exchanges and staking pools to help you stake crypto without taking in all the hassle.
A Staking Exchange
If you’re a newbie and aren’t sure what you have to do to stake your cryptocurrency, an exchange might be the safest option. There are staking exchanges like Binance, Kraken, and many more. Each one has a number of perks. Some may even allow you to use Fiat currency to buy and stake cryptocurrency.
There is no hassle on your end, as you’ll be holding your crypto and getting rewards. This is a good passive income source, but you must check if a specific exchange allows staking in your cryptocurrency.
Some exchanges don’t explicitly support staking but reward users for getting their services. This is similar to staking because you hold your cryptocurrency in the exchange and get a specific reward.
A Staking Pool
If you don’t want to stake your cryptocurrency through a staking exchange, you can try staking pools. In a staking pool, you and other users lend their coins to a person who validates on behalf of all of you.
You can find a number of websites with staking partners’ info to confirm if you’re staking your currency with the right person. It would be best if you went with established staking pools where you can trust the person staking for you.
Staking pools are an excellent way for newcomers to start their staking journey. Because established coins, like ETH, have a high paywall for people to begin staking.
You Trust the Cryptocurrency
If you own a specific cryptocurrency, you have to have trust in it. Your trust would mean you’re willing to hold the currency long-term.
Holding a specific cryptocurrency can lead to long-term benefits because the market is maturing, and the use cases are increasing per day. In addition to long-term benefits, holding and staking a cryptocurrency is your chance of making short-term profits from your crypto.
Other Options for Passive Income
If staking isn’t for you. Then you can invest in crypto-related projects. You can also buy stocks in a metaverse-related company. Buying LAND or NFTs in the metaverse and using these smartly for passive income is also an option.