WHAT IS STAKING?
Staking is a process of holding funds in a cryptocurrency
wallet to support the security and
operations in a blockchain network. Staking Rewards enables passive income
opportunities with digital
assets. Cryptocurrency staking is
one of the easiest and most effective ways to earn additional income through blockchain and easily increase your portfolio. Staking has attracted
many investors to play it safe in the risky business of crypto
trading. For example, the way you
have an option for fixed deposits with your bank and when people hold money in
their bank account or reserve a particular amount with the bank for investment,
the user receives some amount of interest from the bank. Similarly, by staking
your cryptocurrency, you gain the ability to generate an extra income. Some
coins may require a bonding period like fixed deposits in the bank. The crypto
profits resulting from staking normally depends on the amount of time one holds
the cryptocurrency. The longer you stake, the higher are your gains.
The staking returns are usually an end product of
Proof of Stake (POS) Consensus
Algorithm where instead of needing the energy to create new blocks, it does it
with the staked coins.
Types of Staking:
Staking
is divided into two broad categories; PoS (Proof-of-Stake) and DPoS (Delegated
Proof of Stake). POS works by freezing the stakeholder’s coins for a particular
period to validate transactions done through the network whereas DPoS is a
delegate that is elected by stakeholders and assigned to become a validator or
block producer. In the event of sharp practices, (confirming a fraudulent
transaction) a penalty is being imposed.
BENEFITS:
Staking is continuously growing in ease and
popularity. One does not need any knowledge of Cryptocurrency
trading and of course, there is no
need to study complex charts for the user to make a profit.
·
The foremost
advantage of staking is the opportunity to generate income from holding crypto.
The value of the staked coin increases with the market valuation of the coin
going higher.
·
Staking provides
an opportunity for the investor to be an active participant in the favorite
blockchain project.
·
The user can
yield an extra benefit of reinvesting the “profits” to increase the staking
portfolio.
·
No Cryptocurrency mining equipment is required as there is no requirement of
the use of mining hardware.
How are staking rewards calculated?
The reward depends on the total staked
percentage, however, a different way of calculation of
staking rewards may be adopted by every blockchain network.
Some are solely adjusted on factors of each separate block, taking
into account many different factors. These can include:
·
The count of coins the validator is
staking
·
The duration from which validator
has been actively staking
·
The number of coins staked on the
network in total
·
The inflation rate
·
Other factors
·
Some may
distribute staking rewards determined at a fixed percentage.
Conclusion:
There is no doubt that staking offers you a
guaranteed and predictable source of earning more crypto
coins with time. It’s
worth keeping in mind, though, that staking isn’t entirely without risk.
Locking up funds in a smart contract is prone to bugs, so it’s always important
to maintain high security of your account and use high-quality wallets. It is
just a secure way to multiply your crypto assets.
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