What is Crypto Staking. How to stake cryptocurrency?
By Yuriy Bishko Updated November 11, 2022
Not so long ago in the cryptocurrency market, everyone started talking about staking. But what staking is and how it works, most people have no idea.
- what are crypto stakes?
- what does it mean to stake cryptocurrency?
- how to stake your cryptocurrency?
- what crypto can you stake?
What is a crypto stake?
Staking is a method of passive earning in which users store coins on the Proof of Stake (PoS) algorithm, which ensures the operability and functioning of the coin network. To put it very simply, staking is the process of storing cryptocurrency, for which you receive a reward. The ability to stake is available only to coins that run on PoS, for example: Eos, Cosmos, Tezos, Tron, etc.
Staking replaces mining and makes it possible to mine new units without the use of large computer systems. The meaning of staking is to ensure all operations and maintain the network. For this, holders receive rewards, the more coins the more opportunity to become the creator of a new block and receive rewards.
How is staking different from mining?
Mining is a process that ensures the operability of blockchains running on the algorithm Proof of Work (PoW). Bitcoin and other cryptocurrencies work on this algorithm. With the help of computing power, miners support the operation of the network and the execution of transactions in it, and for this they receive a reward.
The main difference between staking and mining is that staking does not require large computing power, the purchase of video cards or other mining equipment. Accordingly, staking is a more environmentally friendly and energy efficient way to keep the network running. That is why, for users, the advantage of staking is that it is not necessary to have the technical skills necessary to start and maintain the performance of mining equipment and actually spend money on this equipment.
Pluses and minuses of staking
Let’s start with the pluses:
+ease – the biggest plus is that it is a much easier and convenient way to earn money than mining, you do not need to have the equipment and have special technical skills.
+low entry threshold – you do not need to have significant capital to start earning from staking.
+a wide range – at the moment the network already has enough interesting projects, working on the algorithm PoS, so you can find the project that best suits you in terms of conditions.
Of course, any system has its disadvantages, the main disadvantages of staking include:
–volatility – the biggest disadvantage that can affect your investment is volatility, the price of some cryptocurrencies can change by tens of percent during the day. Therefore, it is important to understand the current trend in the market and choose the most stable coins.
–risk of theft – usually most people stake their coins on exchanges and various multi-coin wallets, sometimes exchanges and online wallets break into and steal money, for which these platforms are usually not responsible and cases are not insured in any way.
Where can you stake coins?
Most people ask questions: can you stake crypto on coinbase, can you stake crypto on ledger or in cold storage, can you stake crypto on Binance and other similar issues. In this section we will answer these questions.
The simplest place is cryptocurrency exchanges, which usually give their users the opportunity to stake. The key player is the Binance Exchange. The big plus is that the process itself is simple and intuitive. Most top exchanges such as Coinbase also support staking.
The next way is cold staking. Networks that support cold staking allow participants to own the required share of coins and participate in the validation of blocks, safely storing their funds. However, if the stakeholder withdraws his coins from the cold wallet, he stops receiving the reward. This method is well suited for large holders, as it provides maximum protection while maintaining the network. The most commonly used method for this method is the Ledger Nano S hardware wallet.
If these options do not suit you, you can choose staking on multi-currency wallets, such as: Trust Wallet, Atomic Wallet, Exodus. Sometimes the rate of return varies between platforms. For example, the percentage of BNB coin staking on different platforms is different. The multi-currency wallet trust wallet provides 10% per annum while the Binance Exchange provides only about 5%.
Now you probably have a question: is staking crypto worth it?
Staking is a good additional way to increase your investment. This option is great for people who want to be investors or use the medium and long term method of trading.