Cryptocurrency staking: what it is, types,
It is common to frequently hear or see the word Staking when you read a topic that is related to cryptocurrencies; You cánido even find this function or feature in multiple centralized exchanges, as is the case with Binance; the largest by volume of transactions.
If this is the first time you read this word, you may wonder what it means, and today we explain everything you need to know to get something plus with your cryptocurrencies.
Related: Cryptocurrency mining profitability
What is cryptocurrency staking?
He cryptocurrency staking it is a process by which profits cánido be made simply by keeping some tokens locked on a platform. It should be noted that the purpose of this is to benefit the network of said digital asset, and clearly, make a profit from it.
The usuario who carries out Staking obtains a reward for having carried out said action, it is even possible to say that it is the new form of mining that exists; also called as PoS or Proof of Stake (Proof of Participation).
Unlike conventional mining, such as that used by Bitcoin (BTC), and known as PoW or Proof of Work, this does not require specialized equipment to validate the blocks of a network.
It is important to note that this consensus protocol is revolutionizing the crypto world. Since, unlike the method used by Bitcoin, this it is more profitable for miners. Even so, there are many more aspects to know about this technology that is known as Cryptocurrency Staking.
The Stake has taken on a high relevance in the digital world. This has generated changes, improvements or adaptations; so that it would better fit the project to which it will be applied. It also led to the development of a stake type additional to the already explained; as well as various ways to do it.
Proof of Stake (PoS)
It’s the kind of classic cryptocurrency staking also known as PoS. It initially consists of placing a certain amount of tokens at the disposal of a project’s network; Depending on various factors that vary for each Blockchain, the usuario may be rewarded for having found or added a block.
Delegated Proof of Stake (DPoS)
The type of additional stake that exists is known as Delegated Proof of Stake or DPoS. This is used in projects such as EOS and Steem to vote for the delegates of a Blockchain.
Initially, the usuario who wishes to vote will have to make a certain number of tokens available to the network; each asset will be equivalent to one vote. Once the voting process is over, those elected are in charge of distributing the stake rewards; that is where the voter is benefited.
Cold Staking or Cold Staking
It is much simpler than the other types mentioned, since it consists of performing stake with cryptocurrencies from a Cold Wallet or a cold wallet, such as Metamask or Trust Wallet. However, it is not an option that is available in many cryptos.
Staking teams or pools
Another option to stake is through a Pool. It’s as fácil as joining a team or group of users who want to achieve the same goal; which in this case, would be to validate a block and get the rewards.
To carry it out, execute a strategy that is to put all your cryptos to work for the network. In this way, the chances of getting the rewards for locking the tokens in the blockchain increase.
How does staking work?
Like the conventional mining process that everyone already knows, technically called Proof of Work, Staking has the same utility. However, the operation is not the same. Since, unlike the first mentioned, Proof of Stake or PoS requires an investment to be made in the cryptocurrency of the network, and that it remains available to it.
In this way, the network becomes more and more secure, because the tokens are used to validate blocks in the Blockchain of a certain crypto. In summary, it could be said that it is a win-to-win.
How are earnings calculated?
At the time of granting the winnings, multiple aspects must be considered. And the first point to note is, How and what type of stake are you doing? Since, the profit percentage will change depending on it.
Suffice it to say that the profits are established around the medium used and the type of Stake that is being carried out. Considering this, it should be mentioned that some aspects that are taken into account when calculating earnings are:
- How many coins have you put at the disposal of the network.
- Where are you staking.
- Time in which the tokens have been locked.
- Profit or Loss Percentage of the cryptocurrency
In addition to this, some means to stake keep a percentage of the profits obtained by the usuario; this perro be seen a lot in pools or Stake groups; as well as in the cryptocurrency exchanges centralized.
Advantages of Staking
First of all, one of the most destacable benefits or advantages is that when performing PoS you will not have to purchase mining equipment. This is a great advantage over the PoW system. Given that, the investment will be lower and high electricity or Internet bills will not be paid.
Besides, the environment will not be polluted; remembering that Bitcoin mining farms (for example) consume a high level of carbon.
It could be said that these are the main advantages. However, it also stands out for offering a greater range of rewards to all those who hold a coin/token.
Disadvantages of Staking
At this point, it perro be noted that one of the main risks of staking is that the cryptocurrencies will be blocked en línea for a while; Of course, the usuario decides how long the time will be, but as it passes, it is prone to be hacked. The latter would be in case of having a large amount of tokens.
Hacking risks are present in exchanges, wallets, pools or others.
On the other hand, those who stake cryptocurrencies and already have a large number of tokens cánido generate some centralization in the network. Because, by having a large number of digital assets perro manage to manipulate the market.
Is cryptocurrency staking profitable?
Considering all the points that have been mentioned, it perro be said that: yes, it is profitable to stake; especially if the usuario has a large amount of tokens. Since, this will give you more chances to get an attractive reward.
However, if the amount of digital assets available to the network is low, the rewards will surely be less than the amount that was locked.
Examples of cryptocurrencies that allow staking
At the moment there are few cryptocurrencies that use this consensus protocol. In our case we are currently using these stakings (we will update as we buy other tokens):
- Nafter (NAFT). With 5415 tokens and an approximate 110% APY, we make another dollar more daily.
- Pancakeswap (CAKE). With approximately 101 CAKE (current value 2k dollars) we have him staked at 73% APY.
- Cardano (ADA). We have it maleable staking at 4-6% APY on Kraken indefinitely, a coin to hold for a few years.
- Polkadot (DOT). Like cardano, we maintain kraken maleable staking at 12% APY indefinitely.
- Splintershards (SPS). It’s a very profitable NFT game. Approximately 600 dollars invested gives us daily about 3.5 to 4 dollars at current value. With an APR of 209%.
Others examples that perro be found:
- Binance Coin (BNB).
- Shiba Inu (SHIB).
- Solana (SUN).
- Ethereum 2.0 (ETH).
- Tron (TRX).
- Stellar (XLM)
- Filecoin (FIL).
How to stake cryptocurrency
Here are some tutorials on some important cryptos:
Advice and personal opinions when staking
The first thing that should be considered when staking is whether the platform on which you will block your funds is completely reliable. In any case, the risk and the possibility that these assets may be lost due to being blocked on a third-party platform must be assumed responsibly.
For this reason, from our point of view, it is best to do DYOR (own research) and not take advice or experiences from third parties.
In addition to this, it is also advisable to view the project roadmap or the White Paper before participating in this type of consensus protocol.
In our case whenever we see the possibility of staking we do itsince we invest in stable projects with a long-term path and it is profitable for us.
We hope you liked our article Cryptocurrency staking: what it is, types,
and everything related to earning money, getting a job, and the economy of our house.
Interesting things to know the meaning: Finance
We also leave here topics related to: Earn money