Cryptocurrency is one of the most diversified investments today. From trading, exchanging mining to several other profitable uses, there are numerous opportunities to generate money using crypto coins.
However, most people think that holding cryptocurrency for a long period of time devalues it or seems unreasonable when you can trade it for profits. It is no more the case because of a new yet amazingly crypto use introduced- Staking. Many people confuse staking with mining as both of these require holding the cryptocurrency for different aims.
Simply put, Crypto staking basically means to earn money from your stored cryptocurrency even when you don’t trade it. Staking your crypto coins for a longer period of time can help you gain small rewards that make a whopping sum of money at last. When you stake your crypto coins, they are involved in certain activities at a safe and secure Proof of Stake (POS) blockchain platform.
This work includes validating several transactions and in return receiving a small proportion of stake-coins reward. The reason why staking is getting increasingly popular is its less energy-consuming and variable POS mechanism and the results it produces. With that said, let’s explore more about how staking works in crypto?
Staking your cryptocurrency is not rocket science if you understand the basic principles of how it works. Today, a lot of crypto wallets where you store our cryptocurrency offer the feature of staking that makes work easier. However, you need to be a little alert and smart if you’re staking your crypto for the first time but once you get that hint -it’s easy peasy.
- The first step in staking includes locking your one or multiple crypto coins in a proof-of-stake blockchain for a definite period of time.
- Once you’ve locked them, it’s time to secure the POS blockchain to make sure that all the transactions go smooth and safe and the reward comes directly on you.
- Any crypto you stake, there will be a list of services that you would have to do without disrupting the system.
- On fulfilling the job with the right terms and conditions, the network ensures your validity and grants you some rewards for your work.
The whole process doesn’t go as smoothly as it sounds. A majority of times crypto traders fail to gain the trust of this network and lose the chances of earning profit. Sometimes they show malicious behaviors or make silly mistakes that don’t allow the system to transfer the validator nodes. The time for which you store your crypto is usually decided by the proof of stake platform or bitql.
In short, the system decides the necessary changes on your crypto coin and restricts you from retrieving your coins during the staking period. To put it simply, the more the number of blocks mined and verified by staking- the higher the profit/ reward you get in return.
However, there are some more conditions of staking set by the POS platform that you must follow in order to have safe and smooth staking.
- The blocks produced as a result of staking need special mining hardware that costs a few extra bucks to ensure the safety and security of staking.
- Due to the high transaction speeds of POS, you need to have an active wallet that can be operated 24/7.
- When staking, you’ll be given a certain fixed amount as decided. But, there’s a possibility that this small percentage can vary depending on the blocks validated.
This was a brief guide about crypto staking and how you can earn money from it. Currently, you are limited to stake only certain cryptocurrencies but if it keeps progressing in popularity then we’ll soon be staking bitcoin for more profits.