In the world of crypto, there are two ways to earn rewards: One is by selling your coins in the market when the price is high, and the other is by crypto staking. So, what is crypto staking? It is a relatively newer concept in the world of cryptocurrency, where you earn passive income from your investments without the need to sell it.
If you have no plans to sell your cryptocurrencies in the near future, crypto staking is a great way to put your investment to use. Moreover, if you want to understand the basics of crypto staking, this article is here to help you. The following article touches upon the basics of crypto staking and how you can earn rewards from it.
Understanding Crypto Staking
Crypto staking is a process where you lock your investment for a set period of time to support the operations of a blockchain network and, as a reward, earn more cryptocurrencies in return.
Crypto staking is similar to putting your investments in a high-yield savings account from which you earn passive income. In banks, you lock your money, and the bank lends this money to other lenders. As a reward for locking up the money with the bank, you earn a portion of the interest that the bank charges. Similarly, when you stack your crypto, you enable blockchain operations, and as a result, you earn a percentage of the yield.
Crypto is increasingly being accepted as a digital currency, but if you are not planning to trade it anytime soon, staking has a lot of potential to let you earn additional income.
How Does Staking Work?
Unlike mining, which relies on solving mathematical problems, staking is closely tied to proof of stake.
Proof of stake is a mechanism that verifies new blocks of data to be added to the blockchain. When participants, also known as stakers or validators, block a certain amount of crypto, they are less likely to work dishonestly because of the financial commitment, which serves as a deterrent against malicious activities. Validators are rewarded for correctly validating transactions and creating new blocks. The rewards are in the form of additional cryptocurrencies, which act as an incentive for their honesty.
What Cryptocurrencies Can You Stake?
Crypto staking is possible with the currencies that are linked to blockchain and use the proof of chain mechanism. Notably, the following are the most popular cryptocurrencies that are eligible for staking:
- Ethereum
- Cardano
- Solana
- Avalanche
- Polkadot
How Can You Make Money Through Crypto Staking?
To make money through crypto staking, you need to find a platform that will assist you in staking your currencies. Every platform will have its annual percentage yield for staking. Moreover, the rewards can also vary based on factors such as the amount staked, the duration of stake, and other blockchain protocols.
You will earn returns according to the promised schedule once you have committed to working with a particular platform. Rewards are in the form of additional cryptocurrencies you can hold as investments and trade for staking or cash.
Benefits of Crypto Staking:
The following are some of the pivotal benefits of crypto staking:
- You can earn passive income: If you don’t plan to sell your cryptocurrencies, staking can be a great way to earn income. This mechanism allows you to put your cryptocurrencies to use and, in addition, earn passive income from them.
- It is energy efficient: Unlike traditional mining, which requires a substantial amount of energy, staking is considered to be environmentally friendly and energy efficient.
- Helps enhance network security: Staking plays a crucial role in enhancing blockchain security. Logically, staking participants will have a vested interest in maintaining the integrity of the blockchain network and refrain from being involved in any malicious activities, as it can result in financial penalties.
Conclusion
Crypto staking represents a new shift in the world of cryptocurrencies that help you earn rewards and security. It is a great way for investors to earn high yields in the long term if they are not interested in short-term fluctuations in prices. However, like with any digital asset, dealing with crypto also requires a lot of caution. Therefore, it is best to take help from a reputable platform while dealing with cryptocurrencies.
