What is Staking In Crypto

Staking cryptocurrency is one of the best ways to get passive income from your investments. But what is crypto staking? How do you do it, and what are the risks of doing so?

What Is Crypto Staking?

Crypto Staking is a method usually chosen by people who will HODL, they earn income from there by locking the coins that will be held for a long time to the platform. Staking is generally available for proof-of-stake (PoS) cryptocurrencies. 

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Like a fixed deposit at a banks, any crypto coins you stake won’t be accessible for a time. However, some cryptocurrency exchanges may allow you to unstake your coins early. While banks use your deposited money for lending, coins collected in a staking pool are used to validate blockchain transactions. 

How does it Work

When you stake crypto, your coins work to validate blockchain transactions. The process works like this:

  1. Staking participants pledge coins for staking.
  2. The cryptocurrency protocol chooses validators to confirm transaction blocks. Participants with more coins are more likely to become validators.
  3. Once a block is validated, it’s added to the blockchain, and new coins are minted.
  4. The newly minted coins are distributed to the validators as staking rewards.

Which Cryptocurrencies Can We Stake ?

You can stake any coin that works with the Proof of staking mechanism.

  • Ethereum (ETH)
  • EOS
  • Tezos (XTZ)
  • Cardano (ADA)
  • Cosmos (ATOM)
  • Polkadot (DOT)

Most of these coins have some conditions if you want to be validator . For example Ethereum requires at least 32 ETH . But don’t worry, many crypto exchanges allow you to stake for free.

How Do You Stake Cryptocurrency?

Staking cryptocurrency is essentially locking your coins into a pool. Let’s talk about how to proceed.

1. Choose Where To Stake

Choose a crypto exchange you like.

Some prominent crypto exchanges that offer staking are:

  • BinanceYou can stake over 90 currencies on Binance, ranging from ADA to MATIC.
  • CoinbaseStaking on Coinbase allows you to earn daily or weekly payouts on select cryptocurrencies like ETH and DAI.
  • KrakenStaking coins on Kraken comes with weekly rewards like extra coins. Additionally, Kraken lets you unstake anytime.
  • Crypto.comStaking Cronos (CRO) on Crypto.com makes you eligible for benefits like higher interest and cashbacks on your Crypto.com Visa card.

2. Buy A Proof-Of-Stake Coin

The next step is to buy your crypto coin. Make sure you buy coins that you can stake on the exchange, as not all cryptocurrencies can be staked. While staking limits are generally much lower on exchanges, buying more coins gives you more rewards.

3. Stake Your Coins

Choose staking period and lock your coin on platform.

4. Receive Your Earnings

This is the best part , now all you have to do is wait.

Benefits Of Staking Cryptocurrency

  1. Get Passive Income And Boost Profits
  2. Support The Blockchain
  3. Save Money On Equipment

What Are The Risks

  1. Your Coins Become Illiquid : Because your coins will be locked, you will not be able to do anything in case of a market crash
  2. The Coin’s Price May Drop : Cryptocurrencies are volatile. If your staked coins drop in value, you can’t sell them quickly and may lose a lot of money. This is an especially likely risk for less popular coins that offer considerably large staking rewards.
  3. Your Coins Could Get Hacked : Cyberattacks may happen if your staking pool operator doesn’t secure it well. If your pool is attacked, you may lose your valuable investments.

I hope this article helped you get some ideas. Do not forget everything have risk , if you do not loose money manage your risk.

About Hama Amefiz

Amefiz is a professional blockchain, cryptocurrency and tech journalist, regular contributor to newsbsc.com who is writing analysis about the latest developments in the cryptocurrency and blockchain space.

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