Are you a cryptocurrency investor? Then staking is an excellent concept you will often come across. It is the way various cryptos verify their transactions. It lets participants earn rewards on all their holdings. Staking crypto is a process involving committing your cryptocurrencies for supporting a network of blockchain and confirming transactions. Staking is available with cryptos that make use of the proof-of-stake model for processing payments. It is a very energy-efficient alternative to the original model of proof-of-work. The latter needs mining devices that make use of computing power for solving mathematical equations. It can be an outstanding way of using your cryptocurrency for generating passive income mainly because few cryptos offer high rates of interest to stake.
Before you begin, it is vital to completely understand how cryptocurrency staking works. Apart from this, you can check this interesting article on Central Banks VS Bitcoin.
How does cryptocurrency staking work?
- Participants first pledge their crypto coins to the protocol of cryptocurrency.
- The protocol selects validators from such participants for confirming transaction blocks.
- The more coin you will pledge there will be a high chance that you get selected as a validator.
- To stake your cryptocurrency, you require owning one using the model of proof-of-stake.
- You can then select the amount you wish to stake.
- It can be done through various well-known crypto exchanges.
- When you start to stake, your cryptos will be in your possession.
- You are putting your staked coins to work and later if you wish to trade your coins you can unstake them.
- You must remember that staking is never an option with every crypto and is only available with those using model of proof-of-stake.
How can you stake your cryptocurrency?
Buy crypto using proof-of-stake:
- Select from the major cryptos that validate all transactions with POS such as Ethereum, Cardano, Solana, Polkadot, and so on.
- Start to learn more regarding any cryptocurrencies that attract you with proof-of-stake such as how they work, staking rewards, the process of staking, etc.
- You can get hold of the cryptocurrency you wish to stake and buy it on reliable exchanges and apps.
Transfer your cryptocurrency to any blockchain wallet:
- After buying your cryptocurrency, it will be there in the crypto exchange where you bought it.
- Few exchanges offer their crypto staking programs with chosen cryptos.
- In such a case, you can directly stake cryptocurrency on the crypto exchange.
- Or else you have to move all funds to your blockchain wallet called a cryptocurrency wallet.
- It is the perfect way of storing your crypto safely.
- You can quickly download any software wallet for free or you can checkout hardware wallets too.
- After having a wallet, select the option of depositing cryptocurrency and then choose the crypto type that you are depositing.
- It will be generating an address for your wallet.
- In your exchange account select the option of withdrawing your cryptocurrency.
- For transferring your cryptocurrency from the exchange account to your crypto wallet, you need to copy-paste the wallet address.
Join any staking pool:
- Depending on the crypto, staking will work differently. However, most people make use of staking pools.
- Cryptocurrency traders combine all their funds in such staking pools to get a better opportunity to earn staking rewards.
- You must research the staking pools that are available for your cryptocurrency. You must check out the reliability if they offer reasonable fees and also the size of the pool.
- Once you find the best pool start staking your cryptocurrency to it via your cryptocurrency wallet.
- Do this and start to earn rewards.
Benefits of cryptocurrency staking
- The percentage of reward is mainly higher than other investment forms. You can make 10-20 % returns annually.
- Staking crypto is the easiest way of deploying your idle cryptocurrency holdings and establishing a steady income.
- It will contribute to blockchain security as you will become a node that will validate transaction data.
- Compared to mining staking is very eco-friendly.
If you are having cryptocurrency, you can start to stake it. Also, if you do not have any plan of trading it soon, then you must stake it. It will not need any such work on your part and you can begin to earn more cryptocurrency.
But if you are not having any cryptocurrency to stake yet, consider the returns you will be making and research cryptocurrencies with staking. Many will offer it, but ensure to evaluate if each crypto is a great investment. It will make sense to buy a cryptocurrency for staking if you too believe that it is a great investment in the long term.
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