Cryptocurrency Staking – How Does it Work?

Cryptocurrency has a lot of ways to earn and produce millions of dollars. One of them is what they call “staking”. Maybe you’ll often hear about it, but it’s just an option other than mining that is less hassle and more convenient, basically a passive income.

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If you’re deciding whether to use your crypto coin holdings for staking, understanding how the process works can be beneficial, which may involve some risks to the crypto coin you want to stake. 

Especially in a decentralized blockchain network, you need to understand how a proof-of-stake network works in securing and freeing you from centralized control. These are the important things you need to consider in staking.

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Cryptocurrency Staking
Credit: BlockNewsAfrica

#1. Understanding What Staking Means

In cryptocurrency, staking is carrying out your crypto assets to aid and confirm transactions on a blockchain network. Before, there was a traditional proof-of-work consensus model that some networks used, such as Ethereum 1.0. 

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Not until there was another alternative way, proof-of-stake, in other words, staking. This is a simpler way of earning rewards for holding certain cryptocurrencies, and it generates passive income that can be a better way of using your crypto assets. 

Also, staking maintains the process and requires the token holder to set up a validator node, which the other investors have extraordinary skills in managing their validator node is well-liked.

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#2. Know What Crypto Coin Allows Staking

You need to know that not all cryptocurrencies are eligible for staking, such as Bitcoin, which uses a different method than the traditional proof-of-work consensus model in validating transactions.

Here are some examples of cryptocurrency networks that are eligible for staking. 

● ETH2 (ETHEREUM 2.0)

● SOLANA

● TEZOS 

● COSMOS

● LUCKY BLOCK

● UNISWAP BLOCK

● DEFI COIN

● POLKADOT

● ALGORAND

● POLYGON

● THE GRAPH

● CHAINLINK

● ATMOS

● CARDANO

Be familiarised and understand each function and which is the best cryptocurrency network to earn money at the lowest interest.

Crypto platforms and exchanges differ in offering available coins to stake. To guide you better in choosing a crypto platform that offers various crypto coins to invest in, you can find valuable information from an article similar to the review of Bitcoin Up. Make sure to read at least a dozen of those before choosing where to start trading.

#3. Learn How to Stake Crypto Coin

This may seem a lot to digest in the process, but patience in understanding is the best way to succeed in learning how to stake in cryptocurrency. As previously stated, there are only three ways to learn how to stake in cryptocurrency. 

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● First, you must buy a crypto coin that is eligible for staking. You can choose what crypto coin you want to buy that is qualified for staking since some cryptocurrencies are.

● Second, you need to transfer your coin to a crypto wallet. Once you have purchased it, the exchange will be available. Please take note that other exchanges may have their selected cryptocurrency staking programs. 

You can automatically stake crypto on the exchange; otherwise, you’ll need to transfer your coin to a crypto wallet. The best-known crypto wallets are Coinbase, Electrum, Mycelium, Ledger Nano X, Exodus, and Crypto.com. 

● Lastly, participate in a stake pool. To have a good chance of gaining staking rewards, most crypto investors combine their funds in a staking pool. You’ll need to learn more about the availability and things you’ll need to consider in the staking pools for the crypto coin you have. 

Once you’ve participated in a state pool, through your wallet, stake your crypto, and you’ll start gaining rewards.

#4. Staking’s Advantages and Risks 

 In the cryptocurrency you’ve invested, staking supports the blockchain wherein these coins depend on investors’ staking to authenticate transactions and maintain everything running flawlessly. 

To successfully do that, you need to take note of the details that can benefit from earning additional crypto in staking. Also, be aware of every potential risk you might encounter when staking crypto, specifically when the price drops. Below are some helpful tips for staking crypto. 

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Advantages of Crypto Staking:

● It is the most straightforward way to monetize your idle cryptocurrency holdings and generate passive income.

● Staking is far less harmful to the environment than mining.

● You’ll earn a higher reward percentage than other types of investments.

● Staking helps secure the blockchain by making you a node that authenticates transaction data.

Risks of Crypto Staking:

● If you’d like to unstake your cryptocurrency, you may have to wait six days or more.

● Cryptocurrency prices are volatile and can fall precipitously. If your staked asset value falls dramatically, the loss may exceed any interest you earn in staking crypto.

● Staking may necessitate the temporary storage of your coins. During that period, you cannot sell your staked assets.

Key Takeaway

If you are a type of investor interested in generating yields on your long-term investments and don’t want to get bothered by the market swings or short-term price fluctuations, staking cryptocurrencies is a good option for you. 

You can learn more about how crypto staking works below

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