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The cryptocurrency sphere is one of the best ways to earn passive income for financial gain and enhancement. A vast number of applications and services capitalize on the opportunity of the cryptocurrency ecosystem. Crypto staking is also an important process or terminology related to the cryptocurrency ecosystem.
It is one of the most effective ways to earn passive income from cryptocurrency projects. Cryptocurrency enthusiasts or investors can refrain from actively trading or mining in the crypto sphere to make money through staking. This article will show you what cryptocurrency staking is and the important things related to it. equip yourselves with the cryptocurrency terminologies and their applications to earn some digital assets to enhance your cryptocurrency portfolio.
What is Crypto staking?
People in our world have probably heard about cryptocurrency mining, and some still believe that it is the only way to earn cryptocurrencies. Still, there are so many ways to earn cryptocurrencies than mining. Crypto staking is another method to earn cryptocurrencies. Crypto staking is the process of getting or earning interest on the coins that are held in a staking wallet or smart contracts. Those who are eligible to get the interest from the crypto platform will be paid out in the form of cryptocurrencies. The platforms generally use their native tokens to pay out the interest.
It is just a passive way to earn some extra coins, and most of the cryptocurrencies are providing this service as part of their project. The staking service is designed to support blockchains that use proof-of-stake consensus protocol. Simply, it is a way to earn rewards by dropping it into a staking contract and helping others to validate the transactions on a blockchain which usually uses a proof-of-stake consensus protocol.
Crypto Staking – Working method
The basic working principle underlying the staking process is lending. When you stake a cryptocurrency in your possession, you are technically lending that particular coin to the network. After lending the coins in the network, lenders, or stakers will get a percentage of the network’s new coins. The coins users are lending into the network will be stored in a staking wallet. Which is an exclusively designed software program to accelerate the staking process. The coins you staked in the network will not be available for trading during the staking period. It will be held in the staking wallet until the culmination of the respective staking period.
All the users or lenders will get the rewards once the staking period ends. The staking wallet will automatically return your coins along with the rewards you attained through staking to your wallet. The percentage of rewards and the amount you have earned through staking will depend on a factor. The collective staking power of the network will be the major factor in the allocation of rewards to the stakers. The collective staking power will depend upon the number of coins held in the staking wallet during the staking period.
Cryptos that You Can Stake for Good Profit
Users can’t stake all the available cryptocurrencies because all the cryptos are not using the proof-of-stake mechanism, only the coins using this method can be staked. Here are some of the profitable cryptocurrencies that can be staked in the network:
- Solana
- Ethereum
- Cardano
- Luna
- Avalanche
Two Basic Types of Crypto Staking
We can find different types of crypto staking in the crypto market, but in that segment, two of them have high significance. Proof-of-Stake(PoS) and Delegated-Proof-of-Stake(DPoS) are the two basic types of crypto staking.
1. Proof-of-Stake(PoS)
This is a wider concept, unlike the other staking process, it doesn’t require a high-energy-consuming mining process. Here the staked coins are kept in a wallet and the stakers will get the reward in the form of interest for the contributed coins. The amount of the coins received as the reward will depend upon the amount of coins we stake at the network. This method is one of the most popular in the cryptocurrency staking process. Well-known blockchains like Ethereum are using this method to validate the network.
2. Delegated-Proof-of-Stake(DPoS)
It is an entirely different concept from the Proof-of-Stake method. In this method, the members of the network have the provision to vote on delegates in the management process of the network. The voting power distributed among the users in the network is based on the number of coins staked by the individual in the network. An individual with the highest number of staked coins will get more voting power to select the delegates. These selected delegates are the responsible individuals for validating the transactions on the network and have the authority to determine the transaction fees and rewards.
Possible Benefits of Crypto Staking
Crypto staking is a process that has good advantages that differ from the rest.
- Earning passive income via the interest of your investment.
- Crypto Staking is a long-term investment, so price fluctuations in the market will not be an issue.
- Less complicated process than the other crypto transactions.
- Users can choose the staking pool based on the commission fee
- Users do not want to worry about trading and other market variations, stakers just need to invest and wait for their rewards to come.
- Staking the assets in the network can increase the asset’s stability and security.
- Lessens the environmental concerns that arise from the traditional mining process.
The Bottom Line
Crypto staking will be a luxury optional alternative for those who don’t like the complexities of other cryptocurrency services and applications. By using this method users can earn some passive income that could ultimately enhance their cryptocurrency profile. Cryptocurrency investment and its applications have high volatility so any kind of investment should be based on thorough research and analysis, equip yourselves with basic knowledge, and make transactions wisely.
