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Staking - Building wealth over time

Staking in cryptocurrency is a way of generating passive income. Instead of letting your crypto lie idle in your wallet, you can earn rewards for staking it. For this, you need to commit coins to the blockchain network on which the particular cryptocurrency exists.

What is Staking?

Staking in market terms means owning a share or a stock in a business. And in crypto, it is a form of holding cryptocurrency as collateral to enable operations and maintain security through the proof-of-stake (PoS) consensus mechanism. Through staking, one can receive an interest fee for locking crypto coins. In essence, you still are in possession of your coins and may redeem them any time you wish. However, some cryptocurrencies require you to commit coins for a fixed time. You may redeem your coins only after this period is over, like in a fixed deposit scheme.

How does Staking work?

Staking is enabled by the Proof-of-Stake protocol. The PoS protocol is a method of validating crypto transactions and ensuring smooth functioning of a particular blockchain. This means that crypto owners can stake their coins to receive the rights to become a validator for the blockchain network. Generally, the protocol picks validators based on the proportion of the number of coins and duration that the coins were staked for.

When you stake your crypto, the blockchain networks makes use of it for ensuring network operability and validation of transactions. Since you staked crypto is used the network, you earn rewards for it.

To become a full validator for staking, you need a minimum investment, dedicated computer system with low-cost power supply, and technical expertise. But being a validator is a demanding job and any downtime on your computer supply may cause your stake to become slashed.

Although, the easiest way to stake your coins is through a cryptocurrency exchange. You get percentage-based rewards for the amount of crypto that you stake. This can be any amount you choose. These can be the in the form of the same coin that you stake or another one, depending on the blockchain.

Which cryptos offer Staking?

So, can you use your BTC and earn staking regards?
NO – since the blockchain that supports BTC uses the Proof-of-Work model.

Staking is not possible for all cryptocurrencies. It is only applicable for crypto networks that use the Proof-of-Stake model. The major ones that offer staking rewards are:
 

  1. Ethereum 2.0 (ETH)
  2. Although ETH uses the PoW model, ETH 2.0 plans to migrate to the PoS model soon. For earning staking rewards on Ethereum, one must be a validator with at least 32 ETH. However, ETH currently runs a parallel chain – the Beacon chain that uses the PoS model already. This chain allows you to earn staking rewards through stake pools without the need to have 32 ETH.

  1. Cardano (ADA)
  2. Cardano uses a modified PoS mechanism called the Ouroboros. You can stake Cardano either by delegating stakes or by coordinating a stake pool.

  1. Solana (SOL)
  2. Solana makes uses of Proof-of-History (PoH) along with PoS. This enables the blockchain to be faster and more efficient. You can earn staking rewards on Solana by being a validator or delegating stakes to stake pools.

  1. Polkadot (DOT)
  2. Polkadot is a blockchain interoperability protocol which connects various different chains into a single network. Thus, it enables parallel transaction processing. Polkadot lets you earn staking reward as a validator or a nominator. However, the rewards for a nominator are dependent on the validator.

  1. Tether (USDT)
  2. Tether has a stable price and a high liquidity. Hence, it may be the best staking cryptocurrency in the market. You can buy USDT and earn staking rewards through a staking pool. Did you know that we update our USDT prices each day and sell USDT at competitive rates? Furthermore, we do not charge any transaction fee.  

    To learn more about stable coins, read our blog post – How to buy USDT/USDC in Dubai?

Why you should consider Staking –

Regardless of whether you choose to be a complete validator or participate in a stake pool, there are multiple benefits. You earn rewards just for holding cryptocurrency for a fixed term. It offers the added benefit of supporting the project that you have invested in. Since mining in PoW requires a substantial investment, staking offers a lucrative way to earn more crypto. In addition to this, staking is environmentally friendly and consumes far lesser energy as compared to mining.

This is one of the ways to earn money with crypto. If you are interested in knowing more, read 5 ways to make money through crypto for free.

Please note that this article is an opinion, and does not represent financial advice by IN4X Global.

IN4X Global is a gateway to build a transparent financial economy that is powered by crypto and accessible to all.