Along with the popularity and adoption of cryptocurrency, its functionality is also growing. Although the original idea of the first crypto Bitcoin wasn’t financial enrichment, you can now make a fortune by trading assets and participating in special programs.
Staking crypto, you earn income passively, that is, without spending extra time and resources. This opportunity is already loved by traders for its simplicity and flexibility. But how does crypto staking work? Let’s delve a little deeper into this question
Crypto staking explained
So, what does stake crypto mean? Staking is a way to get passive income from cryptos working on the Proof-of-Stake (PoS) consensus algorithm or others. The system takes a certain amount of coins from your wallet. You can participate in maintaining the blockchain and get a reward.
It’s something like Bitcoin mining but in PoS blockchains. Staked crypto is a profitable alternative to holding cryptocurrencies in a wallet, an analog of a bank deposit. Staking profits vary by blockchain. Its value can reach tens of percent per annum and more.
Proof-of-Stake is a consensus mechanism that plays between nodes the right to generate new blocks, verify transactions and add them to the blockchain according to a particular algorithm. It takes into account how many coins of a blockchain they own. The more coins a user has, the more blocks he or she can generate.
How to stake crypto
The main participants in staking are validators who manage nodes and play the role of miners in PoS blockchains. The holder of the minimum amount of crypto can delegate it to validators and, thus, participate in staking, receiving a reward.
There are different types of staking, such as locked staking, flexible staking, and DeFi (decentralized finance) options. The first type implies a precisely specified period of the process. The crypto owner can choose a convenient term for staking, but it will be impossible to change it. For example, if you set a month, you cannot pick up coins earlier.
In the second case, you don’t need to specify the end date of the holding period. You can stop participating in the validation process whenever you want. The network members will get interest until they withdraw the crypto or open an order to sell it. DeFi staking involves third parties. For example, organizations or individual users take coins from the owner at interest.
Make a right choice
Crypto staking is a great tool for earning money that requires a minimum of resources. Thanks to the Proof-of-Stake algorithm, you can get a decent interest for providing your tokens to work.
It’s equally important for staking crypto to choose an easy-to-use platform on which you will do it. To date, many services for staking cryptocurrencies and crypto exchanges are providing this opportunity.
So, in order to comfortably get passive income, you need to make several important choices:
1. Choose a crypto project that you believe in and whose community you will join;
2. Instead, you can focus on the type of staking that you find more profitable or convenient;
3. Pick a platform that will help you earn.
