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HomeCrypto NewsEducationWhat is Cryptocurrency Staking Or What Is Proof-Of-Stake

What is Cryptocurrency Staking Or What Is Proof-Of-Stake

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This article explains the details of Staking, Proof of Stake, Staking Pool, how staking works, how to stake Cryptocurrencies, how much Staking rewards you can earn, best-Staking coins List, and top Cryptocurrency Exchanges Offering Staking.

What is Cryptocurrency Staking?

Crypto coins that support staking mechanisms are called Proof of Stake coins.

Crypto Staking is a method of validating blocks by simply holding coins in wallets just like miners mine bitcoin or Ethereum blocks to confirm the network transactions, and in return, miners get rewards, this process of mining is known as Proof of Work (PoW)

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Read also: What is Bitcoin and How Does it Work.

In the Staking method, cryptocurrencies are kept in a crypto wallet to maintain a blockchain network’s operation. It is the locking of cryptocurrencies for a particular period to get rewards.

The process of staking coins depends on users engaging in blockchain by holding a minimum needed amount of that coin in its wallet for a particular time. Still, nowadays, the concept of Crypto staking through well-known crypto exchanges is becoming more popular as you don’t have to set up any wallet or technical process; instead, you have to hold your coins on exchange in a wallet and earn rewards.

The staking concept is based on Proof of Stake (PoS), and remember, not every coin gives you the option of staking. Staking coins only work on Proof of Stake mechanisms like Cardano, Tezos, Ontology, and many others.

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Read Also: How to Buy Bitcoin Cryptocurrency

In most easy words, crypto staking is holding your cryptocurrencies in a wallet for a certain period to get rewards; this method is very similar to how bank accounts work, and they reward account holders with interest by holding fiat currencies in their accounts for a particular period for a month or so

What is Proof of Stake?

The Proof of Stake (POS) is a process to validate block transactions depending on how many coins a user holds in a wallet. This indicates the more crypto coin a person owns, the more mining power he will have and more rewards he will get

Read Key Points when selecting cryptocurrency exchanges.

POS is different than proof of work (POW). POW requires heavy amounts of energy and expensive devices to set up a mining process, whereas POS gives mining power to the user based on the percentage of coins held by a user

Scott Nadal and Sunny King were the first to provide the idea of Proof of Stake in 2012. They introduced Peer coin as the first PoS crypto

What is Staking Pool?

A stake pool arises when many coin holders gather their resources to validate blocks and, in return, receive rewards, just like a group of investors invests together in a shopping mall or any business and returns in shopping fares or business profits.

The staking pool’s contributors combine their commitment, resources and share the possible block rewards in proportion to their contributions.

Read Binance Exchange Review, a mini-encyclopedia on Binance.

Staking Pools are useful in networks where the technical, financial, and minimum amount of holding coin barrier is relatively high. This gives the pool with committed and long-term holding participants. For example, DASH staking requires a minimum of 1,000 Dash coins to hold, and one Dash coin is 92$ at the time of writing, so you need to invest 92000$ to start Dash staking and earn rewards.

Staking Pools often require technical setup and maintenance. That’s why many pool providers charge a fee from the bonuses distributed to pool participants.

How Does Crypto Staking Work?

The rules for staking in every PoS blockchain are different from another. Crypto Staking is used in networks that use the proof of stake, whereas PoW blockchains are based on mining to verify new blocks.

Read: Top 17 Best Crypto Trading Bot

In most of the PoS, all you have to do is buy cryptocurrency coins you are interested in holding, download its wallet, install it on your PC and keep the wallet connected to the internet all the time. In the case of a small network, you need to download a copy of their entire blockchain.

In networks like ARK coin, you do not have to download the entire blockchain or keep your wallet open and connected to the internet all the time. You have to vote on a delegate if you want to receive bonuses.

Proof of Staking creates and validates new blocks by staking, and blocks are created and validated without relying on any mining hardware.

Mining requires a large investment in hardware and requires technical and programming skills to set up a miming process; Staking only requires direct investment in the Cryptocurrency that a user wants to hold. Each PoS blockchain has its Cryptocurrency.

How To Stake Cryptocurrencies?

There are many options to stake coins and get rewards.

The most profitable and easy way of Crypto staking these days is to deposit and keep holding your coin on crypto exchanges, but always remember only with reputable exchanges like Binance exchange, Coinbase, Okex, and others, you have to do nothing but to deposit and hold your coins on that exchange and get rewards, it is as easy as that. You don’t have to download any wallet, blockchain, or do any other technical stuff. Details of cryptocurrency exchanges offering Crypto staking are coming below.

Also Read: Cryptohopper Trading Bot Review

You can stake crypto coins through mobile apps, apps like trust wallet owned and run by Binance exchange gives you the option of staking many cryptocurrencies from your mobile

The other purpose is to download a wallet and, if required, a blockchain of any PoS coin on your computer and deposit your coin in that wallet by making sure that the computer and the wallet keep connected to the internet 24/7

You can get included in crypto staking pools. The staking pools’ rewards are then spread to all users based on the percentage of their holdings.

You can also use online cryptocurrency staking services, but you must invest in popular platforms to avoid fraud. Some PoS coins have their staking platform, and investing in them can give you a passive monthly income. These platforms may charge a monthly fee in return for their services of maintaining wallets, providing security, and other functions.

Read 3Commas Crypto Trading Bot Review.

Another option is to install a cryptocurrency wallet on a server or Raspberry Pi. The shortcoming is that users need to take the necessary steps to protect their wallets and server to avoid hacks.

How Many Staking Rewards Can I Earn?

Staking rewards or staking profits depend upon three things

  • First of all, how much you have invested, the more the investment, the better the repayments
  • What coin you will get as a reward by staking any coin, e.g., by staking Ontology (ONT), you will get ontology gas (ONG), by staking NEO, you will get NEO GAS in return as a reward, but by staking DASH, you will get DASH in return.
  • What is the price of the coin that you are getting in return as a reward? The price of crypto coins keeps changing, and so will be your profit; for example, you are staking DASH and getting a reward of 10 DASH coins every month; for the first-month DASH price is 90$, you will get 10×90=900$ in profit. Still, the second month Dash price is 80$, so you will get 10×8=800$ in staking profits, so your earnings depend upon the coins’ worth.

Best Staking coins List

The best coins to stake are

  • Vechain
  • Tezos
  • Neo
  • Ontology
  • Cosmos
  • Tron
  • Stratis
  • Qtum
  • Komodo
  • PIVX
  • Dash
  • Stellar
  • TROY
  • Elrond
  • Algorand
  • One
  • Fetch.ai
  • Theta
  • Loom
  • Kava
  • Arpa
  • Troy
  • Lisk

Read in detail: Best 12 Profitable Staking coins List and Exchanges.

Top Cryptocurrency Exchanges Offering Staking

Staking with crypto exchanges is growing very attractive as it is easy and uncomplicated. You need to deposit or buy the coin on the exchange you want to stake and earn rewards. The best exchanges offering a variety of coins for staking are

 Frequently Asked Questions

How many crypto coins are required for staking?

The minimum quantity required for staking depends on the network; every coin network minimum requirement is different from another network. Some network has a minimum requirement of only one coin like ontology, but Dash like network requires 1000 coin as a minimum deposit to earn staking rewards.

Is there any risk involved in Cryptocurrency staking?

Financial investments are always risky. In staking, you need to take all security precautions to protect your wallet where you are keeping your coins. There are chances of hacks in staking with exchanges, and you may lose funds, but the more significant problem with crypto staking is that the crypto market is very volatile. Prices fluctuate a lot. Your return depends upon the price of coins you are making as rewards. If prices fall too much, your profits in terms of prices will fall.

What are the advantages of staking?

The main advantage of Cryptocurrency staking is that you do not have to invest in costly equipment of mining hardware; you do not need any technical skill or equipment to set up a mining process. Instead of staking, you need to keep your coins in a wallet and keep that wallet connected to the internet and earn rewards; staking guarantees your passive income and is environment-friendly.

What are the disadvantages of staking?

The main disadvantage of staking coins comes when the price of currency keeps falling. The price fall decreases the amount of your profit against the fixed quantity of coins you are getting as rewards and reduces the overall value of the asset you are holding for staking.

How to start cryptocurrency staking?

Nowadays, staking has become extremely accessible, with top cryptocurrency exchanges like Binance exchange, Coinbase, Kucoin, Okex, Gate.io providing staking. You need to store the coin you want to stake with these exchanges and receive rewards, or you can buy the coin you want to stake on that exchange and hold it there to make rewards. Staking cannot get more easygoing than that.

Is Cryptocurrency Staking Profitable?

Staking is no doubt profitable and without much risk. Mining demands expensive equipment and technical know-how, whereas cryptocurrency trading needs a lot of patience and understanding of markets and trading skills. But in staking, you need to hold and earn. The more coins you will hold, the better returns you will make.

Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.

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Jakkk
Jakkkhttps://thecryptobasic.com/
Owner of TheCryptoBasic. Involved in cryptocurrencies for more than five years, Love to trade and write on cryptocurrencies. My primary aim is to provide genuine information to cryptocurrency readers because crypto is filled with frauds and scams. Accurate information is scarce to get. So We at TheCryptoBasic will be providing accurate information about cryptocurrencies topics that users can trust.

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