The article what is Cryptocurrency Staking explain 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
Table of Contents
- What is Cryptocurrency Staking?
- What is Proof of Stake?
- What is Staking Pool?
- How does Crypto staking work?
- How to stake Cryptocurrencies?
- How much Staking rewards I can earn?
- Best Staking coins List
- Top Cryptocurrency Exchanges Offering Staking
- Frequently Asked Questions
What is Cryptocurrency Staking?
Crypto coins that support staking mechanism 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)
Read also: What is Bitcoin and How Does it Work
In the method of staking, cryptocurrencies are kept in a crypto wallet to maintain the operation of a blockchain network. It is 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 certain time, but 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 rather you just have to hold your coins on exchange in a wallet and earn rewards
The concept of staking is based on Proof of Stake (PoS) and remember not every coin gives you the option of staking, Staking coins are only those that work on Proof of Stake mechanisms like Cardano, Tezos, Ontology and many others
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
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 Kingwere were the first to give the idea of Proof of Stake in 2012. They introduced Peer coin as first PoS crypto
Proof-of-Stake vs proof-of-work. Source, Youtube: Simply Explained – Savjee
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 get the return in the form of shopping fares or business profits
The contributors of staking pool combine their commitment, resources and share the possible block rewards in proportion to their contributions
Staking Pools are effective 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 coin 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. The term Crypto Staking is used in networks that use the proof of stake whereas PoW blockchains are based on mining to verify and validate new blocks
In most of the PoS all you have to do is buy cryptocurrency coins you are interested to hold, download its wallet, install it on your PC and keep the wallet connected to the internet all the time. In 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 just 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 favorable 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
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 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 rewards of the staking pools are then spread to all users based on the percentage of their holdings
You can also use online cryptocurrency staking services but you must make sure to invest in popular platforms to avoid frauds. 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 of their services of maintaining wallets, providing security and other functions
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 much Staking rewards I can 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 keep on changing and so will be your profit, for example, you are staking DASH and getting a reward of 10 DASH coin every month, for the first-month DASH price is 90$ you will get 10×90=900$ in profit but the second month Dash price is 80$ so you will get 10×8=800$ in staking profits, so your profits depend upon the price of the coins
Best Staking coins List
The best coins to stake are
Top Cryptocurrency Exchanges Offering Staking
Staking with crypto exchanges is growing very attractive as it is easy and uncomplicated, you just 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 upon the requirement of the network; every coin network minimum requirement is different from another network. Some network has a minimum requirement of only 1 coin like ontology etc but Dash like network require 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 precaution to protect your wallet where you are keeping your coins, in staking with exchanges there are chances of hacks and you may lose funds, but the greater 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 term of prices will fall also
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 rather in staking you just need to keep your coins in a wallet and keep that wallet connected to the internet and earn rewards, Staking guarantee your passive income and is also environment friendly
What are the disadvantages of staking?
The main disadvantage of staking coins come when the price of coin keep of falling, the price fall not only decrease the amount of your profit against the fixed quantity of coins you are getting as rewards but also decrease 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 just need to store the coin you want to stake with these exchanges and receive rewards or you can simply 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 just need to hold and earn, the more coins you will hold the better returns you will make