Cryptocurrency purchasing and mining are the two traditional ways of generating income in the crypto trading space. However, crypto staking is now emerging as a popular choice to earn money without trading in conventional ways. It is a beginner-friendly concept that allows investors to earn crypto without giving much effort to understanding cryptos.
Let’s understand the ABC of crypto coins staking and explore how it facilitates earning staking rewards in crypto assets!
What is crypto staking?
Staking in crypto resembles depositing funds into a bank account. Just as banks use deposited funds to generate interest, through staking in crypto, users lend their cryptocurrency tokens to support the blockchain network and earn staking rewards, similar to earning interest in a bank account.
How does crypto staking work?
In cryptocurrency staking, you need to own specific types of coins, such as Ethereum that use a proof-of-staking consensus mechanism.
Staking locks up your assets in the blockchain network to provide security, and gets you staking rewards (in more of the same token or other rewards) in the process. Engaging in crypto staking can be lucrative for the same reason.
Notably, most cryptocurrencies that allow staking require a minimum time commitment and a minimum amount staked to stay in this process.
What is proof of stake?
So far, you already know that crypto coins staking works with a proof-of-stake model. But now, what is proof of stake?
Proof of stake is a consensus mechanism that verifies blockchain transactions. Proof of stake empowers the coin holders to stake their currencies and grants them the authority to verify new blocks of transactions on the blockchain in return, along with the staking rewards.
Examples of crypto coins that allow staking
Here are some of the most popular coins that allow staking:
Ethereum (ETH)
Ethereum adopted the proof of stake consensus in late 2022. It is not only safe for staking but also investing. Ethereum is the investors’ top choice due to its increased scalability and ability to withdraw staked ETH.
Solana (SOL)
Solana is another popular cryptocurrency for investors. SOL coins were first introduced to the public in 2020. It has a significant contribution to decentralized finance (DeFi).
Cardano (ADA)
Crypto staking with Cardano coins has no minimum time limit or lock-in period. It was launched in 2017 and has been on the favorites list for almost a year.
Polkadot (DOT)
Polkadot is a relatively new digital currency that came into existence in 2020. Polkadot distinguishes itself with an advanced design consisting of multiple chains. The quantity of DOT required to stake varies on factors like individual validator stakes, the number of validators in the pool, and the overall network size.
What are the advantages of staking in crypto?
You must know the advantages and risks of earning staking rewards. Let’s begin with the advantages first.
- Crypto staking is a way to earn while holding on to your coins.
- It is very user-friendly and involves a straightforward process to earn income as opposed to active trading.
What are the disadvantages?
- Crypto staking usually has a minimum lockup period, so you lose access to your funds while it’s staked.
- You may face a penalty if you are involved in malicious activities during block validation. This scenario is termed as ‘slashing’.
How do I start crypto staking?
Cryptocurrency staking is simpler than mining. You have to follow some easy steps:
Step 1: Choose the right cryptocurrency
First, you must choose a cryptocurrency that allows staking, as only some digital currencies bring proof of stake or other supporting consensus mechanisms.
Step 2: Acquire tokens and transfer them to staking- enabled wallet
Buy some tokens and transfer your crypto coins to a blockchain wallet. You have to be sure that the wallet features staking functionality.
Step 3: Initiate staking
Now, you are ready to stake your cryptocurrencies. Follow the guidelines of the platform that you have chosen, and be prepared to earn crypto staking rewards.
Conclusion
Staking cryptocurrencies is a great way to earn some income without crypto trading actively- you can earn an extra penny by leveraging your existing coins. While it involves some risk, proper knowledge and practical experience can help you overcome its downsides easily!
To know more about the world of crypto, head over to the Millionero blog! Further, if you are interested in crypto trading, the gates of Millionero are open!
Disclaimer: Cryptocurrencies are an inherently volatile asset class, and investments can carry substantial risks. This information is for educational purposes only and should not be construed as financial advice. Always do your own research and conduct due diligence before investing in crypto projects.