Earning with cryptocurrency is easy. Buy and hold until it gets more value. Then sell and calculate your profit. But there is a way to earn more. And we are not talking about active trading now. That’s a complicated craft that requires a lot of time and devotion. Today we will talk about crypto staking.
It’s hard to argue that the crypto world is evolving day by day. And almost every day there are new ways to earn and spend on crypto appeared.
Now you know how to trade tokens and buy any crypto without high fees. But it’s also important to learn some passive income methods.
You can find tons of investment opportunities on any crypto exchange website.
One of the most widespread passive income features is crypto staking. Being similar to a bank deposit, staking allows you to earn interest from your tokens.
Nonetheless, you should be aware of some crypto staking details before putting your assets into it.
What is crypto staking?
To put it simply, staking allows you to earn rewards for holding different tokens in your wallet.
Speaking more precisely, the staking concept is responsible for verifying transactions in different cryptosystems.
The process of staking works like this: you are choosing tokens and the period of stake; the platform locks staked tokens; you get a reward after the staking period ends.
Staking is frankly similar to a common bank deposit. But you should understand that staking helps maintain some blockchain networks.
So while staking tokens you are becoming a true crypto community member.
Is staking related to the Proof-of-Stake concept?
It is.
All the tokens based on PoS protocol (Solana, Cardano, Celo, Mina, etc.) can be staked.
In this kind of blockchain networks staking confirms transactions and supports the chain working.
Moreover, staking and PoS protocol are considered to be more energy-efficient than mining in the Proof-of-Work model, which needs computing power to process payments.
How does crypto staking work?
Staking is the process of pledging your tokens to the crypto protocol for verifying new transactions on the blockchain.
The more tokens you’d pledge – the more chances you get to become the full block validator.
In most cases, you are getting the reward in the same type of token you pledged. But there are networks with different staking and rewarding tokens.
PoS consensus mechanism requires tokens to be staked for some time. You can withdraw the tokens before this period ends, but in this case, you won’t get any reward.
Joining staking pool you can also be obliged to pay some fees. So staking can be unprofitable with a small number of tokens.
How to stake crypto?
You can start staking with any popular crypto exchanges or digital/hardware wallets.
The staking subscription offers and its earning percentage are always changing. For instance, ADA staking for 30 days will give you a 3% reward, but ADA staking for 90 days can bring you a 7% reward.
Some crypto exchanges offer staking with a fixed and floating rate. Usually, the fixed rate is smaller, but you’ll be guaranteed to get the agreed reward.
With a floating rate, you got more risk, but the reward can also be higher.
Staking pros and cons
Obviously, crypto staking can be a perfect passive income method for long-term holders. You just hold your tokens and get a reward almost for nothing.
By staking some of your crypto funds you not only build up the transaction process but also make the blockchain more resistant to attacks. It’s important, taking into account the recent huge blockchain hacks.
Speaking about the risks of crypto staking you should be aware that your assets will be locked while staked. Moreover, you should watch the price changes and not lose more by holding your tokens during buy/sell periods.
Don’t forget to look through the description and requirements of a specific crypto staking project before joining it.
Everything in crypto can be risky, so watch your steps and always have more profit than losses.
Sources: Coinbase, The Motley Fool
Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of cryptolife.report. Every investment involves risk, so you should always perform your own research prior to making important decisions. We do not recommend investing money you cannot afford to lose.
