November 24, 2022
  • November 24, 2022
  • Home
  • Cryptocurrency
  • What is staking in cryptocurrency and how does it work? A staking guide

What is staking in cryptocurrency and how does it work? A staking guide

By on October 26, 2022 0

The ways to navigate the world of cryptocurrencies are constantly expanding. Whether you are new to the game or an expert in your own right, crypto staking can always be the way to go. We have prepared your ultimate staking guide with everything you need to know.

The ways to navigate the world of cryptocurrencies are constantly expanding. Whether you are new to the game or an expert in your own right, crypto staking can always be the way to go. We have prepared your ultimate staking guide with everything you need to know.

What is crypto staking?

Staking is a way for traders or investors to earn rewards by holding certain cryptocurrencies over a period of time. It involves engaging in a blockchain network by locking up some of your crypto assets, and possibly earning more cryptocurrencies in exchange for your stake in an exchange.

Staking is only available for cryptocurrencies that actively use the proof-of-stake model. Some of these cryptocurrencies include Ethereum, Cardano, and Solana.

Here is a step-by-step guide on how to go about staking crypto:

  • You must buy, and therefore invest, in a cryptocurrency that uses the proof-of-stake model. For example, Ethereum, Cardano, and Polkadot are such cryptocurrencies that validate proof-of-stake transactions.
  • Once you have purchased your cryptos, you may need to move your assets to a crypto or blockchain wallet, which is a secure way to store your cryptocurrencies.
  • Many crypto traders choose to combine their assets in the so-called staking pool, which increases their chances of earning long-term crypto staking rewards. When choosing your staking pool, it’s best to consider the size, reliability, and fees added each time, so you can choose the one that best suits your strategy and goals.
  • Once you have selected a staking pool, all you need to do is stake your cryptos through your crypto wallet.

What are the benefits of crypto staking?

  • Stakeholders can earn interest, especially through an exchange, which can offer them additional rewards via tokens
  • Staking is less resource-based, which means investors need fewer resources
  • Staking allows for more transparency within the blockchain, which means it gives stakingrs more inclination as to how certain cryptocurrencies will act next
  • Staking requires little effort, instead of constant attention, so you can keep investing and get a good night’s sleep

What are the risks of crypto staking?

  • The volatile nature of cryptocurrencies is essential, as it means that you may need to keep rethinking your strategy due to unpredictable price fluctuations.
  • Beware of lockout periods: while you can lock your crypto assets for other rewards, it also means that you won’t have access to them for a while and you could receive a penalty if the system doesn’t work as expected. This is called ‘slashing’.

Risk Warning: Cryptocurrencies are highly volatile and trading may result in the loss of your invested funds. Before investing, you should be aware that cryptocurrencies may not be suitable for all investors. You should therefore carefully consider whether trading or holding digital assets is right for you in light of your financial situation and not invest money that you cannot afford to lose.