Cryptocurrency has been making steady gains in the stock market, and this is attracting a lot of investors. However, not all people are aware of the concept that is crypto staking. If you’re new to this, we have a comprehensive post for you.
What is Crypto Staking?
Crypto staking is the process of earning rewards in the form of tokens for staking, which is a kind of passive income. Stakers are rewarded on the condition that they hold their coins in an active wallet and make transactions.
Why Is Crypto Staking So Popular?
Earn passive income.
According to the experts at SoFi, earning passive income in cryptocurrency can lead to a substantial increase in wealth. Depending on the cryptocurrency, it can earn up to 100% profits, and the more transactions made, the more crypto is staked.
In this case, it is possible to receive higher rewards. However, from individuals’ experiences, it is not uncommon for newbies to get nothing if they don’t spend the coins they have earned quickly.
The more coins individuals hold, the more rewards they earn. How does staking crypto work?
1. Get coins in your wallet.
You can get the coins from a cryptocurrency exchange or decentralized exchanges. After people buy the coins from an exchange, they can transfer them to their wallets.
2. Put your coins in an active wallet.
To stake, users need to keep the coins in an active wallet. Active wallets are wallets that make transactions.
Types of PoS Staking
1. Active Wallet Staking
The staking that people do is by keeping their coins inactive wallets and then earning rewards. The reward may take a little while.
2. Passive Wallet Staking
The staking that people do is by holding their coins in wallets, which don’t make transactions, but you can receive rewards on the condition that your passive wallet holds your coins in it. This type of staking is the fastest one.
3. Offline Staking
The staking that people do is by transferring their coins to offline wallets and then earning rewards on the condition that they hold their coins in an active wallet. This type of staking takes a little longer.
Benefits of Crypto Staking
1. Passive income
To begin with, people get to enjoy passive income through staking. They don’t have to do anything, and the rewards will be sent to them automatically.
2. Earning rewards
Second, people get the chance to earn some tokens through staking. The amount of rewards that individuals earn is dependent on the number of coins they hold and their network weight. People can also earn more rewards when they stake the same coins in multiple wallets.
Crypto Staking Risks and Cons
1. Loss of coins
The main risk that people can incur when they invest in staking is losing coins. In such cases, they will need to purchase new ones.
2. Long time to earn rewards
The other risk that people can incur is when earning rewards takes too long. In such cases, people may sell their coins at a lower price, not making any gains.
3. Need to keep coins in an active wallet
The other risk that people can incur is when they need to keep their coins in an active wallet. They can buy and sell them easily after the staking process, but this does not apply to inactive wallets.
What Crypto Can I Stake?
Cryptocurrencies include Bitcoin, Litecoin, Ethereum, and many others. As long as you have them in your active wallet, you can begin staking.
How to Stake Crypto in 5 Easy Steps
1. Wallet setup
To begin with, people need to transfer their coins to their active wallets (wallets that make transactions).
2. Enable staking
They can enable staking by changing the maximum weight in their wallet. This is usually 50000 for the addresses of the coins they stake in. They should also change the minimum weight to 0 to avoid mining.
3. Staking
Once people enable staking, they need to wait for a few hours or days until the staking process begins.
4. Start earning rewards
Once it starts, they can start earning rewards by making transactions. The amount of the rewards is dependent on the number of coins they stake and their network weight. For each block that is mined, users are awarded one token, and at the same time, the amount is divided among all users with active wallets.
5. Staking profits
The rewards that people get can be used to increase the value of their coins.
Conclusion
With the appearance of peer-to-peer networks and cryptocurrency, staking has become one way to increase coins’ values. People can earn passive income without doing any other work. Moreover, they can also enjoy instant rewards without ever spending their own money.
