- Staking & Interest
Different Ways to Start Crypto Staking
Did you know that you can reap the rewards of your crypto mining without buying expensive hardware or spending on maintenance? Let us introduce you to cryptocurrency staking – a convenient and easy way to generate passive income. Before you learn how to crypto stake, let’s talk about what staking is and how it works.
What Is Crypto Staking And How Does It Work?
Crypto staking is the eco-friendly, energy-efficient process of committing specific cryptocurrencies to a blockchain network to earn passive income. It’s only available on currencies that use a Proof of Stake (PoS) consensus algorithm as it works as an alternative to the energy-intensive Proof of Work algorithm.
A PoSblockchain functions with the help of volunteers committing their crypto assets for validation. When a new block is added to the blockchain, the validators receive newly minted coins as a reward. Staking is similar to earning interest on a fixed deposit. However, it offers the potential of a higher reward but also comes with higher risks.
When staking, you lock your tokens into your chosen PoSblockchain, which uses them to achieve consensus to keep itself secure. In return for offering your token, you are rewarded new coins from the network proportionate to your stake number.
Where Can You Stake Coins?
Here are the places where you can stake cryptocurrency:
• Staking Platforms – online staking-as-a-service platforms that demand a percentage of the rewards for staking your tokens.
• Exchanges – the leading cryptocurrency exchanges offer staking as an option
• Private Wallets – using offline crypto wallets to stake. It’s known as cold staking.
Two Ways to Stake Cryptocurrency
There are primarily two ways to stake cryptocurrency – validating and delegating. The first involves running your own staking node using online hardware and advanced technical skills. It presents higher rewards and controlling rights on some blockchains. It also requires higher investment to qualify.
The second route is delegating, more popular amongst smaller crypto investors who want to stake crypto. It involves paying a small commission to an established validator who can then use your crypto for staking to earn rewards for you.
How to Stake Cryptocurrency Coins
The steps you take for staking cryptocurrency will depend on the platform you choose to stake. That said, here are some basic steps to stake cryptocurrency coins:
• Select Your Coin – research factors such as the minimum stake, APY rewards, lock-up periods, etc., to find the perfect coin to stake.
• Pick a Validator or Do It Yourself – for some currencies, the validators charge exorbitantly. They also need desktop PC internet connectivity and advanced node skills. So, make your decision wisely.
• Download a Wallet – you will need a software wallet to stake the coins and then store your funds. Go to the website of the cryptocurrency you wish to stake to download the wallet.
The Bottom Line
The upside of staking cryptocurrency is that it doesn’t involve the steep costs associated with mining. It doesn’t hike your energy bills and is an eco-friendly reward-generating option. If you’re a beginner, your best bet is to try your hands at staking through an online platform. However, before you start staking, remember that it comes with its fair share of volatility and risk as a crypto-related investment. So, make sure to choose established cryptocurrencies that use the PoS algorithm and avoid lesser-known altcoins to minimize your risk.
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