June 15, 2020
WHAT IS STAKING?
Staking is a process of holding funds in a cryptocurrency wallet to support the security and operations in a blockchain network. Staking Rewards enables passive income opportunities with digital assets . Cryptocurrency staking is one of the easiest and most effective ways to earn additional income through blockchain and easily increase your portfolio. Staking has attracted many investors to play it safe in the risky business of crypto trading . For example, the way you have an option for fixed deposits with your bank and when people hold money in their bank account or reserve a particular amount with the bank for investment, the user receives some amount of interest from the bank. Similarly, by staking your cryptocurrency, you gain the ability to generate an extra income. Some coins may require a bonding period like fixed deposits in the bank. The crypto profits resulting from staking normally depends on the amount of time one holds the cryptocurrency . The longer you stake, the higher are your gains.
The staking returns are usually an end product of Proof of Stake (POS) Consensus Algorithm where instead of needing the energy to create new blocks, it does it with the staked coins.
Types of Staking:
Staking is divided into two broad categories; PoS (Proof-of-Stake) and DPoS (Delegated Proof of Stake). POS works by freezing the stakeholder’s coins for a particular period to validate transactions done through the network whereas DPoS is a delegate that is elected by stakeholders and assigned to become a validator or block producer. In the event of sharp practices, (confirming a fraudulent transaction) a penalty is being imposed.
Staking is continuously growing in ease and popularity. One does not need any knowledge of Cryptocurrency trading and of course, there is no need to study complex charts for the user to make a profit.
· The foremost advantage of staking is the opportunity to generate income from holding crypto. The value of the staked coin increases with the market valuation of the coin going higher.
· Staking provides an opportunity for the investor to be an active participant in the favorite blockchain project.
· The user can yield an extra benefit of reinvesting the “profits” to increase the staking portfolio.
· No Cryptocurrency mining equipment is required as there is no requirement of the use of mining hardware.
How are staking rewards calculated?
The reward depends on the total staked percentage, however, a different way of calculation of staking rewards may be adopted by every blockchain network.
Some are solely adjusted on factors of each separate block, taking into account many different factors. These can include:
· The count of coins the validator is staking
· The duration from which validator has been actively staking
· The number of coins staked on the network in total
· The inflation rate
· Other factors
· Some may distribute staking rewards determined at a fixed percentage.
There is no doubt that staking offers you a guaranteed and predictable source of earning more crypto coins with time. It’s worth keeping in mind, though, that staking isn’t entirely without risk . Locking up funds in a smart contract is prone to bugs, so it’s always important to maintain high security of your account and use high-quality wallets. It is just a secure way to multiply your crypto assets.