One of the main ways you can earn in crypto is to sell your investments when the market prices go up. However, another way to make money in crypto is by staking. By doing this, you can just let your digital assets do the work for you while you earn passive income without having to sell them.
Cryptocurrency staking is similar to depositing your cash in a savings account with high yields where the bank will lend out your deposits, and your profit will come from the interest of your account balance. Basically, staking is when you lock your assets for a period of time to help the blockchain grow, and in return, you will earn more cryptocurrency.
This article will talk about staking meaning, how it works, and how you can use this method to earn in crypto.
How does staking work in crypto?
Like many things in crypto, a lot of ideas, whether complicated or simple, will depend on your level of understanding of cryptocurrencies. Traders and investors understand that knowing how staking works is a great way to increase their assets and earn income. Most blockchains have been using the proof of stake consensus mechanism.
The proof of stake consensus mechanism is done by validating the transactions on the platform and adding new blocks to the chain, thus helping it grow. Validators also use proof of staking for cryptocurrency minting. This process ensures that only legitimate transactions and data are added to the crypto blockchain.
Those who do staking are called validators, and they participate to earn a chance to validate a new transaction. If there is fraudulent data and inconsistencies in the validation, you may lose some of the assets you staked as a form of punishment. On the other hand, if you do a good job in staking, you will be rewarded with more cryptocurrency.
How to Stake in Crypto
Staking in crypto can be a little daunting and confusing for beginners, but the process is quite simple once you get a hold of the basics. Here’s how you can do staking in crypto:
Buy crypto that uses a proof of stake (PoS)
If you know something about how cryptocurrencies work, then you probably know that not all offer staking. Proof of staking needs less energy and it does not need specialized equipment. You can look up online a list of all the blockchains that offer PoS mechanisms and choose from those.
Transfer your crypto to a blockchain wallet
After buying the crypto, it will reflect on the exchange where you bought it. Some exchanges offer their staking program, while others will require you to move your funds to a blockchain wallet. A blockchain wallet, also called a crypto wallet, is considered the fastest and most secure way to store your crypto assets.
After that, choose the option that lets you deposit your crypto and the type of crypto you’re depositing. You can then copy and paste the wallet address to transfer your assets from your exchange account to your blockchain wallet.
Join a staking pool
You can join a staking pool when you have enough crypto in your wallet. Most traders combine their funds in staking pools to have a higher chance of earning staking rewards. Staking works differently, depending on the cryptocurrency you are using and their staking pools.
You should always remember that the assets you put into crypto staking pools are still yours. This means you can still withdraw your funds anytime if you wish to do so. Also, to become a validator, you will need to source enough funds before you can start.
Pros and Cons of Staking in Cryptocurrency
Still unsure whether you should try staking your assets? Here are the pros and cons of crypto staking that will help you decide:
Cons of Crypto Staking
- Your assets may be locked in a fixed term
- There is a risk of slashing the penalty if you do the validation improperly
- There are fees that you may incur during the process
Pros of Crypto Staking
- You can easily earn interest in your assets
- The transactions are much faster and cheaper
- It is more energy efficient
- You can have potential voting rights for the chain growth
FAQs
Here are some frequently asked questions about staking in cryptocurrency:
How much can I make in a crypto staking pool?
You can earn around 6% APY or Annual Percentage Yield when doing staking in cryptocurrency. Depending on your platform, some independent validators on blockchains earn about 4-5% APY.
Can you lose crypto by staking?
Unfortunately, you can actually lose money when staking in crypto. Even though this method is very profitable and is a great way for long-term investors to have passive income, like all crypto strategies, it also comes with the risk of losing money.
Create a Decode Account Today and Get FREE $DECODE! Scan the QR Code Now!
Decode Coin is the cryptocurrency made by the Decode Group, a financial services company that offers educational training, foreign exchange services, and fund management, with two decades of experience.
The Decode Coin ($DECODE) aims to be the most trusted currency used in the Financial Service industry, being used to settle all fees such as transaction fees and referrer fees. $DECODE may soon be used as a payment for all transactions within the Decode Group and over 50 partner establishments worldwide.
Visit decodeex.com/promo, Register and Verify your Email, Sign-in and Input your ERC-Wallet, Submit KYC requirements, and that’s it! You will be AIRDROPPED your FREE 500 $DECODE within 24 hours.