Today we are going to learn about crypto staking. After reading this piece of content you will be easily able to decide whether you should stake Ethereum or Solana?
Before I we jump in, one question I would like to ask you from is, “Do you feel bad when you receive interest on your bank savings?”
Of course, you like it.
Then why don’t you earn same interest on your cryptocurrencies by staking them?
I know you are smart enough and you got the idea that your cryptocurrency holdings can help you earn interest in the form of crypto staking rewards.
Next, I will be showing you some important points so you can understand stake crypto process in depth.
Understand Crypto Staking
First understand how cryptocurrency transactions are confirmed and verified
Before you understand Ethereum staking or similar coin staking, first you need that how blockchain network confirms the transactions.
As you might already know cryptocurrencies eliminate middle person or third party need to confirm the transactions. But it still needs a system to keep records of the transactions happening on the network and verify the same.
Cryptocurrency transactions can be validated by two ways: Proof of Work and Proof of Stake. Proof of Work is for mining and Proof of Stake is for Crypto Staking.
Mining as well as crypto staking serve the same purpose
Both ways validate and confirm cryptocurrencies transactions onto the blockchain and in return validators get rewards in the form of cryptocurrency.
In case of crypto staking, staked coins are put to work to verify the transactions happening on the blockchain.
Crypto Staking is similar to earning interest on your bank account savings
When you chose crypto stake, your coins help the blockchain to run and maintain the ledger. And when your coins are selected to validate the transactions, you receive rewards. Your coins will not be selected every time but whenever selected you will be rewarded appropriately.
If you have cryptocurrencies, who support crypto staking, you can earn interest on them by simply staking them.
Staking is better than mining
Mining is suitable of less complex networks such as Bitcoin but for more complex networks like Ethereum, who not only run its own ETH coin on the network but also help run other smart contracts, requires crypto staking.
Mining is not cost-effective and energy efficient because it requires powerful computers and miners who consume significant amount of energy.
Therefore, Crypto Staking came into existence in which cryptocurrency holders stake their bought coins to support the blockchain transaction validation process and earn rewards on their holdings.
Crypto staking is easy
Staking is easily available via reputable cryptocurrency exchanges and if you own a hardware wallet like Ledger Nano then you can also stake using your hardware wallet app.
All you need to do to stake your coins is visit your exchange and go to your holdings and the choose crypto staking.
On the other hand, if you have a hardware wallet, most safest way to securely store cryptocurrencies, like Ledger Nano X and Trezor Model T then you can log it to your hardware wallet app and choose stake crypto option.
It is rewarding
Crypto Staking is less risky but rewarding. As I mentioned, whenever your coins selected for validation, you will be rewarded. Blockchain network selects staked coins by using different parameters like amount of coins staked, how old coins are in holdings, and the like.
One thing to be noticed here that just like bank fixed deposit, your coins will be locked for a certain period as security. Don’t worry, they will remain be yours.
Takeaway: In the staking crypto process, your investment will be locked up for a period and unavailable for transfer, just like Bank Fixed Deposit.
Staking makes blockchain network fast
Crypto Staking makes the blockchain network fast, cost-effective, and energy efficient. Instead of miners, people who participated in stake crypto receive rewards.
In mining, computers with strong configuration participate in solving mining algorithm and in return receive rewards. But in the process, they consume way too much energy which is not a cost-effective way to run the blockchain and also it harms our environment.
On the contrary, crypto staking consumes significantly low amount of energy and makes the blockchain network fast.
Stake crypto does the mining job
If you choose to stake crypto, your coins become part of that proof of stake process that helps to add a new block onto the blockchain in exchange for a reward.
You can simply support the blockchain network by staking your coins. And you will not be doing this for free. You can earn from your holdings.
If you are a long term holder then you should think of crypto staking after knowing all its pros and cons.
Only few coins support
There are only few cryptocurrencies who currently support staking.
Not all cryptocurrencies support proof of stake like Bitcoin only supports Proof of Work (Mining). Ethereum and Cardano support crypto staking.
Most popular coins for staking are Ethereum and Solana.