What is cryptocurrency staking?
Staking is an alternative method of providing security and effectiveness to the blockchain network in exchange for an incentive and without wasting resources.
What are the different types of staking?
Staking is divided into two broad categories; PoS (Proof-of-Stake) and DPoS (Delegated Proof of Stake). The first works by freezing the stakeholder’s coins for a period to validate transactions done through the network.
In the case of DPoS, a delegate 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 will be imposed.
What are the stak-ing rewards available?
The different benefits of the two types of staking include:
- Earning transaction fees by applying to become a DPoS.
- Getting a percentage of tokens as rewards for stak-ing.
- Holding or reducing transaction fees for stak-ing on exchanges.
Cryptocurrency staking has some major benefits:
- Cheap : If PoW you need to buy expensive equipment and pay for electricity, PoS requires minimal computing power. A regular old laptop or mobile wallet on your smartphone is enough for staking.
- Safe : PoS is much more resilient to 51% attack, as you would need to buy 51% of the coins to take over the network, but such an attack is economically disadvantageous.
- Staking implies asset growth : Indeed, it would be best if you staked more coins to make big profits. In addition to profit from stak-ing, the value of the coin itself is likely to grow as well.
- Simple : There is no need to have specific knowledge. You only need to buy coins on the exchange and delegate (put) them into staking in your wallet. Then the system calculates the reward on its own.
Why has Staking Become a Trend?
Since mining has become harder and takes away too many resources, the new people involved with digital assets find staking on exchanges a good alternative. It is also another path to diversify assets and reduce transaction fees on the blockchain.
New projects aim to use PoS instead of PoW, among them Tezos which gained huge support during its ICO. Ether moving on with the Casper project to change from PoW to PoS is another example. Cold wallets like Ledger or Trezor have bet on stak-ing too by adding the feature in their hardware wallets. During 2019 and 2020 the number of exchanges providing stak-ing features as investment tools saw an increase.
Here is a good staking website – Utown, which provides different stak-ing % according to the level of membership, and enjoys a maximum discount of 8%.