Oftentimes, when we think about investing in crypto, we only think of mining or buying and trading it on an exchange. However, crypto staking is another option to potentially grow your capital passively.
Crypto staking involves locking up your tokens in your crypto wallet to earn rewards or interest in exchange for participating in the network’s consensus processes.
This is in line with the proof-of-stake consensus, which requires staking to validate transactions on a blockchain.
Not all cryptocurrencies use proof-of-stake, however, one of the most famous ones would be Ethereum.
Ethereum underwent “The Merge” where it switched from a proof-of-work consensus to proof-of-stake.
The main difference between the two would be the consumption of power that is significantly less with proof-of-stake.
How Staking Works?
When an investor holds a certain crypto that can be staked, they can stake them in an exchange or through a wallet.
By staking, the network will be able to use the tokens to forge new blocks on the network blockchain. If you stake more cryptos, there is a high chance that it would be selected to validate the transactions.
The coins that are staked already have the “markings” of validation. So they can be used to validate any new tokens that are having new information “embedded” into the block.
The tokens used for validation generate rewards for the owner and that’s how staking rewards you with passive interest.
Is Staking Crypto Worth It?
It’s pretty difficult to tell if any form of investment is worth it because it all depends on the level of experience and know-how of the investor. Generally, the more you know, the less riskier your investment.
Therefore, before deciding to stake your tokens, make sure you have evaluated the pros and cons of staking and if it’s a risk you’re willing to take.
Staking Tokens You Should Know About
We already have a staking coin list that you can check out but if you want a quick breakdown of some of the more popular tokens, read on below!
Ethereum just recently switched its status as a staking coin on September 15th 2022. It has a programmable blockchain that is used to create smart contracts called dApps.
Cardano was founded through extensive peer review and is developed through evidence-based methods according to its official website. It is both sustainable and has astounding security features. A force to be reckoned with!
Polkadot allows different blockchains to work together and connect. Staking rewards for DOT can offer an average return of 14% with the right platform.
Solana is a scalable blockchain that is known for its fast transactions and lower fees when compared to Ethereum.
Final Thoughts on Staking Tokens
Staking can be a good way to passively earn interest while participating in the crypto network. If you have cryptos that you are not looking to trade, it could be staked for interest while it sits on an exchange or a wallet.
However, it is always important to do your own due diligence when buying into cryptocurrencies due to their volatility. It only makes sense to buy a cryptocurrency for the long term and stake it when you believe it’s a good investment.
The best way to do this is by reading about their projects and evaluating the pros and cons of purchasing the tokens.