If you are a crypto trader or investor and love to enjoy profits out of buying and selling cryptocurrencies , then you might have heard of crypto staking too.
Many experts believe that staking is the next big business for crypto holders because putting their digital currencies into the task of validation and regulation of cryptocurrencies’ transactions earns them a huge passive income even without selling their digital assets.
Now that you are here, I’m sure you might be interested to know “how to earn money through crypto staking”. In this article, we will discuss everything about crypto staking, how it works, what kind of currencies you can stake, how to start your crypto staking and the risks involved in So, read it to the end.
WHAT IS CRYPTO STAKING ?
Crypto staking is a process of earning passive income by depositing your cryptos to run blockchains and maintain security with the use of the proof of stake model.
Just like how banks pay you a certain rate of interest as they use your money for lending out loans and investments, staking your digital currency is also put to use in verifying transactions made on the blockchain under the protocol called proof of stake (PoS) and in return you earn certain rewards.
Staking is a way in which if you as an investor hold cryptocurrencies that operate under the proof of stake model, then you can become a validator in that particular blockchain by staking your cryptos. As a validator, you verify and validate the transactions and those transactions become new blocks on the blockchain. Whoever participates in these successful transactions of creating new blocks is rewarded with some cryptocurrency.
Pros of Crypto staking :
- It yields you the rewards or interest.
- Provides, easy, fast and cheap transactions.
- More eco friendly and
- Might get you the voting rights.
Cons of Crypto Staking:
- You might need to put your cryptos at stake for a certain lock-in period.
- Risk of penalties.
- You may have to bear fees for staking.
How to do Crypto Staking :
Now that you know what is crypto staking let’s understand how you can earn money through crypto staking:
- Buying proof of stake model using cryptocurrency:
It is to be remembered that not all cryptocurrencies offer staking. You need those cryptos which use proof of stake to verify the transaction on the blockchain. Some of the examples of such cryptocurrencies are:
- Ethereum (ETH)
- Luna (LUNA)
- Avalanche (AVAX)
- Solana (SOL)
- Polkadot (DOT)
2. Use Blockchain wallets and transfer your crypto to it :
After the purchase of cryptocurrency, it’s available in the exchange from where you bought it. Some of the exchanges have their own staking program for selected cryptocurrencies in such cases, you can stake your crypto directly through the exchange.
Or you can use a blockchain wallet, also known as a crypto wallet. Within your wallet select the option of deposit crypto and then select the type
also known as a crypto wallet. Within your wallet select the option of deposit crypto and then select the type of cryptocurrency you are depositing. A wallet address will get generated and then go to your crypto exchange account and select crypto withdraw. At last paste the wallet address you copied on the exchange account to transfer your cryptos from the exchange to your wallet.
- Join Staking pool:
Based on the type of cryptocurrency there are various ways of staking crypto, but the most common one is a staking pool. Numbers of crypto holders contribute funds to these staking pools that improve their chance of earning rewards.
But there are certain things you should keep in mind while choosing the staking pool, such as:
Uptime: You should go for the staking pools whose servers have an uptime of 100% as you can’t earn rewards if your servers are down.
Fees: Look after the cut your staking pool is gonna get from the rewards as a fee. Usually, fees depend on different cryptocurrencies but the ideal rate is 2% to 5%.
After selecting your staking pool you can stake your cryptocurrencies via its blockchain wallet and you’ll start earning rewards.
Risks involved in Crypto staking:
Crypto staking is reward yielding investment, but it also involves some risks that you should be aware of so that you can take decisions smartly.
- Cryptocurrencies are unstable. Sudden price changes can sink even greater rewards you earned. Staking is great for those who don’t intend to exchange or trade their digital assets any time soon.
- Staking often requires a minimum lock-in period. During that period, it’s not possible to do anything with your staked assets such as withdrawing or selling them.
- Hacking has the potential to damage either the platform or your cryptocurrency. Even the most popular staking platforms that have been around for quite some time now are still prone to security breaches and hackings. That’s the reason many crypto investors choose hardware. wallets to stake their funds.
- Fraudulent returns or staking platforms. Some staking platforms or currencies may offer huge returns, but such platforms are not trustworthy as it leads to the loss of rewards and funds. Therefore, in-depth research currencies may offer huge returns , but
- such platforms are not trustworthy as it leads to the loss of rewards and funds. Therefore, in-depth research and inspection of the platform is a must before you stake your funds.
How much you can earn through staking?
Crypto staking is the best alternative for the investors who are looking for long term investments and earnings and are not affected by fluctuations in the price of the asset. According to a survey, the average rewards rate for staking of top 261 staked crypto assets is more than 11% annually, although it’s subjected to change anytime.
Also, staking pool fees also affects the rewards you will receive. Staking pool operators deduct their cut from the rewards for the work and efforts, which affect the percentage of the overall return. And these charges vary for different blockchains and pools.
You should always opt for the staking pool that charges low commission rates and has a track record of validating numerous block. transactions as it will maximize your rewards and minimizes the risk of pool penalties or suspension from the validation process.
Cryptocurrency staking allows cryptocurrency owners to earn income without having to directly trade in their cryptocurrencies. While this may seem like a dream for cryptocurrency owners. It’s important to look at the risks involved in the staking process, especially when considering that many staking benefits are relatively small and likely won’t cover your entire investment; it’s crucial to note that investing in the cryptocurrency market is extremely risky if the staking pool is offering you the unrealistically higher returns and rewards than the normal market profits.
Crypto stakers can potentially increase the face value of their currency holdings and also earn interest while contributing to the crypto community.
Q1. Where can I stake my Cryptocurrencies?
Ans- There are a number of platforms from which you can choose that suit you best for staking your cryptocurrencies. Some of these platforms are Exchanges, Binance Staking, Coinbase staking, Karken, Celsius etc.
Q2. What is a Hardware wallet?
Ans- A hardware wallet or cryptocurrency wallet is a device, physical or virtual medium, or a service with which and/or inside of which you can put your cryptocurrencies such as cryptos and private keys of crypto transactions like the bitcoins for example. Aside from the key feature of storing your cryptocurrencies, a cryptocurrency wallet also generally comes prepared with the functionality to send and/or receive information about cryptocurrencies in your ownership whether accessing them for whatever purpose or selling them for profit.
Q3. Can I start staking with any cryptocurrency I own?
Ans- Cryptostaking is only possible with those cryptocurrencies that use the proof of stake model for verifying the transactions and adding the blocks to the blockchains.
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