STAKING IN CRYPTOCURRENCIES
One of the most searched topics around cryptocurrencies is how to earn cryptocurrency passively in a legitimate way.
There are many illegitimate programs out there that make wild claims of 1-3% a day in profit, or that AI trades for you, or that they use smart contracts to funnel money to you. You obviously want to avoid these traps as anything that promises such high rewards can be guaranteed to be a scam and eventually hurt those involved.
Mining has been one way people have earned cryptocurrency, starting with Bitcoin and then expanding to other proof of work cryptocurrencies, but mining comes with heavy upfront investment in equipment and also the electrical costs to run that equipment. An alternative consensus method, called Proof of Stake, allows users to participate in block creation and be rewarded by staking a certain amount of the blockchain’s native coin.
In this case, the investment is in the coin, which has an underlying value and requires much less electricity to run. There are pros and cons to each type of consensus method as each looks for the best way to operate the network while keeping it secure and decentralized. To learn more about the difference between Proof of Work and Proof of Stake protocols, check out our recent How-To Crypto Report on that topic.
Let us dig in now into what staking means and what resources you can use to evaluate staking rewards and earn passively on your holdings. Staking is the process of keeping funds either in a staking pool or in a cryptocurrency wallet while simultaneously running a node on the network to help in the block creation and allow the network to run efficiently and securely.
HOW STAKING WORKS...
Staking is your right to vote in a project as well. By holding your stake in the network and helping with block creation, those that stake can earn a reward that is paid out for this.
There are several versions of staking protocols. Some allow you to hold the cryptocurrency in your own wallet, in some cases, even a cold storage wallet, while others require you to either deposit to your online wallet tied to staking or deposit to a staking pool. Staking differs from traditional investment dividends in the fact that you are not being paid based on the performance of the asset or company.
Instead, you are being paid a return for helping to secure and run the network. While most will flock to staking to earn passively on cryptocurrency they may have otherwise just held in their wallet, many forget that the primary reason to stake is to be able to participate in a governance system that allows the network to operate and transactions to take place. Below we will look at the basics of how staking works and also some resources to help you in your staking decisions.
Staking involves buying or acquiring a cryptocurrency so that you can stake it, or lock up, in a smart contract. This allows you to participate in the governance and vote to approve transactions, although, most of the voting happens automatically as long as network parameters are followed.
Staking is an agreement to follow certain rules such as only approving valid network transactions while rewarding the staker with a staking reward. If a staker acts maliciously, they have the potential to lose some or all of their stake. When you research the staking rewards and requirements of different cryptocurrencies, you will see a wide range of % returns.
Usually, highly volatile cryptocurrencies or those that are little known, will offer higher returns due to the fact that there is more risk to holding the coins you are staking, plus staking rewards are paid in the same cryptocurrency. Trying to identify which coins are profitable to stake can seem like a daunting task, but there are resources available to help you with this.
Newscrypto’s Staking Reward tool is a great resource that helps you identify which coins are available to be staked, along with many other great tools such as a staking calculator, a ranking list of staking providers sorted by either centralized provider, defi, exchanges, or wallets.
Each cryptocurrency, when clicked on will have overviews, stats, and ratings on many aspects of the staking. Also, most will have information on instructions on how to stake that cryptocurrency in the FAQ section. Education is important when identifying what cryptocurrencies you will stake. Also, you must choose a platform based on the options available.
Staking, in many cases, can be done from your own hardware or mobile wallet, from a native wallet designed for staking, or on centralized exchanges or other entities that pool and pay staking rewards. While there is always a higher risk with centralized entities, many of those allow a user to pool whatever they are willing to stake, when that person may not hold enough to run a full staking node based on a particular crypto protocol. Always do your research when selecting not only what to stake, but where to stake it.
Now, let’s show you a way of staking made easy. Newscrypto allows you to simply and seamlessly stake your NWC tokens and not only earn a percentage back on your staked tokens, but also gives you access to either intermediate or advanced membership perks during your staking period. More details can be found here.
The Newscrypto platform allows you to purchase and stake your NWC tokens all from a simple and easy to use interface. You have the option of 3 month or 12 month terms to stake which have a set payout percentage.
If you see the value of any project available for staking, use the information to learn how to stake and compound your earnings. There are many good projects built on a proof of stake method, and if you choose to stake your cryptocurrency, make sure to take advantage of all the tools available within the Newscrypto platform.
Content written by Blockchain Wayne and NewsCrypto Analyst team.
