What is crypto staking and what are its benefits?

Crypto staking is essentially the process of locking up a certain amount of your holdings as collateral in order to validate transactions and gain rewards. You can stake your crypto through specialised applications, which can offer user-friendly interfaces and simplified procedures, such as a wallet application such as a ledger, mobile wallet or web wallet, or use an exchange to stake your tokens for you. There are numerous crypto assets that can be staked, like Cardano (ADA), Ethereum (ETH), Tether (USDT), and Solana (SOL), with a growing ecosystem of tokens adding the ability to stake and gain rewards.

In any case, think of staking as locking up your funds in your savings account. The longer the lock period, and the more funds you tie down, often the higher returns you can expect. Despite the similarity of outcome, there are major differences between staking and regular saving, among which is the potentially higher returns staking features. 

What is Proof-of-Stake (PoS) and how does it work?

Proof-of-Stake (PoS) is a consensus mechanism that countless crypto ecosystems use to ensure security and integrity. PoS is regarded as one of the most optimal currently available consensus mechanisms by many, mainly thanks to its scalability, cost efficiency, and environmentally friendly nature.

Contrary to Proof-of-Work (PoW) algorithms where consensus is backed by substantial amounts of special computational work, Proof-of-Stake systems utilise locked up crypto holdings as disincentives against malicious behaviour. In PoS, nodes need to put up a predetermined amount of crypto tokens in order to verify transactions and collect rewards, and if the network detects that they attempt malicious actions, it permanently seizes their stake. This way, nodes will likely not tamper with transactions, as their stakes are too significant to lose.

How can you stake your crypto assets?

Staking your crypto assets can sound like an intimidating experience, but can be an easy and rewarding experience when using the best set of tools and platforms. Usually all you need to do is choose which crypto token you’d like to stake, connect your wallet to a specialised application, enter the amount and the lock period you’d prefer, agree to staking terms and conditions, and you’re ready to go. One thing that you definitely should keep in mind is that during the lock period, you will not be able to sell or move your crypto assets in most cases.

What returns can you expect from crypto staking?

Just like savings’ interest rates, staking returns can also vary. For instance, your rewards are expected to be lower if you stake a stablecoin, such as Tether (USDT), than staking Ethereum (ETH), Cardano (ADA), or Solana (SOL). With this in mind, the bottom line is that your returns can range between a few to double-digit percentage points per year, depending on the application and the specific terms at hand.

Ending Remarks

Overall, crypto staking is popular for good reasons, namely solid returns, easy accessibility, and underlying utility. With coinpass, staking your crypto assets is easier than ever—stake crypto, and take a step towards the life you dream of today.