What is Staking?

Staking is a method of earning interest on your cryptocurrency by storing it for a set amount of time. Staking works in a similar fashion to typical bank interest accounts.

Traditional banks pay interest because they use your money to create loans and invest in other things. Your cryptocurrency is used in staking as well. The Proof of Stake or "PoS" mechanism, in which deposited currencies are used to validate transactions on the blockchain, is referred to as staking.

Verified transactions are added to the blockchain as new blocks. Proof of stake is required for staking in cryptocurrencies that support it. Everyone who contributes to the successful creation of a new block is rewarded.

What are the Pros and Cons of Staking?

The Pros of Staking

Earn interest on your crypto

The Cons of Staking

Often a fixed term where crypto is locked

Faster transactions

Voting rights ( Cryptocurrency dependant)

Potential early unstaking penalties

May have charges attached

1
How does staking work?

Staking allows you to place your cryptocurrency into essentially a pool where you can earn interest, similar to how you would in savings interest account.

The reason you earn from the staking is that the blockchain uses your cryptocurrency in a consensus mechanism (Proof of Stake) so your crypto is being used in the process.

2
What are the advantages of staking?

Staking allows crypto holders to have their crypto work for them and generate rewards and additional crypto rather than sitting stagnant in their wallet.

Staking allows holders to also contribute to the blockchains efficiency

3
Are there any risks to staking?

Similar to a term deposit, some staking opportunities require a vesting period whereby you cannot transfer or access that crypto during the holding period. This is only a problem should that coin have some price fluctuations in which you would ideally prefer to be selling the asset rather than holding.

4
How do i start staking?

Staking has become a much easier process for crypto holders to get into with many centralised exchanges now offering staking opportunities for holders.

To operate a full validator requires a substantial investment (32ETH) but requires a much higher level of understanding and technical knowledge.

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