There are currently a number of concepts that promote investment mechanisms and transaction methods using blockchain technology and related cryptocurrencies, including Staking Coin. Staking involves locking down your digital assets such as BitCoin, Ether, USDT for rewards.
So what is staking? And how can users increase their income with Staking Coin to earn cryptocurrency? This article will help you find out what is the easy answer to Staking?
I. What is staking?
Staking can be understood simply as locking or holding a certain amount of coins/tokens for a certain period of time. The purpose of this is to receive rewards or help support security, maintaining the operation of some blockchains using the Proof of Stake (PoS) consensus mechanism.
First mentioned in 2011, the Proof of Stake (PoS) consensus mechanism was born to address the energy crisis of validating transactions on the Blockchain by encouraging users to stake their assets. In return, they will receive a block reward for their contribution to the operation of the blockchain. This bonus is calculated based on the number of stake assets and the duration of the stake.
Today, staking is seen as a popular and not-so-complicated form of passive income creation in the crypto market. By locking their crypto assets in their wallets or on exchanges, users can get rewards. It’s like saving from a bank.
II. How does staking work?
To fully understand how staking works, you need to understand how proof of stake works.
Proof of Stake (PoS) is the authentication mechanism or consensus algorithm of the blockchain. In PoS, block authentication does not occur through mining as in PoW but is done through coin/token stakes. The greater the stake assets, the higher the chances of being selected to become authentics as well as receive block rewards. After the authentication process is successful, the rewards will be divided among participants corresponding to the contribution rate.
You can see the image below to see the difference between Staking and Mining to better understand how it works.
Anyone who wants to participate in the staking process must own a coin/token in the blockchain system. After successful staking, the coins/tokens will be locked down as collateral for the network.
So, to start staking, you need to take some of the following steps:
- Choose a coin/token with a staking mechanism and buy at least a minimum amount as required.
For example, you need to hold at least 32 ETH to start staking ETH 2.0.
- Install a wallet configuration or computer configuration to prepare staking.
- Deposit coins into wallets/computers/exchanges.
Note: If you are staking on a cold wallet then you must make sure it is connected to the internet 24/7.
- Once everything is ready, you just need to check the amount of assets you’ve taken away from time to time to make sure everything goes smoothly.
III. Staking classification
Staking in the PoS consensus mechanism
In the PoS mechanism, you stake coins/tokens to ensure, demonstrate your ability to process transactions and create blocks. In return, you will receive a reward corresponding to your effort, including stake time and stake asset volume. This staking directly impacts the blockchain network.
For example, Staking PoS coins in Blockchain Platform projects such as TomoChain, IOST, OneLedger (OLT), WAX, Tron (TRX) ,…
Staking gets rewards
In this form, users will lock their crypto assets in projects on centralized/decentralized platforms and protocols for rewards (usually transaction fees or project tokens/ tokens). This type of staking is not directly involved in transaction authentication or any task related to activities within the blockchain. However, projects still call it staking.
For example, Staking receives rewards on exchanges such as Binance, Coinbase, Bitfinex, Huobi, OKEx,… or PancakeSwap, Uniswap,…
IV. Benefits of Staking
Cut costly investment costs
The first advantage of staking coins is that it does not consume much electricity and does not require expensive machinery such as high-end GPUs or ASICs. This makes it easy for investors to get involved without having to spend too much initial or operating costs like mining.
Generate passive income
Instead of leaving on the exchanges and the coins remain there, you can stake to make more profits. Of course, this will be suitable for you who own the amount of idle coins that are not used for a period of time. If you are a trader and often have to exchange and use those coins, the stake will lock your coins up during the stake and can miss out on good investment opportunities.
Simple and Easy
Staking doesn’t require you to have an understanding of complex computer algorithms or how machines like mining operate.
All you have to do to start staking is buy a coin/token and put it in your wallet for a stake. Even with some platforms, you don’t need to do anything at all. On Binance, for example, you just need to buy the coin and keep it on the floor to get a reward.
Improving network safety
To carry out an attack, hackers must hold 51% of the network’s power, meaning they must hold more than 50% of all coins in the market. If you want to do that, the only way is to buy the coins back.
In fact, it is difficult to find a group of hackers capable of buying such a large amount of coins. Therefore, it is almost impossible for the network to be hacked by hackers.
V. Risks from Staking
Risk of loss or theft
The first risk to mention is the possibility of a cybersecurity incident that could result in the loss of your assets being staked in an exchange or online wallet. To eliminate this threat, some cryptocurrency investors have turned to the option of stakes in cold wallets.
Cold storage of your crypto assets will protect your assets from cyber attacks, as the hardware is not connected to the internet. However, loss or damage to hardware can also occur when using this form of stake.
Another risk is that the price of the coin/token you are holding is likely to fall during the stake. Since the stake will lock your coin for a period of time, you will not be able to liquidate your assets in case the market moves downwards. Therefore, you risk losing a portion of the principal without having to cut the loss. This will affect your overall profitability.
Running an authentication node to stake cryptocurrencies involves technical issues to ensure that there are no interruptions during the stake process. Nodes need 100% uptime to maximize stake returns.
Furthermore, in the event that the authentication nodes are misrepresented or interrupted, you may be subject to (rather severe) penalties that affect your overall stake income.
VI. What is staking pool?
Staking pool can be understood simply as a group of coin/token holders to consolidate their resources. By this consolidation, the chances of being selected to authenticate blocks and receive rewards increase. This is the main reason behind the popularity of staking pools today.
The reward will then be divided among pool contributors in proportion.
Staking pools usually yield smaller but more frequent returns. The reason is that a pool with a large amount of coins/tokens will have more chances of being selected than a single individual. But that’s why the rewards must be divided among the participants in that pool.
In addition, most pools will charge a fee collected from the participants’ staking rewards because organizing and maintaining a pool requires significant resources. In return, they require a fairly small number of coins/tokens to start participating, and you can unstake your assets at any time. If you are new to the market and are interested in staking, this may be an ideal option for you.
VII. How do you make money from staking?
For stakers with small amounts of capital
The solution for you is to participate in the pool staking pool to receive a reward corresponding to the coin/token ratio that you have contributed to the pool.
This includes staking on some exchanges or platforms that offer staking services. A lot of them allow you to make more profit thanks to promotions.
For example, Coin98 recently partnered with PancakeSwap to launch the CAKE stake token feature on Pool Syrups to receive C98 tokens with an initial return of more than 7,000%.
Also, consider choosing the best and high-interest-rated coin stakings to maximize profits. However, it should be noted that this interest rate is only expected and can change over time, so you should regularly monitor them and can occasionally switch to other coins to hedge risks and increase profits.
For stakers who own large amounts of capital
If you own a large token salary, you can consider taking a stake in staking pools or staking products like the above or applying for the node, masternode of the network to receive more rewards. However, if you become a node, almost all of your coins will be locked during that time. And in the worst-case scenario if there is a mistake (by mistake) or interruption in the staking process, you can be fined and lose a portion of your total profit.
The best staking coins
Since its launch, C98 tokens of Coin98 Finance, a Vietnamese company, have attracted the attention of the crypto community by successfully raising $1.25 million in the Seed Sale round. Coin98 focuses on developing applications across the DeFi ecosystem with three main products: Coin98 Exchange, Coin98 Wallet and Coin98 Portfolio.
After being listed on Binance, the coin’s price has risen more than 45% from $0.95 to $2.04 in just two days and is now in the top 220 market capitalization according to CoinGecko.
Coin98 Staking currently has:
- Stake BNB-C98 LP, $CAKE on PancakeSwap. The profit is quite attractive, up to more than 500,000%.
- Stake $C 98, $OSWAP on OpenSwap.
With what C98 does now and the promising potential in the future. This can be considered the most valuable coin in 2021.
To stake BNB, you must set up the hardware with the necessary specifications, run a full BSC node and deposit a minimum of BNB 10,000. But those are just the requirements for you to become a candidate for the position of authentic person. To participate in authentication and create blocks, an authentic candidate needs to be elected.
In turn, the annual profit of BSC validating is quite high, averaging up to 60%.
Fortunately, BSC offers an easier alternative for you. Through a BNB copper support wallet such as Trust Wallet, you can authorize and contribute shares to BSC validator. In return, you will receive a reward from the credentials’ income. Of course the better the authentics work, the higher your income.
For example, since March 2021, top-rated ankr have given the authorized an annual interest rate of up to 27%.
While ethereum 2.0 has not yet completed the upgrade phases, it has allowed users to staking ETH in exchange for rewards. This ETH will then be locked down and cannot be withdrawn until Ethereum 2.0 launches the Shard Chain, which is expected to be at least another year.
To stake ETH 2.0 you need to have at least 32 ETH and hardware to run a node as well as internet connection 24/7. The rate of rate of rate for ETH staking is expected to be around 4-10%.
Currently, Polygon (MATIC) can be considered one of the best PoS coins to staking on the market.
MATIC staking rewards range from 5.2% to 52% per year depending on the total number of MATICs being staked.
LUNA is the original staking token in terra protocol used to protect the integrity of the Terra protocol.
Staking LUNA does not require a minimum number of tokens. The reward received is fairly stable, at about 12% per year minus the authentication fee. The reward size will also increase as the volume of transactions in the network increases, including the LUNA mix and a variety of stablecoins. You’ll also get free sections of ANC, MIR, and airdrop sources of some future protocols.
With the above information, you already understand what Staking is and the benefits that staking coins bring. As a reason, staking has quickly become one of the favorite methods of investors looking to earn more passive income with cryptocurrencies.
However, like all forms of investment, staking still carries certain risks. So do your best before deciding to stake any coins.
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