Looking for a way to put your crypto to good use? Staking makes it possible to earn passive income with crypto you already own. Here’s what you need to know about it:
Staking is the act of pledging your crypto to help secure and verify transactions on a blockchain. In return for this, you earn rewards from the network.
There are several benefits to staking your crypto:
- Passive income. Staking is mostly a passive activity, which means you can earn rewards without having to do much (or any) work.
- Returns. Staking typically offers a higher return on investment (ROI) than simply holding crypto, especially if the staking wallet compounds your interest.
- Participation. You can support the network you believe in and help it grow.
- Low cost. Staking can help you earn rewards more cheaply than mining, as staking requires less computing power and no specialized equipment.
There are a few risks to consider before staking your crypto:
- Volatility. The value of your staked assets can go up or down, just like any other crypto asset.
- Loss of control. Once you’ve staked your assets, you won’t be able to access them until you unstake them (which usually takes a set period of time).
- Slashing. If a validator sends invalid transactions, the network may penalize, or “slash,” parties who would otherwise receive rewards. This is meant to discourage bad behavior on the network.
Staking only happens on cryptocurrency networks that use the proof-of-stake model as their consensus mechanism. A consensus mechanism is the process that a blockchain network…