What is coin staking?

If you have heard of the statement, “earn while you sleep,” then you might probably want to continue reading this.

If you’ve been keeping up with crypto or just watching your evening news, you’ve probably heard about cryptocurrency staking.

Coin staking is how many cryptocurrencies verify their transactions, and it allows participants to earn rewards on their holdings. It helps keep the blockchain secure while allowing crypto holders to make a little extra money on the side. As such, staking can be a great way to use your crypto to generate passive income.

This is a guide curated to help users understand coin staking, its profitability, and why it should be considered as a viable means of earning crypto passive income. It is crucial to note that this is not financial advice.

What is coin staking?

Staking is a form of transaction verification in which users commit their assets to support a blockchain network by confirming transactions. In return, they earn rewards with new coins similar to the one staked. Not all coins can be staked. Staking, however, is only available to Proof-of-stake (PoS) cryptocurrencies. This is because the PoS model does not require massive amounts of electricity and computing power like the Proof-of-Work (PoW) consensus algorithm originally developed for Bitcoin. 

So, users only need to lock up a certain amount of their coins or tokens to become trustworthy enough to operate the blockchain network. The more crypto you pledge (stake), the higher your chances of becoming a validator (or miner) since the system considers you more trustworthy than other users. When staking a coin, you help validate and record a new block to the blockchain, which yields staking rewards similar to the native cryptocurrency.

Although the reward often comes in the same coin/token you used to stake, some projects create an opportunity to stake one coin and get another as a reward.

Benefits of coin staking

Staking has proven to be a more energy-efficient alternative to mining which is hugely popular with Proof-of-Work mechanisms like Bitcoin. BTC mining, for instance, consumes a lot of electricity since the computers have to work non-stop to verify transactions. Besides, people usually invest thousands of dollars into equipment to increase profits. With cryptocurrency staking, there’s none of that. 

All you need to do is buy crypto, lock up your coins inside a staking pool and sit back to enjoy the privileges and benefits. You don’t lose your coins either, but some projects might require you to stake your coins for a specific period. In that case, you’ll be charged some penalties if you decide to withdraw or sell your crypto (also known as unstaking) before the staking period expires.

Many upcoming DeFi (decentralized finance) penalize users who unstake their crypto early to protect the project and prevent price manipulation. Locking up your coins for a specific period of time shows that you have faith in the project and encourage others to invest, thus further increasing or stabilizing the price of the coin. 

Furthermore, you’ll be helping to maintain the security and efficiency of the blockchain whose coin you’ve staked. That said, you may find some projects that allow you to take your coins and withdraw them anytime you want, with no consequences.

Why should I stake cryptocurrency?

The biggest benefit of staking is that it offers an easy way to earn interest on your own cryptocurrency. Rather than wait for years for the next crypto bull run to come and take your crypto to sky high, you can simply stake them and start earning profits right now. Yes, you will still be able to wait for the price to increase, but while you’re waiting, why not start receiving rewards for holding crypto? Think of staking as a way of earning from your crypto twice – like holding shares and still receiving dividends every quarter.

In truth, staking is not new. People have been engaging in coin staking for a long time, except that cryptocurrency allows you to do it in a decentralized way.

How much can I earn from staking crypto?

You don’t usually need a lot of crypto to stake. Most platforms ask for a minimum amount so as to make staking of their coins accessible to everyone. In addition, there are some attractive rewards offered for staking crypto. However, some coins offer better staking rewards than others. Binance.US, for instance, was estimated in late October 2021 that annual rewards for staking algo (the native currency of the Algorand blockchain) would range from 8 to 10%.

It is crucial to conduct due diligence to whether staking a particular coin suits your financial goals. Some of the things to consider include:

  • How big is the reward?
  • The size of the staking pool
  • The amount of supply locked.
  • Is the project transparent enough to be considered trustworthy?

Rewards, however, are subject to fluctuations. Depending on the coin and how long you stake your coins, your staked assets can suffer a significant price drop that could ultimately outweigh any interest you earn on them. Moreover, staking can require that you lock up your coins for a minimum amount of time. During that period, you can’t sell or withdraw your crypto holdings.

Lastly, the unstaking period may take longer than expected (sometimes it takes days or weeks), which can be frustrating to many crypto users.

Stake HI and earn

Staking can be highly profitable if you choose the right project with high rewards. If the project you selected is good and strong, its price will definitely rise, and you’ll be able to get more and more of the coin through staking rewards. Staking crypto is a reasonably straightforward process, and almost every project offers it.

HI is one of the leading cryptocurrencies you can stake to earn passive income in terms of daily rewards. hi is the world’s first cross-platform financial service system based on chat tools – no need to install a separate application. You can register and start earning HI by answering a simple question every day directly in Telegram or WhatsApp. Alternatively, you can register on the website to purchase HI directly from the hi Web App.

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