what-is-cryptocurrency-staking

What is Cryptocurrency Staking?

Cryptocurrency Staking is how a crypto holder can mine/mint new cryptocurrency coins in return for keeping their wallet open.

To elaborate on this concept, let’s say that your cryptocurrency is similar to “money” and the blockchain network to “banks.” The financial institution allows you to deposit fiat currency in an account to keep them safe.

Afterward, you may get certain benefits and additional services – such as a possibility of a loan. In cryptocurrencies staking plays exactly (or almost) the same role; however, instead of banks, we have mining farms, mining pools, and supernodes.

What is cryptocurrency staking?

Staking is a type of activity in cryptocurrency networks where users are rewarded for validating transactions to secure the blockchain. This process is also known as proof-of-stake (PoS). It is the process of securing a blockchain network by using your computing power and helping verify transactions. When you commit your crypto for staking, you’ll receive a part of the transaction fees collected in each block.

The many coins you have staked, the higher your rewards will get. You can stake with small amounts, but you’ll get more rewards if you stake with plenty of coins. Thus, staking allows you to earn passive income with cryptocurrencies.

You don’t need to do anything except hold your crypto in the wallet that supports staking or have it in your possession. You will start receiving rewards for the cryptocurrency you are staking as soon as you start taking it.

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How does cryptocurrency staking work?

Staking refers to the process of providing pledging your crypto holdings to help secure the blockchain and validate transactions. Staking rewards come in different forms, depending on the project you are staking. In most cases, staking rewards are a percentage of the total new coins created and distributed to coin holders. The rate you receive depends on how much stake you have with all other stakeholders.

What is Proof of Stake?

Proof-of-Staking (PoS) is when the network validates transactions and distributes the block rewards among other users for each transaction. Staking cryptocurrency means investing in a blockchain network that operates on Proof of Stake.

In contrast, the Proof-of-work (PoW) algorithm uses computationally intensive methods to validate electronic transactions. To stake means to pledge a part of your asset to help support a cryptocurrency platform (i.e., exchange).

In PoS, instead of mining for cryptocurrency, users can earn rewards for keeping their wallets open. This process is known as staking or “minting.” rewards from staking go directly to holders on top of any transaction fees they may collect in the process.

Ways to Stake Cryptocurrency

Staking is usually done in fractional amounts and requires no technical expertise or special hardware, making it a desirable proposition for people who want to invest in crypto but may not be technically savvy or proficient in mining.

The process of staking depends on the Proof of Stake protocol. For example, to stake HI, you need to hold a certain amount of HI in your wallet for a minimum period.

A PoS system typically rewards users according to their stake size (the number or percentage of coins staked), but some coins may not require you to hold any coins before you begin staking them.

Below are the different ways to stake cryptocurrency.

1. Through an exchange

Select an exchange platform. The very first step is to find the best exchange platform for you. Some of the most popular choices among crypto enthusiasts include Binance, Coinbase, and eToro. The exchange stake your token on your behalf. In return for using this service, the exchange charge some commission.

To stake crypto through an exchange, open an account with your preferred platform. Sign up on an exchange platform for an account by providing your name, email address, and password.

🔥 Best Cryptocurrency for Staking in 2022

2. Join a Staking pool

If you want to invest more in cryptocurrencies, you must know about staking and how to join a staking pool. It gives you a share of the profits generated by block mining and ensures that your coins are safe at all times.

Staking pools are groups of people who have pooled their cryptocurrency together to get interest in the coins they hold there. You can join one of these groups or “pools” and earn anywhere from 2 percent to even 20 percent per month on the coin that you hold in the pool. It is straightforward to connect your crypto wallet with the validator’s pool and transfer your tokens for staking.

3. Become a validator

Validators are nodes that store the entire blockchain for a cryptocurrency, verifying transactions and adding them to the ledger. It is similar to how a bank processes transactions.

Instead of keeping transaction records on its servers, validators hold all cryptocurrency transactions in an encrypted digital ledger.

Validators collect fees from every transaction they approve. They also receive newly minted cryptocurrency at regular intervals in return for performing this work. In addition, if they’re operating in a proof-of-stake system, they also earn interest on their holdings of crypto (this interest is paid out in additional cryptocurrency).

However, being a validator requires setting up a staking infrastructure, which might be costly. Also, entry costs can be a bit high.

Is cryptocurrency staking profitable?

Staking is an excellent option for anyone who wants a passive income stream. When looking for a cryptocurrency to stake, you should consider the network transaction fees. You should also think about how long you’re planning to hold your coins. If you’re planning on selling your coins after just a few months, then staking may not be the best investment option for you.

📖 Read more on: Is Staking Crypto Worth It?

Start staking HI

HI is one of the leading cryptocurrencies you can stake to earn passive income in HI on a daily basis. You can stake and earn HI directly with the chatbot by answering a simple questions daily. hi also has a Flexible Earn program in which you can earn up to 11% of your deposited coins (such as USDT). To stake hi Dollar, simply head over to Telegram or WhatsApp to register. Alternatively, you can register on the Web App to purchase HI directly from the website.

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