What is Crypto Staking And How To Benefit From It?
There are several avenues of cryptocurrency you could make money from. Crypto staking remains one of the most effective and easy ways to make money through blockchain. Most investors are turning to this gold mine in bid to get high investment returns. As cryptocurrencies have eliminated the over reliance on traditional stock brokers and stock exchanges, investment in the cryptocurrency sphere is now becoming a hot trend. The volatility downturn associated with crypto investment has made investors look for other alternatives to rip more profits. Apart from cryptocurrency mining and trading, the Proof of Stake methodology has introduced the world into staking. Staking has compelled many investors to play it safe in the risky business of crypto trading.
The proof of stake consensus algorithm works by way of ensuring all network participants are holding a given amount of coins in a fixed wallet for a certain amount of time.
What is Crypto Staking?
Staking involves holding digital currency in your wallet for a fixed duration and continuously earning interest from it. The end profit resulting from crypto staking normally depends on the duration you have held the cryptocurrency. The higher the duration, the higher the gains.
The concept of crypto staking is not a new one, since it has been the idea behind earning interest from dividends. The long forebear market is almost making it less valuable to invest in crypto trading as the gains are hardly fruitful. Therefore, staking closes a market gap for rewarding the denominated digital assets being staked.
The staking returns are usually an end product of Proof of Stake (POS) Consensus Algorithm. The algorithm was introduced by Sunny King and Scott Nadal as a peer to peer method of verifying transactions.
What determines the amount of Returns in Proof of Stake?
There are two important factors that will influence the amount of reward you gain from crypto staking. These factors include;
With simple interest, reinvestment is allowed after the expiration of the staking coin. Compound interest, will allow you to reinvest in the reward.
The higher the duration of staking; the higher the amount of returns. 12 months of staking will guarantee you a 100% return on the staked amount, 6 months will return 50%, while 3 months will return 20%.
Type of Coin
The valuation of your return on investment usually depends on the type of coin staked.
Benefits of Crypto Staking
No need for mining machines
The main benefit of crypto staking remains to be its avoidance of expensive mining hardware. The only requirement is to buy crypto coins and hold them in a fixed wallet. Once in the wallet, the coins will grow their value. This makes the method quite a simple way of making money. In case you had planned to buy some mining hardware, you could also turn to buying coins with the money instead. The method will actually guarantee you a return on investment.
Ability to mine coins
With staking, you can also mine coins too. The amount of mined coins will usually be influenced by the amount of coins held in the wallet.
Guarantee of getting returns
The market valuation of the coin goes high and simultaneously increases the value of staked coins. Therefore, crypto staking offers you a guaranteed and predictable source of earning interest with time. You can compare this to placing your money in a strong fixed bank account, you will always have the guarantee of getting your money back.
The only disadvantage of staking a coin is that you cannot have the coin sold after staking. Until the coins maturity or expiration date, can you have your returns and then sell the coins if you need to.
The benefits of crypto staking can be established even among people with little to no trading knowledge. You don’t have to study and understand complex market patterns for you to gain profit. The only risks associated with staking are the systems vulnerability to cyber-attacks. Crypto staking requires that a computer remains online. Most of the times, staking requires your computer to remain online always. This makes a forger’s computer vulnerable to IP address exposure. Having your machine hacked potentially makes it easy to have your private key accessed.
Shreya holds an engineering degree from a reputed college. Skilled in Public Relations, Project Management, Business Management, Negotiation and besides these her interest in writing for various technology platforms. She is an avid follower of Blockchain Technology and passionate about the latest technologies.