Cryptocurrency is a digital currency that functions as a medium of exchange. With cryptocurrency, we can buy products and services or earn profits from trading. Cryptocurrency also makes it easier for us to trade internationally and engage in confidential transactions.
We can enjoy countless benefits when we use cryptocurrency as our financial platform, but we need to understand certain concepts to maximize it fully. Crypto staking, for one, is an important concept to remember because it lessens our susceptibility to cyber attackers.
Defining Crypto Staking
Crypto staking is gaining popularity worldwide because it provides effectiveness and security to the blockchain network in exchange for incentives without wasting resources. There are two types of staking: Proof of Stake and Delegated Proof of Stake. The first type works by freezing our coins for a certain period to validate transactions done through the blockchain network, while the second type involves a delegate who is elected by stakeholders to become a block producer or validator.
In crypto staking, the right to validate transactions depends on how many coins are locked inside a particular wallet. In this process, stakers are also incentivized to add a transaction on a blockchain or find a new block. Aside from the incentives, POS blockchain platforms have high transaction speeds and are scalable.
This concept was introduced in a paper in 2012 with the intent of solving Bitcoin mining’s high energy consumption. During that time, the average cost of maintaining a Bitcoin network was $150,000 a day.
Benefits of Crypto Staking
Using or investing in cryptocurrency can already provide benefits, but using crypto staking at the right time can amplify these benefits. In fact, knowing how crypto staking works can become our leverage when investing in cryptocurrency. Here are some benefits of crypto staking.
1. No Equipment Needed
Unlike other point of work or POS systems, staking will not require us to purchase expensive equipment. This will make it easier for us to earn incentives and secure our assets even if we’re just starting to use cryptocurrency.
2. Provides Passive Income
By staking at the right time, we can earn passive income while still having full control of our digital wealth. For anyone looking to make money easily, crypto staking is a great option.
3. Non-Technical Process
There are many concepts to know and practice when trading cryptocurrency, but most of these are technical, making it challenging for novices to fully understand them. Crypto staking is different because it’s non-technical and is easy to use. There are now many platforms that allow us to stake with ease.
Since POS chains are less energy-intensive, crypto staking is known to be environmentally friendly. Crypto staking has a smaller carbon footprint and has little impact on the environment.
POS chains are cheaper to run in the long run because they don’t require any expensive equipment, yet they allow us to earn passive income. This is something that point of work or POW chains can’t provide.
Knowledge Is Power
Crypto staking might still be a new practice for some, but it’s bound to revolutionize the face of cryptocurrencies. As more and more POS networks start to grow in influence, it’s best if we start learning about crypto staking and using it as an investment tool.
Even if we’re still new to cryptocurrency, we should take the time to research our options and consider taking them. As always, we should be fully informed of the benefits and risks of crypto staking before we decide to take any actions.