How to stake your cryptocurrency
What is staking ?
Staking is the process of delegating or locking up crypto holdings to earn rewards.
Some of the rewards you can earn from staking are earning additional tokens, for
example Crypto staking is similar to depositing money in a bank account, in which an investor
locks up their assets, and in exchange, earns rewards
What is block chain ?
Its a network of blocks connected without going down deep in technical stuff so we have
network of connect blocks it allow us to use direct transaction, peer to peer transaction
or connections
Proof of work.
Proof of Work is the original algorithm in a blockchain network. The algorithm is used to
confirm the transaction and creates a new block to the chain. In this algorithm, miners ( the person who obtains units of a cryptocurrency by running computer processes to solve specific mathematical problems) participate against each other to complete the transaction on the
network.
Proof of stake.
It’s the mechanism that allows transactions to be gathered into blocks. These
blocks are linked together to create the blockchain More specifically, miners compete to solve a complex mathematical puzzle, and whoever solves it first gets the right to add
the next block to the blockchain.
How does staking work in cryptocurrency?
Those Cryptocurrencies which use the proof-of-stake model can be utilized for staking. Every time a block is added to the blockchain, when a new cryptocurrency coin is distributed as staking reward to that block's validator. If you
want to stake crypto, you need to own a cryptocurrency which uses the proof-of-stake
model. Then you can choose the amount you want to stake .Your coins are still in your
possession when you stake them. You're essentially putting them to work, and you're
free to unstake them later if you want to trade them. The primary benefit of staking is
that you earn more crypto, and interest rates can be very generous. In some cases, you
can earn more than 70% or 100% per year. It's potentially a very profitable way to invest
your money.
Risks of staking.
Cryptocurrency is a volatile investment, and as such, price swings are common. The
volatile nature of crypto and corresponding price swings can make you rethink of your
strategy on a daily basis. Staking involves locking up your funds for a specific period of
time, and if you lock up your holdings for months (or years), you won't have access to
them for some time.