What is Staking?

Written by Pedro Lopez

June 30, 2022

The cryptocurrency market is becoming one of the most profitable markets for retail and institutional investors. Not only has it introduced new ways to invest, but the possibilities it offers are increasingly practical for those looking to earn passive income in new ways.

Well, staking is based on that principle, powered by blockchain technology and cryptocurrencies. This method is beginning to be applied to many sectors of the crypto world, as is the case with NFT staking.

What is Staking?

Staking is the process through which cryptocurrency holdings are delegated or blocked in order to earn rewards. This entails acquiring a series of cryptocurrencies that the investor will keep in his digital portfolio or wallet to earn long-term rewards.

The user can obtain extra earnings by buying and keeping their cryptocurrencies locked in a wallet. As we can see, it is a process that takes time, so it is not a method in which immediate benefits are obtained. Here the holders (investors who prefer to store cryptocurrencies to get a long-term return) use coins to add new blocks to the associated chain of blocks, and consequently receive a reward in the form of additional coins.

Staking is also a method used to validate transactions in a variety of systems, such as Proof of Stake (PoS), Proof of Authority (PoA), or Delegated Proof of Stake (DPoS). This is done through the process of validating transactions on the blockchain, known as proxy mining.

How can I benefit from staking?

Cryptocurrency staking is still a very young concept, but it has brought with it a lot of advantages for crypto investors:

  • Passive income: This is the main attraction of cryptocurrency staking. Thanks to this method you can get rewards just for keeping your cryptocurrencies in your wallet, which means that you can earn passive income without having to do practically any work.
  • Averaging losses in a bear market: The cryptocurrency market is characterized by high volatility. Since staking requires you to lock up your cryptocurrency, it can help prevent you from selling during market downturns and can help you resist the urge to make impulse purchases.
  • Secure the network. This method contributes exponentially to securing the network. Therefore, you are not only obtaining economic performance, but you are also securing the network on which you are working.
  • Opportunities: One of the values ​​of this practice is that it offers a wide range of investment possibilities. Staking can be done with a variety of different cryptocurrencies, so you can choose any project.

How does staking work?

The process to stake cryptocurrencies and obtain profits can be somewhat complex for those users who are just entering the crypto world, and for this reason we have seen fit to offer a small guide regarding how this process works.The first and most important thing is to be registered in an Exchange to be able to access the purchase of cryptocurrencies.

Next, you need to buy the tokens of the cryptocurrency you want to profit from.

The user must deposit all the tokens that he has bought in the specific cryptocurrency wallet for staking. This will give the cryptocurrency wallet the ability to use the tokens you have purchased to validate transactions on the cryptocurrency blockchain.

Once this is done, the wallet will reward you with a small amount of the value of the cryptocurrency with which you are staking.

Like any investment, staking also carries a series of risks, so it is necessary for the user to understand this before jumping into the action. With good research on this entire process and an analysis of its entire operation, you will be able to decide if this practice will be profitable for you in the long term.

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