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Staking is a familiar term for crypto investors as they usually see it as a way to earn rewards. However, for those who are naive to the market, the term is not that easy to understand.
Staking is a method to verify the transactions of many cryptocurrencies, and it enables participants to earn rewards on the digital assets they hold. Staking cryptocurrencies refers to a process that involves committing your crypto assets to back a blockchain network and verify transactions. The process involves “locking up” a certain percentage of your cryptocurrency for some time to contribute to a blockchain network. In return, stakers can earn rewards, usually as additional coins or tokens.
Staking has become a common and widely used method for generating passive income, mainly because specific cryptocurrencies provide attractive interest rates. It should be noted that staking is available with cryptocurrencies that use the proof-of-stake (PoS) mechanism to process payments. The PoS model is far more energy efficient than the proof-of-work (PoW) model, which requires mining devices that require computing power to solve complex mathematical equations. Though not every cryptocurrency can be staked; however, most can.
Participants pledge their coins to the crypto protocol in the initial steps of this process. From those participants, the protocol selects validators to verify blocks of transactions. The higher the number of coins you pledge, the more chances you have to become a validator.
The possible rewards you can reap from staking are directly impacted by how much you are ready to put at stake.
Here are a few steps on how to stake crypto step by step:
Since cryptocurrencies are volatile, staking carries a lot of risks. This is because if your staked assets see a drastic price drop, that could overshadow any interest you earn on them.
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