Crypto staking is a lot like earning dividends on your existing investment. It is a good way to have a passive stream of income by putting your existing assets to use. You can earn more cryptocurrency tokens as rewards when you stake your cryptocurrencies. The staked coins are used to validate the transactions on the blockchain network. Though it may seem like a mammoth task, anyone can stake crypto directly with the help of their digital wallets or by using the services crypto and bitcoin exchange offer for a commission. 

Typically crypto staking brings returns that are way more than what you can get from the interest in a savings account. But one has to remember that staking comes with its own set of risks. The rewards you earn through staking will be in the form of crypto which is a highly volatile asset. In some cases, you may have you lock your crypto tokens away for a particular period of time. There is also the possibility that you may end up losing your crypto as a penalty if your computer is unable to work as expected.

Do note that crypto staking is an interesting way to diversify your cryptocurrency portfolio with the help of the cryptocurrency that you want to go long on. As compared to the mining process used by Bitcoin, staking is a much more energy-efficient alternative to running a blockchain network. 

That brings us to how staking works!

In order to understand staking, one needs to be able to briefly understand the role of blockchain networks. Here is a broad overview that should help you:

Blockchains do not have an intermediary or a middleman because they’re decentralized. Thus, there is no bank involved in the process of validating new activities and ensuring that it is in line with the past record that the different nodes maintain all over the network. Rather, different users compile blocks of transactional information into data blocks and send them so they ca be added to the immutable record. For those whose blocks are accepted, a transaction fee is paid out in cryptocurrency. 

Staking is a step that helps in avoiding fraud and errors. When investors propose a new block or when voting takes place to accept a new proposed block, they put aside some of their assets for validation. This also incentivises and encourages people to go by the rules. 

Typically, the more crypto is at stake, the better chance an investor has in being rewarded. However, if there are some inaccuracies in the information provided by the blocks proposed, the investors may end up losing a part of their stake because of slashing. 

Where can you stake crypto?

You can start staking cryptocurrencies in many ways but this will depend on the kind of technical, financial, and research commitment you will be able to make. Your primary decision will be whether you will use your own system to validate the transactions or would you trust someone else with your cryptocurrency so they do the work for you. Networks that allow crypto staking generally let people with crypto tokens delegate the task to them so they can validate transactions on their behalf and earn a commission from their rewards. 

Using an exchange

Your easiest bet is to work with an online service that can do the staking on your behalf with your crypto tokens. Some of the prominent cryptocurrency exchanges can stake cryptocurrencies on your behalf for a commission. 

Joining a pool

In case you do not wish to allow an exchange to take the staking calls for you or if you’re unable to look for the exchange that backs the token you wish to stake, you may want to be a part of a staking pool that another user runs. 

To be able to do this, you should know how to use a crypto wallet so you’re able to link your tokens to the validator’s pool. You will be able to find more information about how you can research validators through the official websites of several proof-of-stake blockchains along with links to guide you to the way they operate. 

Becoming a validator

It can be a tedious task to establish your own crypto staking infrastructure. It needs fully functional computing equipment as well as software along with a copy of a blockchain’s transaction history from the very beginning. The cost of entry is also likely to be very high. 

For instance, to start on the Ethereum network, you should have a minimum of 32 ETH which would be roughly worth $84,000 as per the numbers on Jan. 31, 2022. When you stake via a pool, you don’t have to meet such requirements. 

Staking crypto with an exchange

To be able to recognize the top exchanges for staking, we can take a look at the eight main factors to analyze every platform: 

  • Basic Trading Features.

The main yardsticks are the number of cryptocurrencies available to trade, the number of fiat currencies accepted, the exchange’s overall liquidity as well as trading fees.

  • Advanced Trading Features. 

Check the availability of high-end trading features like advanced order types and volume discounts for those who trade frequently. 

  • Platform Availability. 

Though some of the finest crypto exchanges are available everywhere, there are still several others with varying degrees of accessibility to different features that change from one country to another. 

  • Customer Service. 

What are the different kinds of customer support?

  • Educational Resources. 

Assess the educational content you can have access to on every platform. 

  • Crypto Rewards Credit Card. 

There are not many platforms that offer crypto rewards credit cards.

  • Security and Storage.

What are the different types of storage options, security, and insurance available? Also, make sure you carry out a proper assessment of any large-scale hacks of each exchange.

  • Staking and Rewards. 

Certain platforms let users stake selected cryptos and earn profit through interest. 

Before you jump in

Staking is not necessarily everyone’s cup of tea. Here are a few factors to reflect on before deciding whether you should actually stake crypto. 

Will you need access to your staked crypto?

You will have to lock away your crypto assets for a set period of time. You will not be able to trade them or access them in this timeframe. 

Do you believe in the project?

Before you stake your crypto assets, make sure to check if it has the potential to hold value in the long run. 

Have you explored other forms of passive income?

Crypto staking is a way to generate passive income. If that is your ultimate goal, be sure to assess other ways of earning the same before zeroing on crypto staking. 

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