What Is Staking in Crypto; how it works
Sometimes you hear the word staking in crypto but don’t know the meaning, especially if you are a newbie in crypto world. Well, in this post, I will be explaining what staking is and how to stake cryptocurrency.
What Is Staking in Crypto?
Crypto staking is the process of locking up your crypto coins in other to get a reward or gain interest. It is just like investing your money in a savings account and getting interest at the end of the day.
We all know that cryptocurrencies are built with blockchain innovation, in such a way that crypto exchanges are confirmed, and the data that results from it are stored in the blockchain. So staking is another way to help secure the blockchain network and also portray the approval of those exchanges on a blockchain.
This approval process is called “proof-of-stake” or “proof-of-work” depending on the type of cryptocurrency you’re working with and its supporting innovations. Each of these process offer assistance to the crypto networks to help achieve a compliance, or affirmation, that all the exchange information adds up to what it should. But accomplishing that compliance requires members. And that’s where staking comes in.
Investors who effectively hold onto, or lock up, their crypto assets in their crypto wallet takes an interest in these networks’ consensus taking forms. Stakers are also, in essence, approving and confirming exchanges on the blockchain. For doing so, the systems compensate those investors, and the rewards depends on the network.
How Does Crypto Staking Work?
Here is a breakdown of how to stake your crypto:
- first in your exchange app, go to web 3, then click on staking, choose the cryptocurrency you want to stake with its network.
Note: Not all cryptocurrency supports staking, the ones that support are; Ethereum, polkadot, Solana and Cardano.
- Then go ahead to check the reward you will get, and the staking duration.
- Now go ahead to choose the amount you want to stake and click approve to lock your coin, and the reward you will get depends on the amount you stake and the network’s performance.
You can think of crypto staking as comparative to keeping cash in an investment funds account. The depositor gains interest on their cash which it’s in the bank, and it’s being used by the bank for other purposes such as giving out loans to people, so in return you are being compensated from the bank. So staking coins is just similar to earning an interest.
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