Hello, community! Recently, we’ve been talking more and more about cryptocurrency. And there’s nothing surprising about that since crypto is actively involved in affiliate marketing: starting from payment methods to an entire vertical. By the way, this vertical can be extremely profitable if you know how to work with it. We’ve discussed this separately here.
Today, we’ll talk about where cryptocurrency actually comes from and how it can be earned apart from buying it on an exchange. We hope you’ll find this interesting!
What is Crypto Staking?
In the simplest terms, staking is a direct analogy to a traditional bank deposit: you deposit a certain amount of tokens for a defined (or indefinite) period, after which you get back your tokens along with a reward in the form of a percentage of the amount you “froze.”
And yes, if it’s staking for a specific period, your funds will be truly frozen. However, this makes you a validator in the network: your assets will help confirm transactions within the blockchain network. Essentially, this is why you earn a reward: your funds support the network’s existence, and the network rewards you with additional tokens for that.
It’s important to note that not all cryptocurrencies can be used for staking. For this, the coin must operate on a Proof of Stake consensus, where new blocks are generated when network participants freeze their coins. Essentially, you’re creating new coins, much like mining, but all that’s required of you is patience. And, of course, having the necessary tokens.
Among the tokens that support staking are many well-known and popular ones. For instance, Ethereum (ETH), Solana (SOL), TRON (TRX), and many others operate based on this consensus.
Benefits of Crypto Staking
Let’s talk about the advantages of staking and why it’s the most attractive method of earning cryptocurrency for the average user.
First of all, it’s essentially a method of earning passive income. All you need to do to earn rewards is freeze your assets. That’s it. Additionally, remember that the reward will be paid out in the form of the coin you’ve locked. Therefore, if its value increases by the end of the staking period, your profit will be significantly higher.
Secondly, you participate in the blockchain’s functioning without needing powerful computer hardware, as is required for mining. All you need is a wallet on an exchange, a certain amount of coins, and that’s all.
It’s also worth mentioning the existence of specific projects where, during staking, you can earn not only a percentage of your frozen tokens but also receive AirDrops of other coins as an additional reward. Such events can happen not only within individual blockchains but also as marketing campaigns by specific exchanges. In any case, for us young investors, this is an additional opportunity to earn even more profit.
Overall, if you diversify your assets with cryptocurrency, staking is something you definitely shouldn’t ignore. It’s a great way not only to preserve your assets but also to earn profits. At the very least, you’ll gain more tokens. And if their value rises, you’ll see profit in monetary terms as well.
However, this should not be taken as financial advice! Consider it just a reflection 😁
Are There Risks in Crypto Staking?
Let’s also discuss the risks. Among them, we would personally highlight the following:
- You effectively lock up funds, which can be critical if you decide to stake your last assets (something we strongly advise against). While there are unstaking mechanisms to retrieve your frozen funds, you should understand that in such cases, you may face blockchain penalties and lose part of your accrued reward;
- The unstaking process is not instantaneous. If you urgently need to retrieve your tokens, you’ll still have to wait a certain amount of time;
- The biggest risk is tied to the liquidity of the chosen token: if you lock up funds for an extended period, say a year, there’s a real risk that the token could lose value relative to fiat currency during this time. Consequently, your assets could depreciate, and the reward earned through staking might not make up for it.
That’s why many investors choose the most promising coins for staking. Although even this isn’t a safeguard. When the crypto market falls, it drags down all coins.
It’s also worth noting that in some cases, you can use staking without a fixed term, allowing you to retrieve your assets at any time. However, in such cases, you shouldn’t expect a high reward percentage.
Conclusion
Crypto staking based on the Proof of Stake consensus is a real opportunity to increase the number of tokens in your investment portfolio. You should keep in mind the existing risks and never freeze your last available funds. Moreover, the primary benefit of staking is that it supports blockchain operations. Thus, this mechanism is most relevant for crypto enthusiasts, in our opinion.
Do you stake tokens, or do you use cryptocurrency only for transactions? Share your experience in our Telegram community. We’d also love to hear your feedback on whether you enjoy cryptocurrency-related content or if you’re here solely for affiliate marketing.
Best regards, Your Geek!
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