2022-04-22 03:03:13
Let’s dive into the world of staking. Most of us know that staking is a way to lock your coins for a certain amount of time and earn percentage-rate rewards for doing so. How does this all work, and why is it better than just investing in a savings account to earn interest? The reason why you earn rewards while staking is because you’re basically putting your coins to work! Its a method called proof-of-stake, a mechanism that validates crypto transactions. You also might have heard of proof-of-work (its arch nemesis) widely used in crypto mining. They both do the same thing, validating crypto transactions and mine new tokens. But what are the benefits of proof-of-stake?
1. Easy way to earn interest
2. You dont need to buy expensive crypto equipment for mining
3. You help to maintain efficiency and security of the blockchain
4. Much more environmentally friendly than mining
I think staking is amazing because of the APR (annual percentage rate), something you wouldn’t be able to find investing in a centralized market (bank account). Just to put in perspective, the average rate for investing in a mutual fund is only 10%. There are protocols out there with APRs over 100%
BUT you should also look at some of the risks associated with staking.
1. Crypto is highly volatile and prices can drop quickly
2. Staking requires you to lock your coins, preventing you from selling them for a certain period of time
3. When you want to unstake, some platforms set a time limit for when you can unstake your rewards (can be 7 days or longer at times)
Most importantly, if you want to stake your coins, research the project before doing so. What are their long term goals? How many users do they have? Check the daily volume of the coin. Are they pulling in revenue?
All in all I think staking is an amazing way to earn passive rewards in this decentralized market. It takes no work, and you’ll have a lot of fun checking every day how much you made, I know I do! Drop down in the comments what your staking now!
Remember this is NOT financial advice, DYOR! Happy Staking
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