As long as you are aware of the fact that crypto currencies exist, you are likely to know what staking means. However, let’s start with the basics. In plain terms, staking is the way for many crypto currencies to verify transactions on their blockchains and to reward the crypto owners who are ready to use their assets for this purpose.
But what does it mean in tech and business terms, essentially? Should you be interested in this mechanism if you are planning to launch your own blockchain project? That is what we are going to discuss in this piece.
A Simple Definition of Staking
According to Coinbase, crypto skating means ‘earning rewards for holding certain cryptocurrencies.’ Thus, it is one more way to get crypto, along with buying it or mining it. As many people like passive income, this opportunity is extremely lucrative for them. In fact, you can even compare crypto staking with bank accounts, however, it works differently..
Any crypto asset is based on its blockchain. In a nutshell, blockchain means that any transaction made is being continuously verified by newer ones. All the data related to those transactions is dispersed and securely stored across the entire blockchain. Such universally accessible and verifiable records are denoted as ‘Proof of stake’ in our context.
That fact is the key to comprehension: each fresh block in its chain requires either new coins mined to support a transaction, or already existing coins to enable it. As an outcome, crypto investors can entrust their digital assets, for a limited period of time, to a crypto protocol. The latter, in turn, chooses some of those investors to validate new transaction blocks. Hence, the fewer coins you pledge, the smaller your chances are to be chosen to confirm a transaction block.
Crypto Staking As a Bank Account: ROI issue
It is of importance that the option of staking is available not with every coin. What you should pay attention to is whether your future digital asset uses the “Proof of stake” method or not. Earlier coins, such as BTC, apply another model, “Proof of work”.
The key difference here is the pattern of energy usage. While “Proof of Work” makes it mandatory for miners to generate new blocks via “solving complex mathematical problems” in competition with each other, “Proof of stake” is less demanding. Therefore, altcoins based on the “Proof of stake” consume less energy and can process more transactions within shorter periods of time.
Right now, such altcoins include Solana, Cardano, ETH 2.0, Polkadot, and Terra.
How attractive is this method to generate passive income? While it is not so often praised by industry headlines, it is extremely attractive. For example, NASDAQ’s recent article called it “the Quiet Giant of Crypto Yield.”
As for the estimated rewards one can earn per year, they vary. But they all seem extremely palatable:
- Solana – 6.9%
- Cardano – 5.8%
- ETH 2.0 – 5.2$
- Polkadot – 13.62%
- Terra – 4.2$
In addition to such profitability, staking offers three more advantages:
- Staking is a perfect alternative to mining, as you don’t have to purchase expensive equipment and pay enormous electricity bills
- Staking helps you keep your blockchain of choice running, secure, quick, and effective, with you as a contributor
- The more your asset of choice uses staking, the less its public image is hurt. The world is now preoccupied with environmental issues and seeks to save energy. Thus, sanctions of any type are less likely to threaten you.
However, two disadvantages for crypto owners as well:
- First, if you lock up your digital assets in this fashion, you literally “immobilize” them and cannot spend them
- Second, the crypto market is volatile. Thus, the price of your digital asset may slump while it is locked up. And it is possible to lose more money than you will get as your ROI
Evercode For Your Staking Project
These concerns notwithstanding, staking is gaining popularity as a crypto business practice. And if you want to capitalize on this growth, Evercode Lab would be happy to help you with this by providing you with top tools to manage digital assets.
For example, take a look at this rating of “9 Best Staking Wallets To Stake And Earn PoS Coins For 2021”. As you can see, two of the top 3 were built with our tech assistance:
- Atomic Wallet
- Guarda Wallet
- As for the Binance Exchange Wallet, we are experienced in this field as well
Thus, Evercode Lab is your perfect IT outsourcing partner if you intend to unleash the potential of staking for your users, customers, and business.