If you have been dealing with crypto assets long enough, you must already be aware, to some extent at least, of the phenomenon of staking. Briefly speaking, crypto staking is how many digital assets get their transactions verified while making it possible for their owners to capitalize on their possessions. 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.

Definition 

As Coinbase puts it, crypto skating implies ‘earning rewards for holding certain cryptocurrencies.’ As such, it is an alternative to buying crypto assets or mining currencies and can be viewed as a sort of passive income. It works like this.

Crypto assets’ foundation is blockchain technology. Its essence is all about the fact that their previous transactions are constantly being verified by newer ones, with the associated data dispersed and safely stored across the entire blockchain. Such universally accessible, visible, and verifiable records are called “Proof of stake” (or, alternatively, “Proof of Work”).  

And this is the key to understanding: every new block in the chain needs either new coins mined to support a transaction, or already existing coins to enforce it. As a result, crypto owners can dedicate their assets, for some time, to the cryptocurrency protocol. The protocol itself, in turn, selects some of those owners to validate new transaction blocks. Hence, the fewer coins you pledge, the smaller your chances are to be selected to confirm a transaction block, and vice versa. 

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: 

Thus, Evercode Lab is your perfect IT outsourcing partner if you intend to unleash the potential of staking for your users, customers, and business.