WHAT IS STAKING?

Cryptocurrency staking is the storage of tokens on a cryptocurrency wallet or exchange to keep the blockchain operational. Validators are rewarded for ensuring that transactions are carried out on the blockchain.

Staking is common in networks that use the Proof of Stake (PoS) algorithm. PoS is an alternative to Proof of Work (PoW). PoW blockchains use mining to validate and validate new blocks. This is a time consuming and costly process.

PoS chains do this by staking cryptocurrencies. The very process of mining new blocks in such networks is called forging. Anyone can become a validator. To do this, the user only needs to buy cryptocurrency and hold it. PoS validators are selected based on the number of coins in the system - in the stake. The more tokens a user invests in a stake, the higher probability that he will become a validator.

Formation of blocks using the PoS algorithm allows to increase the scalability of the blockchain network. Related to this is the transition of the Ethereum network from PoW to PoS.

Users who have blocked their tokens (holders) can unite and form a staking pool. Participation in a pool increases the probability of being chosen as a validator.

As a rule, participation in a staking pool takes place if a high threshold for entry is set in the blockchain network - technical or financial. Most pools require complex configuration and maintenance. Therefore, pool providers take a percentage of the reward.

As already mentioned, in order to receive a reward, it is enough to buy a cryptocurrency and block it. You can "invest" tokens on major cryptocurrency exchanges (Binance, Kraken and KuKoin) or on decentralized exchanges (DEX).

Let's take a look at staking on Binance as an example. The exchange offers two ways of staking - locked staking and DeFi staking. Let’s talk about locked staking.

To lock tokens on Binance, you need to open a Fiat & Spot wallet. Next, you need to select a token and click "Earn" - "Locked staking".

A full list of cryptocurrencies available for staking will be presented on the page that opens.

We select the required token, for example BNX. After clicking the Stake Now" button, the deposit window will open.

In the window, you can select the term of the deposit. After choosing the term and entering the amount, Binance will calculate how much BNX the user will receive at the end of the deposit term.

Also, cryptocurrency staking is supported by some cryptocurrency wallets. One of the most popular mobile staking wallets is Trust Wallet. Ledger hardware wallet users can stake Tezos tokens. There are also special platforms for staking. Services: Staked, Stakinglab and Everstake.

Gradually, cryptocurrency staking is gaining more and more popularity. In the long term, this may affect a decrease in the threshold for entering the cryptocurrency ecosystem.