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Crypto Staking: Earn Passive Income On The Blockchain

By Louis H-P on May 19, 2022

Reading Time: 4 minutes

Crypto staking is one of the most rational and cost–effective ways to earn money for cryptocurrency holders. With the rise of cryptocurrencies, opportunities are opening up to earn passive income from this megatrend. As with any opportunity there are risks but we will suggests ways of gaining exposure without betting the house!

Key Takeaways

What is crypto staking

The difference between staking and mining

Why you can earn income quickly


How does crypto staking work?

The principle of crypto staking is that the user stores his assets on the Proof of Stake (RoF) algorithm. Translated from English, it sounds like “proof or confirmation of ownership”. Thanks to this, the functioning of the blockchain network is maintained. This provides a decent level of protection against the placement of false information and hacking.

Along with the fact that the investor provides all this for the blockchain, he also receives% for it. This method of passive income is available only to coin holders working on this algorithm. Examples include COSMOS, TRON, TEZOS, BTCa.

It is worth noting that stacking competes well with mining. It allows users to earn money without expensive specialized computing equipment. The essence of this activity is to maintain the operability of the blockchain network and the processes taking place inside it. Thus, depositors receive remuneration from the network for stimulating its normal functioning. The larger the size of the investor’s digital asset, the higher the chances of getting a new block, that is, coins.

Staking as a way to get coins

Crypto staking works hand in hand with crypto currency mining

When the conversation turns to ways to get crypts, you definitely need to remember about mining. It is based on the most complex mathematical calculations that are performed on heavy–duty PCs.

Mining is an active type of income. It is based on the Proof of Work (RoW) algorithm. The efficiency of mining farms is supported by the power of computing equipment and the correct execution of transactions. It is for this that the miner makes a profit. Experts in this industry claim that mining is a direct competitor to computing technology. Stacking, as the owners of cryptocurrencies are already competing with each other here.

Cypto staking is the complete opposite of mining. You do not need to purchase special expensive equipment and spend electricity in huge quantities. This is a passive profit provided exclusively by the storage of cryptomonets.

Types of staking

The fundamental principle of staking is universal for all existing types of this earnings. It consists in the fact that a certain number of coins are stored in the staker’s account. In return you will receive dividends. The size of the asset will determine the amount of income. The working mechanism can be supplemented with other various conditions depending on the type of staking.

For example, individual blockchain systems pay remuneration exclusively to validators. In this case, the stake holders have to combine assets to create pools in order to become a validator. You share the contract. The income is distributed among the pool participants in accordance with the size of the deposit.

Limited staking

Here, the investor needs to specify the period for which his cryptocurrency will be blocked. After the deadline has been determined, it will be impossible to change the duration of this period.

The main advantage of this type of staking is good%. When you sign a contract, a specific amount will be agreed. The depositor will receive the income after the expiration of the term for holding coins. 

Indefinite staking

There is no time frame for holding cryptocurrency. The investor has the right to terminate the contract and withdraw his coins unilaterally when he sees fit. Interest accrual is carried out until the network participant transfers the cryptocurrency to another wallet. Alternatively, You can sell your tokens on an exchange, 

The first accrual is 1 day from the moment of signing the agreement on indefinite staking. Payments is made once in 30 days. Such staking is chosen by stackers who are not ready for long-term contracts

De-Fi Staking

De-Fi store, exchange, transfer and credit crypts. The main advantage of decentralized staking is that no one has direct access to money. Operations are carried out in accordance with special algorithms in automatic mode.

At the heart of this type of staking is the issuance of funds on credit to various organizations and individuals from investors’ wallets. At the same time, the system automatically ensures compliance with all credit conditions. In general, the scheme is very similar to traditional bank deposits.

De-Fi Staking has several undeniable advantages over other types:

Quick income

Accruals are made daily. Therefore, the depositor always has access to remuneration for capital retention.

High level of income

Decentralized staking has a lower entry threshold compared to other varieties. It also has a higher profitability (up to 10 times). In some cases, the profit can be even 100% or more. It all depends on the chosen cryptocurrency and the period of its blocking.

Payment guarantee

De-Fi platforms guarantee % payments, so the staker does not risk losing its asset.

Which currency is better to choose for staking and how to start receiving rewards?

The first step is to buy or accumulate tokens in the right amount. They will act as “free” coins. In other words, if you had lost these funds, you should not have felt any serious damage from it. Never invest all your digital savings in staking.

Your funds will be unavailable to you for some time. At the same time, do not be lazy to carefully study the terms of contracts at various sites offering staking. Spread your contracts over several tokens. This will allow you to protect yourself from losses when the value of the asset decreases. If one token “falls”, the other may “grow”, and you minimize or avoid losses altogether.

When choosing a specific coin, pay attention to those that are less volatile. The volatility determines the stability of prices, as well as the likelihood of risks. It is also possible according to the volume of trading to draw conclusions about the demand for a particular currency as a whole.

Note! Experts strongly recommend making regular redistribution of the investment portfolio. The frequency of 1 time per quarter is suitable. During this time, the changeable cryptocurrency market will most likely have time to change significantly. In order to maintain its position in the market, it is necessary to monitor innovations and existing trends.

Conclusion

 Like with any new technology, crypto staking has its risks. If you give yourself a margin of safety there is no reason why you cannot benefit from it. By being an early adopter, you will also learn how to be competitive. This will be useful when other income seekers flood in. 

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Louis H-P

Louis is a portfolio manager and a trader who brings a wealth of experience in private banking to The Lazy Trader. A fundamentalist and a trouble-shooter, Louis makes a firm contribution to the trading team.

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Louis H-P

Louis is a portfolio manager and a trader who brings a wealth of experience in private banking to The Lazy Trader. A fundamentalist and a trouble-shooter, Louis makes a firm contribution to the trading team.

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