Cryptocurrencies are digital assets that are issued by decentralized autonomous organizations called blockchains. By design, they are decentralized (not controlled by a single entity) and are not controlled by a single party. A blockchain is a chain of blocks linked by cryptography.
Cryptocurrency has been gaining traction in the past few years, and this technology has never been more popular. There are hundreds of coins out there, and most of them are beginning to adopt the Proof of Stake (PoS) consensus protocol. A few coins out there have adopted this protocol, but most of them have been around for years and have only a small market cap. The more popular the coin, the longer it will take for the developers to upgrade the coin with this protocol. One of the newest cryptocurrencies to adopt this protocol is Byteball.
With the crypto space going through one of its most volatile periods ever, it is important to have a basic understanding of exactly what crypto staking is. The concept of staking is nothing new, as it has been around since the conception of Bitcoin and other cryptocurrencies. The difference between staking and other forms of mining is that miners mine blocks of a blockchain to create new bitcoins. Stakers, on the other hand, have no role in the process of generating new coins; they simply secure the network by maintaining a balance of tokens.
If you’re not familiar with staking, it’s the process by which coins are independently “backed” by the coin’s original developers. In the same way, the government backs a bond. It’s a very useful way of providing some proof that the coins you’re dealing with are legit and not just someone pretending to be able to provide a service you want.
As you may or may not know, one cryptocurrency is already starting to use staking as a reward mechanism. CryptoStaking is a new way to earn rewards, and it’s currently being tested on the Ethereum network. Similar to how Bitcoin holders earn rewards in the form of transaction fees, Ethereum holders will earn rewards in the form of new coins. Having said that, if you are interested in learning how to cash out your Ethereum tokens, you may want to head over to this blog post here (https://www.coin.cloud/blog/how-to-cash-out-ethereum) that can explain how to do so.
Cryptostaking is the process of obtaining shares in a cryptocurrency network by staking your coins. Every cryptocurrency network has a coin(s) called a cryptocurrency token. A token is the representation of a good or service on the blockchain. The good or service is often called a coin/token to distinguish it from the actual good/service. When you want to obtain shares in a cryptocurrency network, you need to stake your cryptocurrency token(s). Staking a token means putting it up for sale in a cryptocurrency network where you are the seller. The seller of this token can then receive a share of the network’s profits.
Staking is a process where a coin’s holder pledges a proportion of their coins as a form of cryptocurrency interest.
How does it work?
It’s simple. The owner of a coin can earn interest on their holdings by holding their coins in a compatible wallet. If the amount of coins held in their wallet increases slightly, then the staked portion will increase by a percentage determined by the developer.
Staking can be confusing and can be a bit of a rabbit hole, so let’s break it down. When you stake a crypto coin, what you’re doing is loan money to the network, and in return, you receive an agreed-upon percentage of block rewards. If you’re staking coins that are currently at an all-time high (like Verge), you’ll earn a lot more money. However, if you’re staking coins that are at an all-time low (like Binance Coin), your returns could be a lot less. That’s because, as the market shifts, so too does the profitability of all coins.
Staking cryptocurrencies is a great way to help protect against inflation and get a slight monetary incentive for holding your coins. A common use of staking is for earning interest on your crypto coins, but there are some non-monetary uses of staking as well. For example, one can use the interest earned to pay for network fees or even to buy new coins. There are also some projects, like BlackJack, that use staking to help secure their network.