staking crypto

Staking: Benefits, Risks, and How to Make Passive Income

Staking is a feature that comes along with blockchain development, which is now starting to use a proof of stake or PoS system. This feature can be utilized to earn additional income from the crypto industry. More about the meaning, benefits, risks, and how to make it passive income will be discussed in detail in the following review.

What is it

Staking is locking crypto assets on the PoS blockchain for a certain period to earn a reward. The owners of crypto assets will be randomly selected to validate, secure, and generate blocks on the blockchain network. The PoS system generates new blocks through the staking process.

Those with a minimum balance on the blockchain for crypto assets of a specific type can validate transactions through the PoS system according to the total number of crypto assets owned. Every successfully validated transaction will be rewarded with a reward.

All users of the PoS algorithm are required to bet a certain amount of crypto coins to minimize the possibility of fraud or fraud. If any user tries to manipulate the system, they are in danger of losing the coins at stake. Generally, validators are chosen based on the number of coins at stake.

All transactions on the blockchain require validation. Each PoS applies different rules to its validators, such as setting a minimum limit for locked assets or the duration of asset locking. The reward calculation is based on the total number of crypto assets locked and how long the validator has locked the asset.

stacking illustration

Staking Advantages

Advances in technology have given birth to a new virtual world called the metaverse. As the popularity of the metaverse continues to climb, investing in crypto assets is also getting more and more attention from the general public. You could say that the presence of the metaverse has also increased the value of several types of crypto coins.

Crypto assets, if managed properly, will bring profits. Staking is the preferred form of crypto management because the potential for profits is quite promising. The greater the number of crypto assets locked and the longer the lock duration, the more rewards you will get. The rewards offered for new crypto coin asset holders are usually very tempting, up to 20% per year.

While waiting for asset prices to rise, stakers can now earn interest from staking activities. Interest that goes directly into the staker’s account, weekly or even daily, can be re-staking or disbursed through a bank or electronic wallet.

Risk of Staking

The staking feature that generates profits from locking crypto assets looks effortless and has minimal risk. But keep in mind, investing using any instrument is not free from risk. Staking has its risks, including:

  • Missing the moment of reaping enormous profits when asset prices rise amid a lockdown. Crypto assets that are being locked cannot be sold until the agreed lock-up period expires.
  • As previously stated, the validator is responsible for maintaining the stability and security of the network. If the validator is successful, it will get a reward. On the other hand, you risk losing all the coins you bet if you fail.
  • Storing assets in digital wallets is vulnerable to hacking.

Some of the steps below can minimize the risk when you want to participate in staking activities.

  • Dig up more information about good and popular crypto assets.
  • Choose a suitable and trusted digital wallet because the funds or assets used for staking will be stored there.
  • Pay close attention to the requirements, such as the amount that must be bet, the minimum amount that can be locked, the length of locking, the rewards that can be obtained, how to disburse the reward, etc.
  • Ensure the support facilities are really adequate and working correctly at all times.

Also read: What is Blockchain, and How Does it Work?

How to Make as Passive Income

Crypto coin holders pool their coins in a staking pool to increase the chances of validation and earning rewards. The crypto industry can be a potential area to earn passive income, one of which is by utilizing the staking feature. Beginners who want to try the staking feature but have limited funds and supporting resources can join the staking pool. Later the benefits obtained are divided proportionally.

Staking is another way to profit from the crypto-asset market without mining or trade and constantly monitoring price movements. It is almost similar to deposits but with a different mechanism. It will be suitable for investors who prefer the type of long-term investment. Come on, start preparing for a bright future by investing.

Written by Faris

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