Crypto staking: how to make money on crypto assets

Photo - Crypto staking: how to make money on crypto assets
Staking is one of the popular ways to generate passive income from digital assets. It makes the cryptocurrency work and does not require its sale. Also, cryptostaking is often seen as a counterbalance to cryptomining, associated with growing energy consumption and high environmental impact.
According to the aggregator platform Staking Rewards, at the beginning of the second quarter of 2022, the total value of the staked digital assets exceeded 280 billion dollars. Many investors prefer this option of earning due to the compensation which exceeds bank interest rates.

Principles of crypto staking

Cryptocurrency mining is carried out through Proof-of-Work (PoW) protocols, which verify transactions. In the case of staking, transaction verification is performed using Proof-of-Stake (PoS) protocols. They have been adopted by Ethereum (ETH) and other famous blockchains. Proof-of-Stake is a tool that allows you to choose honest participants and new blocks of data which are added to the network. Cryptocurrency holders, called stakers or validators, buy and block a certain number of tokens. Why is it profitable for participants to act strictly according to the rules of the platform? In case of illegal actions in relation to the blockchain, the associated tokens, as a rule, lose their value, and their owner bears financial losses. To act honestly and transparently is the only way to get rewarded.

How to stake coins?

The stake in cryptostaking is the coins of both one and several users. Quite often, participants collect the assets of a certain number of owners and manage the pool of rates on the principle of delegation. The main advantage of this approach for an ordinary cryptocurrency owner is the ability not to participate in routine procedures related to transaction verification. They are performed by qualified operators. The rules for stakers differ depending on the chosen blockchain. Participants face requirements regarding the maximum number of validators, the amount wagered, etc. Today, crypto asset owners can stake: All staked coins remain the property of the owner. If necessary, the owner retains the ability to withdraw the staked cryptocurrency. The only nuance is the timeout of return, which is individual for each blockchain. You can stake both on cryptocurrency exchanges and on special platforms for staking. They help users find the most attractive terms.

Possible risks

Risks are an integral element of investing, regardless of the instruments used. In the case of cryptostaking, it is important for participants to remember the following features: Crypto staking is the best solution for digital asset owners who want to earn passive income from long-term investments. To get the maximum reward and reduce risks, it is worth considering the features of blockchains, staking pools, commissions, and the experience of verifying a large number of blocks.