Crypto staking for beginners: a step-by-step guide

Sushree Behera

Crypto staking is the process of holding a cryptocurrency in a wallet to support the operations of a blockchain network. By contributing to the security and stability of the network, it can be an effective way to earn passive income. In an honest view, a user is essentially locking up the crypto in a wallet for a certain period of time, when he stakes their cryptocurrency. 

This helps to validate transactions on the network and maintain its overall integrity. Users are rewarded with additional cryptocurrency as an incentive for their contribution to the network in return for staking their coins.

There is no fixed number to predict how much one can earn through staking. It varies depending on the network and the number of coins being staked. It is also a matter of fact that a minimum amount of coins is needed to be staked in a network. But this condition is not bound to all networks. Some are offering the freedom to keep any amount of staking.

How does staking work

Staking is a process of holding and locking up a certain amount of cryptocurrency in a wallet for a specified period of time. This is carried out to aid a blockchain network’s functions. Staker incentives come in the form of more cryptocurrencies. The amount of cryptocurrency staked and the duration of the staking period, both are responsible in deciding the amount reward received. 

Staking is a crucial component of Proof of Stake (PoS) consensus algorithm. In PoS, validators or stakers are chosen to validate transactions and create new blocks based on the amount of cryptocurrency they have staked. This incentivizes them to act in the best interest of the network and maintain its security and stability.

Staking is a relatively low-risk way to earn passive income from cryptocurrency holdings. However, it requires careful consideration of factors. These factors include the staking rewards, staking period, and the overall health and performance of the blockchain network. To guarantee the protection and safety of your staked assets, it is crucial to conduct careful research and select a reputable staking service.

Read also: Litecoin, imminent halving: what will happen to the cryptocurrency behind BTC

How to start staking your crypto

When you say “Staking Cryptocurrency,” you are referring to a strategy that will help you to earn rewards for holding and supporting the network. It’s a popular and very easy way to earn passive income in crypto. Here are the steps you can follow to get started in your crypto-staking career:

  1. choose a cryptocurrency: Not all cryptocurrencies are supported by an exchange platform. Check the cryptos available for staking. Some popular cryptocurrencies that support staking include Ethereum, Cardano, and Polkadot;
  2. set up a wallet: The Crypto you have purchased now needs a storage place, and you must have a wallet that supports staking. You can use a hardware or software wallet that supports staking;
  3. purchase the cryptocurrency: You need to buy the cryptocurrency you want to stake. There are trustworthy names from where you can acquire your cryptocurrency. Platforms like Binance, Kraken, or Coinbase are the most common among people;
  4. use a staking wallet to transfer and store the cryptocurrency: You must transfer the cryptocurrency to your staking wallet after buying it;
  5. choose a staking pool: Join a staking pool is a smart option today. Why is it so? Suppose you don’t have enough cryptocurrencies to stake on your own; staking pools allow you to pool your resources with other users. It will help to increase your chances of earning rewards;
  6. delegate your cryptocurrency: Once you have chosen a staking pool, you need to delegate your cryptocurrency to the pool. This indicates that you are lending the pool your Bitcoin in exchange for a portion of the profits;
  7. start earning rewards: Once you have delegated your cryptocurrency, you can sit back and start earning rewards. The rewards will be automatically deposited into your staking wallet.

What are the risks of staking

Staking is most often associated with technical issues or hacking attacks. This has potential for heavy loss of funds. The loss of the staked funds is easy, if the staking platform or wallet is not secure.   

Additionally, if the blockchain network experiences a technical issue or a bug, it could lead to the loss of staked funds.

Another risk of staking is the possibility of slashing. This occurs when a validator node (a computer that helps secure the blockchain network) acts maliciously or in violation of the network’s rules. Validators acting against the network can have a portion of their staked funds slashed as a penalty.

Lastly, staking also carries the risk of market volatility. The value of the cryptocurrency staked can fluctuate significantly. This fluctuation can lead to a reduction in the actual value of the rewards earned through staking.

Read also: Cryptocurrency regulation in Europe is final: agreement reached with MICAR

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