What is crypto staking? The best way for passive income in crypto

So what is crypto staking?

Staking is the process of being part of the active validation of transactions on a blockchain built on Proof of Stake functionality. On these blockchains, anyone who has a minimum amount of stake can be part of the process and earn rewards.

Any person who holds a minimum number of cryptocurrencies of that blockchain becomes a ‘validator’ and can then participate in the system by validating other transactions to earn a reward. The extent of participation of a validator and the returns that are earned from the system are linked to the number of holdings with the validator. Simple rule: the more you stay invested in the system the more the system rewards you for your loyalty.

It means that your pile will grow if you stick around without pulling out coins and your rewards will also increase as your pile grows.

Crypto Mining versus Crypto Staking

Crypto chains such as Bitcoins are built on Proof of Work blockchains where powerful computing and enormous amounts of energy are used to keep the system running. If the computer is able to solve a complex question it gets rewarded with a Bitcoin. This is called mining.

Proof of Stake networks is more modern and more inclusive. The computing power, so essential for Proof of Work, becomes not so central but quite redundant. The computing power here becomes important only to maintain the health of the system by taking care of the node.

Nodes take care of keeping the system in order and in doing so get rewarded.
The nodes which get to participate in adding a new block to the chain to get rewarded are picked by the system’s DEFI protocol. But be careful – not all nodes are treated equally.

Should I start doing it?

Crypto staking is not available to all cryptocurrencies, but only on those which blockchains built on the Proof of Stake protocol.

Can I start a node in order to participate and earn? Yep, but it is challenging! Simply because the entry barriers are high for smallholders. For a ETH node to become a validator it’s usually 32 ETHs.

Such investments can be pooled together to be a part of the network either through Crypto Exchanges or Crypto Staking Pools. Each has its pros and cons. Exchanges burn a lot of gas but are the easiest to use. On the other hand, staking pools require a good amount of research to know what and where to invest.

Is staking safe?

Just like other financial investment tools, crypto staking brings its own challenges. The fundamental questions to ponder upon are always around the high transaction fees, the performance of the crypto, reward distribution, etc.

It’s best to do detailed research and ask pertinent questions to align the goals in order to get the most out of the various options available under the umbrella of Staking.

Proof of Stake blockchains are a scalable model and a source of passive income while maintaining a high degree of liquidity of the system.

And, you can find all these at MEXC Global right now!

Keen on stacking some crypto? MEXC Global is one of the most popular crypto exchanges. MEXC is a centralized exchange that allows users to buy and sell with the lowest transaction fees. We’re also compatible with all hardware wallets, so you can store your funds safely offline while trading on our platform.