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Gate Blog
Your Gateway to crypto news and insights
What Is Cryptocurrency Staking?
08 November 17:41
This mechanism was developed to mitigate the negative impact of crypto mining and proof-of-work. Crypto mining involves users competing against each other to perform one task first.
This meant a lot of resources were being wasted behind one transaction. Furthermore, the enormous amount of electricity and energy consumed had harmful effects on the environment. So, with an intent to make blockchain more environment-friendly while ensuring that there’s more efficiency in operations, proof-of-staking or crypto staking was developed.
In crypto staking, users lock their cryptocurrencies in the system in exchange for a reward. Here, users are individually assigned transactions for them to validate and verify. Thus no user is competing for a reward, and different people are working on different transactions.
The higher the amount of cryptocurrency a user stakes, the higher their chance of being assigned a transaction.
A few cryptocurrencies which follow the proof-of-stake consensus mechanisms are Polkadot, Cardano, Ethereum, Solana, etc. Each of these has a minimum staking requirement. You can find that out and start staking. All you need to do is, decide which coin you’re going to stake, choose a platform such as Gate.io, and start staking.
Benefits Of Staking
1.Unlike proof-of-work, proof-of-staking doesn’t require any hi-tech hardware. People can use their desktops or a Raspberry Pi to save some electricity. You just need a full-time internet connection.
2.In proof-of-work, it is relatively easy for users or miners to monopolize the mining activity. After all, the better your hardware, the more rewards you earn. Here, no one user can gain complete control over the staking mechanism since transactions are assigned at random.
3.With staking, the prices or value of any cryptocurrency increases with time if more people stake their coins and lock them in a protocol.
4.Finally, it is a much more eco friendly and efficient mechanism that doesn’t use considerable resources like mining.
Is Crypto Staking Profitable?
Users should go for crypto staking if they have a considerable volume of cryptocurrency which is being unused. Then, the user merely needs to stake their crypto and sit back as they earn rewards for the same.
The only thing people need to be cautious of is the drop in market value. If the value decreases, they’ll suffer losses. So if you hold the cryptocurrency at the right time, it could earn you profits.
However, staking cannot be a primary source of income. There are numerous factors involved with this, such as how big the reward is, the size of the pool, the volume of locked supply. One must consider these factors along with the volatility and only then decide because overall, staking might not be entirely profitable since there are too many factors that one can’t control.
*This article only represents the views of observers and does not constitute any investment advice.
*The content of this article is original and the copyright belongs to Gate.io. If you need to reprint, please indicate the author and source, otherwise legal responsibility will be pursued.
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