When the cryptocurrency market is subject to periods of extreme downside volatility, long-term crypto holders can balance out temporary losses and accumulate a few extra coins. There are many ways to do this, but participating in the Proof of Stake process is considered the most efficient and least risky. Some crypto exchanges, such as Gate.io allows users to contribute to this process, in exchange for a part of the rewards generated.

What is PoS Flexible Staking?

Proof of Stake (PoS) is a consensus mechanism where block validators are selected based on the number of coins they are staking. The process of staking cryptocurrencies involves committing crypto assets to support a blockchain network and confirm transactions. While Proof of Work (PoW) is considered by many to be an extremely energy-consuming process, Proof of Stake is, in contrast, a more energy-efficient alternative. By committing their coins, crypto users can contribute to the security of the network and earn passive income, which depends on the number of coins made available and the specific type of consensus mechanism of the chosen blockchain.
However, staking has risks for token holders. These risks are associated with many factors, including a sudden drop in the market price and, above all, attacks on the blockchain perpetrated by malicious actors. Last but not least, the process of earning with PoS can encounter liquidity problems, which can be avoided if you rely on the centralized services that exchanges offer.

Many people tend to confuse staking with lending, but these are two different things: while lending consists of pledging their funds to allow other people to speculate on the price of a coin, staking is about helping a blockchain operate more safely and efficiently. In a nutshell, when staking, a user is more committed to supporting the blockchain project represented by the coin he holds.

How Does Gate.io’s HODL & Earn Work?

As already mentioned, Gate.io gives users the opportunity to contribute to the staking process and earn passive income by simply depositing coins on its platform. This product is called “HODL & Earn” and is available to all users who have signed up for the exchange.

HODL & Earn products are usually suitable for those who believe their currency can grow in value over time, so they are not in a rush to sell. Typically these products are linked to the platform’s lending activities or to the protocol of a specific currency. Each product has a different investment period and rate of return, depending on the type of product and the specific currency. There are two main sections:

1. Fixed Term: it requires you to lock your coins for a certain period of time. This, in turn, is divided into two types of products: Earn Daily and Lock & Earn. There is a slight difference between the two regarding the rewards distribution. The first distributes them daily, the second at the end of the predetermined period. Both initial capital and rewards are paid directly into your account.
2. Flexible Term: it does not require you to lock your coins. You can withdraw anytime you like. This, in turn, is also divided into two types of products: Single Staking and Flexible Staking. The first includes the products belonging to the section “Lending & Single-Asset Vault”, a separate section that we will cover later. The second includes certain products whose earnings will be based on the last 7 days’ average holding (excluding your borrowings).

Source: Gate.io

What Is the Advantage of Using HODL & Earn?

Most of the time, in order to be able to stake on one of the many blockchain protocols available, the user must manually connect with his private wallet and meet the protocol requirements. These requirements can differ, such as choosing the validator to entrust your coins to or participating in voting activities. By using Gate.io’s HODL & Earn, on the other hand, the user doesn’t have to worry about these things, as the exchange itself takes care of everything else. The user just needs to deposit the funds and enjoy the rewards earned.

In addition, this earning product has been designed for users who prefer a low risk to something else more profitable but at the same time very risky, as it does not require any trading skills. This does not mean that it is free from risks; in fact, there may be a robust downward market movement, and you cannot sell your currency because it is locked in one of these financial products.

Conclusion

Staking is a great way to engage people in allowing their favorite blockchain to perform better, as well as keeping it secure. In addition, it is an easy way to earn interest with your cryptocurrency holdings and is more environmentally friendly than crypto mining. Lastly, products like Gate.io HODL & Earn are an effective way to protect the portfolio from sudden price drops that occur in the market. However, it must always be considered that everything has a certain risk: it is important to carefully study the blockchain projects you want to interact with, to avoid making mistakes that could cost you dearly.

Additional information is available in the Help Center section of Gate.io.