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What is cryptocurrency staking, how do you earn on staking

Cryptocurrency staking is a replacement for mining, which allows you to earn virtual currency without having expensive equipment with a lot of computing power. It refers to passive and simple ways of earning, available even to beginners.

What is cryptocurrency staking?

Staking is a method of confirming a transaction and creating new blocks in the blockchain. The more coins a staker has, the higher their chances of creating a new block and earning a coin. This is a passive way of earning, which consists in placing the crypt in storage. The process is carried out through the Proof of Stake (PoS) algorithm, which means proof of ownership of an asset. This algorithm protects the blockchain from third-party interference.

By choosing a cryptocurrency based on the PoS algorithm and sending it for storage, the owner of the asset receives a reward – an analog of interest when opening a bank deposit. The reward motivates crypto owners to actively invest coins in staking, which in turn ensures the efficiency and security of the blockchain.

Where and how to make money staking cryptocurrencies? 

Staking services are provided on many popular cryptocurrency exchange platforms. Let’s take a look at how it works using Binance, one of the most profitable exchanges today. To receive a reward, the user must place an asset on a special platform; coins cannot be sold during storage.

Cryptocurrency staking can be of two types on this platform – fixed and DeFi. If the user has chosen the fixed option, they need to select an asset and confirm the blocking consent. During storage, the coin will disappear from the spot wallet, and interest will be accrued daily. The contract can be terminated ahead of schedule, but the accrued early interest will be debited.

DeFi staking on Binance allows users to participate in decentralized projects that typically have a high barrier to entry. The exchange combines the blocked assets of users, uses them for the development of various projects, and divides the income received between the owners of the crypt in accordance with their contribution. One of the advantages of DeFi staking is high profitability, as the exchange attracts specialists to select projects.

Some platforms other than fixed and DeFi staking offer perpetual. By choosing this option, the user can at any time withdraw his asset and the interest that he managed to earn during the storage of the crypt. The ability to withdraw tokens at any time and not lose interest is the advantage of perpetual staking over fixed staking. At the same time, a fixed model is more profitable, since a contract with fixed terms of blocking an asset earns higher interest than a perpetual one.

How much do you earn from staking cryptocurrencies ? 

In the case of staking, a simple rule applies – the more coins the user is ready to block in the wallet, the higher his earnings will be. However, do not forget about the high volatility of the cryptocurrency, the current exchange rate of the coin affects the final income.

The most profitable staking option is DeFi. Fixed and perpetual staking on average gives the owner an income of 10% per annum. DeFi allows you to receive an income of 100% per annum or more, depending on the period of blocking the asset, the coin itself and the exchange. The larger and more popular the exchange, the more promising the projects in which it invests.

Which coins to use for staking?

There is no best cryptocurrency for staking, there are a number of tokens that can be used for this way of earning. Staking requires coins with the Proof of Stake algorithm. Some of them:

You can learn more about staking and other ways of earning passively on cryptocurrencies on the SmartMaker course. We teach investments and earnings on virtual assets, we have developed an effective course not only for beginners but also for those who have already tried to trade cryptocurrency on the exchange on their own and want to do it more successfully.