You may have heard of the stake, but perhaps you have not understood what this type of investment means. Here we will explain exactly what staking is and how you can get interesting returns by investing in blockchain projects.
What is Staking?
Staking is a verb borrowed from English that would literally mean “bet”. So, in a literal interpretation, staking would be the act of staking your tokens to support the growth of a project.
It makes sense to think of it this way, and you will understand why, but the concept used in crypto actually comes from the financial market and bookmakers; where investors or players put money “at risk” or, in the original translation: “at stake”.
The investor or player who puts money “at stake” (at risk) is a “stakeholder” (one who assumes the risk) in an investment or bet. He makes (staking) with the expectation of obtaining a financial return superior to the risk assumed.
In crypto, there are some blockchain projects that use Proof of Stake to validate transactions made on the network, in the same way as blockchain projects. bitcoin miners -or other Proof-of-Work networks- use ASICs or video cards to generate computational work that creates blocks, also validating transactions.
It is a different way of achieving a similar result and it works very well for these blockchains.
To participate in the Proof of Stake, the “stakeholder” does not need to buy expensive machines and spend energy, but only stake the assets that he has in his portfolio, demonstrating to the network that he is interested in that project and is willing to “put something in.” risk”. A widely used term is “skin in the game”, which means that the investor puts his “own skin” into play, showing how much he believes in the project.
Just as mining can generate profits for miners by creating new coins, in a system of controlled inflation, staking allows investors to receive a proportional part of the money “at stake” invested in that network.
The more investors who “skin in the game”, the lower the net income for the other participants, since the rewards are diluted among all those interested, but do not think that this is a negative thing!
More people staking means more decentralization and distribution of votes on the network, which helps with security. If the network becomes more secure, it also becomes more valuable in the eyes of the market, which can influence long-term price increases, benefiting all investors.
Unlike staking from many exchanges and other service providers, your coins are not locked when you stake from your own project wallet and blockchain network. In this way, the client remains free to move their funds with full liquidity at any time, while receiving proportional returns.
Does it seem complicated?
For newcomers and even some more experienced investors in the cryptocurrency market, all these dynamics can really seem complicated and that is why we have decided to meet this high demand for staking related questions.
In many applications, it is possible to buy assets from proof-of-stake networks and become an “interested party” with a few taps on the smartphone screen. With an automated staking tool, if the blockchain of the token you are investing allows this option, your wallet will receive returns proportional to the current balance.
For example, in the network ethereumyour ETH in your wallet earns about 4.9% per annum with staking.
Other tokens that also offer annual staking returns (and approximate amounts, depending on how often new coins are issued in each of them):
Solarium (SOL): 5.8% per annumavalanche (AVAX): 9.4% per annumPolkadot (DOT): 13.9% per annum LooksRare (LOOK): 49.64% annual
What are you waiting for? The best way to learn is to experiment.