What is Crypto Staking?

What is Crypto Staking?

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Crypto staking is an activity in which a crypto asset user can gain money simply by validating transactions or all activities that occur on the blockchain system. It’s just that, users must first store or lock their crypto assets in a digital wallet so that they are deemed “appropriate” and “legitimate” to get the intended cuan.

This activity can only be run on a blockchain system that utilizes the Proof-of-Stake consensus algorithm. What is the meaning of the algorithm?

In the Proof-of-Stake algorithm, one can mine or validate crypto asset transactions on the blockchain according to the number of coins that he “locks”. This means that the more coins they own, the higher the stake they will have in doing this. One of the most common uses of this algorithm is for activities that run on top of the Ethereum blockchain system.

What is Crypto Staking?In other words, the more coins that are “locked” in the wallet, the more significant the impact on the blockchain system will be. Then, he had a high chance to gain cuan just by taking advantage of that position.

Different Crypto Staking Tools
Crypto staking is the activity of earning passive income from crypto assets without being exposed to direct risk, which usually arises when trading. It’s just that crypto asset collectors rarely realize that crypto staking can be done in various mediums. Anything?

1. Crypto Asset Exchange Platform
Usually, crypto asset users are increasingly using this tool for crypto staking. Because, this tool is a common way for them to diversify idle crypto assets. Within this platform, crypto asset owners can stake a series of crypto assets using a Proof-of-Stake consensus algorithm system such as Ethereum, Tezos, Algorand, and Icon.

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2. Personal Wallets (Cold Wallets)
In addition, users can also take advantage of personal crypto asset wallets for crypto staking. However, users are required to “lock” their crypto assets for a certain period of time. If they move crypto assets before the period ends, then the share of the staking activity can simply evaporate. Well, such means are usually known as cold wallets.

3. Special Platform for Staking Services
Unlike cold wallets and crypto asset exchange platforms, this medium is a tool specifically for crypto asset owners who have the sole intention of staking. However, these platforms will quote a percentage of the user’s stake, which is often seen as a transaction fee.

This type of staking is commonly known as soft staking.

4. Decentralized Finance (DeFi) Staking Platform
This is a means of staking in the DeFi ecosystem. DeFi itself is a variety of crypto asset financial services applications that run on the Ethereum blockchain system. Well, these applications act and have activities like conventional financial service companies, for example, lending and borrowing services.

Crypto StakingThis condition also applies when staking the DeFi application. In this activity, the user will store his crypto assets in a DeFi account – much like opening an account at a conventional bank. Later, these crypto assets can be channeled for crypto asset credit activities and users can get a proceeds from the “interest” credit on the distribution of the loan in question.

However, crypto staking in the DeFi application is not limited to lending and borrowing activities alone. Because, there is also a DeFi application that acts like conventional investment management. Where, the activity is to collect crypto assets that are “locked” in digital wallets and “distribute” them back to various platforms that can gain a decent return.

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Crypto Staking Is a Way to Profit in the Future
Now, more and more users understand that crypto staking is the safest way to make a profit in the crypto asset ecosystem. Mainly, by placing crypto assets on DeFi platforms.

This can be seen from the total value of locked crypto assets (TVL) between 2020 and 2021. At the end of April 2020, the value of TVL on the DeFi platform was only US $ 867.35 million. However, by the end of April 2021, the figure had shot up to US $ 59.44 billion.

However, this activity does not mean it is risk free. Keep in mind that the instrument that users keep is a crypto asset, an asset whose price is fairly volatile. Thus, the risk of price changes will still haunt the perpetrators of this activity.

Not only that, the high public interest in staking activities also encourages irresponsible parties to carry out deception. Usually, they will pretend to offer staking services with fantastic returns, which sometimes leads to mass theft of crypto assets.

So, it’s a good idea to keep crypto asset users careful before jumping into the crypto asset staking scene.