Crypto-Staking: An Easy Way to Make Profits for the Beginner traders in Nigeria

By: Damian Okonkwo

What is Crypto- Staking？

Staking is a passive way of earning rewards for holding a particular cryptocurrency over a long period of time without trading them. Staking allows an investor to commit their holdings of a given crypto assets into a pool known as the “staking pool” and earn a certain percentage-rate for them over a period of time.

Very often staking helps to support a blockchain network and confirm transactions. Thus, through staking, many crypto currency blockchains are able to verify their transactions and in return offers participants some rewards for submitting their cryptos into the pool. Staking is very common and required for cryptocurrencies that uses the proof-of-stake model to process payments.

Staking can be a great way to use your cryptocurrency to generate passive income, especially with those cryptocurrencies offering high interest rates for staking.

The reason your crypto earns rewards when staked is because the blockchain puts it to work. Cryptocurrencies that allow staking use a “consensus mechanism” called Proof of Stake; which is the way they ensure that all transactions are verified and secured without a bank or payment processor in the middle. Thus, whenever you submit to stake your cryptocurrency it becomes a part of that process.

Of course to stake your cryptocurrency you will need to make the crypto available via an exchange for use in the proof-of-stake process. The good thing about staking remains that it allows holders to monetize their crypto holdings that would otherwise lie idle in their crypto wallet.

How does one proceed to stake a cryptocurrency？

There are basically two major ways for staking a particular cryptocurrency. These include: staking on a cryptocurrency exchange or joining a staking pool.

Staking on a Cryptocurrency Exchange

Staking on a cryptocurrency exchange requires that the holder makes his crypto available through an exchange for use in the proof-of-stake process. Here the exchange serves as a facilitator for the process, providing a node for the investor to join so you dont have to do it yourself. This process is not completely risk-free. However, the investor does not have to submit his crypto to the exchange but rather to the staking pool of the blockchain network that allows the staking.

Joining a staking pool

The second method of staking involves joining a staking pool. In this case, the blockchain allows the investor to link up his wallet address with the liquidity pool and commit the desired amount he wishes to stake. A staking pool enables stakers to earn block rewards by sharing their resources, similarly to a mining pool. These pools tend to follow a two-tier system, with an administrator overseeing the work of the validators and ensuring things run smoothly. When rewards are earned, they are often split between the pool operator and pool delegators, however, some pools additionally charge for entry and membership fees.

Some Advantages of staking crypto？

· There is a potential for high returns (depending on the interest-rate of the specific cryptocurrency youre staking).

· Staking offers you the opportunity to contribute to the growth of your favorite cryptocurrency.

· No equipment is required for staking.

· Staking is often more environmentally friendly than crypto mining.

Risk associated with staking of cryptos？

· Crypto prices are often very volatile and can drop quickly. If your staked assets suffer a large price drop, that could outweigh any interest you earn on them.

· Staking often requires that you lock up your coins for a minimum amount of time. Thus, during this period you are not able to put your crypto to use should you need the money urgently.

· When you want to unstake your crypto, there may be an unstaking period of seven days or more depending on the terms associated with that particular cryptocurrency.

· Staking involves a high risk of entrusting your cryptocurrency to an unknown but trusted to deliver third party. Often the investor remains helpless if the contract fails or rugpulls.

· Staking can expose one‘s to hacker’s based on some agreement unknowingly approved in the process of staking especially when one is using an unsecured wallet to stake the wrong project.