Coin staking is a relatively new way of making passive income in the Cryptocurrency world.
Traditionally in the regular Crypto network (Bitcoin), all transactions are confirmed in the network using the proof of work (POW) algorithm.
This means that transactions on the network are “mined” by solving complex mathematical equations. The reward for solving these equations is a small portion of the block rewards.
This can be very expensive. In order to claim the rewards and confirm transactions, you need to invest In costly mining equipment.
Coin staking, however, uses a completely different algorithm altogether known as proof of stake (POS).
This system has been around since about 2012 but has recently seen a huge rise in popularity. Unlike the POW system proof of stake doesn’t rely on expensive equipment that requires lots of energy.
Coins are generally either pre-mined for a very short time using POW. They are then sold as an initial coin offering (ICO) or they will switch the protocol after a specified amount of time. Coins are then distributed throughout the network.
How Does Coin Staking Work?
There are two ways that staking is generally used. The first is age-related staking.
This effectively gives higher priority to people who “lock in” a specified amount of coins as a stake. The longer those coins are held the higher priority that stake is given when issuing block rewards.
The second way is random block selection. Again participants will stake their coins. A formula will then randomly determine who will be rewarded based on their stakes and hash values.
The benefits of coin staking.
The biggest benefit to coin staking is that it is the lowest cost available to generate an income.
You do not need to purchase and maintain mining equipment like with bitcoin mining. Also, you don’t need to be connected to the network via a dedicated server and IP address like with masternodes.
Another benefit is control.
Your coins are often staked in your own desktop wallet. Unless you agree to lock your coins in for a specific amount of time you are free to access your coins at any point. Although if you are agreeing to lock your coins in for a certain period of time you may need to send your coins to a specified address.
Coin staking is also more environmentally friendly. There is no loss of value in terms of assets like with traditional Cryptocurrency mining.
There is only one real risk you will face staking your coins and that is price fluctuations. If the coins price goes up it’s great. Not only are you increasing the number of coins you hold but the price per coin is increasing too. It’s a win-win situation.
However, if the market turns bearish the number of coins you make won’t cover the loss in value.
What coins can I stake?
The last few years have seen a massive increase in the number of coins that you are able to stake.
The most popular coins for staking at the moment are the more well-known coins such as Dash, PivX, Neo, OKcash and Nav. There are loads of others out there too though.
You can make some very good profits by staking newer undervalued lesser known coins that may one day see huge increases in price.
As always guys be sure to do your own research before making any investments. Research the coins you’re buying thoroughly to limit your risk.
Look for coins with real-world application and use case with a transparent team and a long-term plan for their projects.
There are staking pools such as StakeUnited set up that give information on the coins available for staking with them that are also very popular.
You can check out some of our coin reviews —–> here.