What is Staking Crypto? Three Things You Should Know

The current cryptocurrency market is worth over $3 trillion. The past few years have seen a surge in the number of people investing in crypto. And with so many more use cases for cryptocurrency, like NFTs, the market will only go up from here.

There are countless ways to make money in crypto. You can buy and hold, which has proved to be extremely effective already. 

But you can also invest in crypto staking awards. But what is staking crypto?

It’s basically the process of earning interest on your crypto. So not only can you buy and hold for price appreciation, but you can also earn additional funds on top of that, similar to interest or dividends.

So what is crypto staking, and how does crypto staking work to make you money? Read on below to find out how to put your digital assets to work. 

How Is Cryptocurrency so Secure?

Staking your crypto is beneficial to the user because this is a way to make money. But even bigger than that, staking provides network security, allowing for a truly decentralized currency.

The reason crypto is secure and decentralized is that the ledger of transactions, also known as the blockchain, is open to the public. Anyone can view the blockchain and verify that transactions took place.

Every bitcoin transaction since 2009 gets recorded in blocks on the blockchain, which anyone with an internet connection can view.

But before these transactions go through, blocks that are full of transactions first need to be compared and agreed upon. This happens with nodes.

Nodes are devices, such as computers, that are spread out across the globe. These devices will receive blocks full of transactions, verify the transactions with other nodes, and agree that the block is valid. 

A cryptocurrency blockchain network, like Ethereum, depends on many people across the planet running nodes, ensuring the validity and security of the cryptocurrency.

What Is Staking Crypto?

So what is staking crypto, and how does it relate to nodes and security? Because crypto depends so heavily on individuals running nodes, the cryptocurrency is designed to incentivize people who run nodes. 

Nodes receive transaction fees paid by users. But nodes are more efficient when they have a large staking pool of crypto funds.

So nodes will open up a pool where individuals can deposit as much of that particular cryptocurrency as they want. Since their funds are helping the node earn more crypto, that money is shared with those who stake it.

This blockchain process is called proof-of-stake. It’s similar to proof-of-work cryptocurrencies like bitcoin, which require mining rather than staking. 

Basically, by staking crypto, you participate in a global process of keeping this decentralized network secure. In exchange for your support, you earn more crypto. On the surface, it looks like depositing money into an interest-bearing savings account. 

Alternatives to Staking

You can stake virtually any proof-of-stake cryptocurrency, such as Ethereum, Terra, Polkadot, Solana, stable coins, and many others. Staking rewards rates range from about 3% to 15% depending on the particular coin you stake.

You can also earn more crypto by depositing assets into a crypto savings account. With an account like this, you can actually earn interest on a deposit of BTC and other proof of work cryptocurrencies.

Support Others, Pay Yourself

So what is staking crypto? It’s the process of earning crypto rewards, similar to interest, by participating in the global, open, decentralized security of the protocol. 

It supports everyone, but it earns you money. It’s a win-win.

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