Blockchain networks are usually formed by users who create and maintain the entire infrastructure. Blockchain networks offer them rewards or incentives to maintain and support the network for smooth operations.
There are two types of these rewards system:
What is staking?
- Staking is also known as Proof of Stake (PoS).
- PoS is simply similar to putting a fixed deposit in a bank account for a fixed period and at the stipulated period, you will get an interest in return as profit.
- Here you will buy a coin, keep it in Wallet for certain fixed time and will get back more coins as a profit or as a reward.
- The factors determining the amount of reward simply work on a simple equation.
- The longer the period of keeping, more is the profit.
Advantages of Staking:
- No need to spend money on purchasing a machine as needed in mining.
- Just purchase a coin, lock (keep) in your crypto wallet and wait for the value to grow.
- It assures you predictable and sure returns of your investment as the value of cryptocurrencies grow predictably.
- The value of the crypto coins might fluctuate over time, but it will not depreciate at the end of the stipulated period.
- One doesn’t need to be a technical expert to invest in cryptocurrencies.
- PoS consumes less energy and needs fewer resources unlike PoW used in Bitcoin mining and is more eco-friendly.
Disadvantages of Staking:
- Once the coin is kept in a wallet, it can’t be sold before the fixed restricted time.
Vechain, NEO, Dash, WAVES, Tezos, Lisk, Ark, Stratis, Decred, Cosmos, Staking Risks, Zcoin, NEM, to name the few.
The decision to buy specific crypto coins:
Once you decide which crypto coins to stake, you can approach crypto exchanges, where the particular cryptocurrency is available. Coinmarketcap could be helpful to know more about current trends in the crypto industry.
Profits simply are proportional to your volume of coins. More coins more profit, more staking time more profit can be achieved.
Level of involvement:
There are two types of staking: Regular staking and Masternode staking
In regular staking, profits are less and can be started even with one token. Whereas, Masternode provides more income, but requires more maintenance, more time and higher minimum token requisite.