What is Crypto staking
Crypto Staking is storing and holding cryptocurrency in a wallet to contribute to the security and normal operation of Blockchain. You are pledging your support for the cryptocurrency network and in return, you earn the rewards in more crypto coins.
To fully understand the Crypto staking concept, we need to be fully versed with three concepts of the crypto world, the blockchain, the proof of work and proof of stake. Let’s try to understand the terminologies used in crypto staking before jumping into practical crypto staking Tutorial.
What is Blockchain
Blockchain is simply a network of connected blocks helping to record and process transactions on the network and validating resources. Blockchain allows to perform direct transactions or peer-to-peer transactions without some centralized server controlling the network. Each connected block plays its role in keeping the security and processing transactions.
Online Transactions vs Blockchain Transactions
Let’s see the difference between our normal online transactions and Blockchain transactions with an example. When you want to buy something online, you will use your credit card or your PayPal account. So, you are trusting a central government or a third party to validate the transactions online while in a blockchain network we don’t have third parties handling the transaction. we do direct peer to peer transactions without any middlemen interaction.
So, how we can validate the transactions and who will ensure security and accuracy when there is no central authority on the blockchain. In Blockchain, every single transaction is recorded and cloned to all the nodes on the network to be validated and processed. So, each node contributes to the Blockchain network.
Proof of Work Cryptocurrencies
In proof of work cryptocurrencies, transactions are validated on Blockchain by the miners by utilizing their GPU and mining resources. In order to validate transactions on the blockchain, miners solve algorithms problems and solve cryptographic equations. So, the miners are utilizing resources like electricity and GPU power to keep the Blockchain optimal operation.
So, crypto mining only works in the proof of work model. Miners actually need to solve equations using electricity and the power of CPU or GPU to validate transactions in the proof of Work model.
Proof of Work Cryptocurrencies
In proof of stake cryptocurrencies, instead of miners utilizing GPU, CPU and power resources to mine and validate the transactions, we pledge our crypto coins to the network by keeping them in special wallets designed for staking. The Blockchain network algorithm then performs the computations and picks up the staking wallets to validate the transactions and in return, the Blockchain rewards the staking wallets.
Some cryptocurrencies like Bitcoin, Ethereum are proof of work cryptocurrencies but still allows you to stake crypto coins to earn rewards. While some cryptocurrencies like Cardano (ADA) are pure proof of stake currencies and direct mining of them is not possible.
So in short in blockchain, we have two main models to prove transactions and validate them, proof of work and proof of stake. In proof of stake, we have mining providing resources to solve equations. In proof of stake, stake coins in the blockchain network to validate transactions.
How To Stake ADA Coins (Cardano)
Cardano can be staked on platforms like Binance or directly from a wallet like Yoroi. Basically, you join a Cardano staking pool where you stake your ADA coins and earn rewards in return.
Cardano is one of the top cryptocurrencies and is strongly backed by academia and Crypto experts. Now, we are going to see the top two methods to stake Cardano to earn rewards.
How to Stake ADA on Binance
Binance is among the top crypto exchanges. Binance offers an easy mechanism for staking ADA coins on its platform. If you don’t have a Binance account, check the Beginners crypto trading tutorial to learn how to make an account on Binance. Now open the Official website of Binance and sign in with your account.
Step-1 Select Binance Earn
Select the Finance tab and click Binance earn to see all earning opportunities that Binance offers.
Step-2 Selecting Binance Staking Model
Now scroll down and select the locked staking Option. You can also click on the Defi staking which will show you if Defi staking is available for ADA at the moment.
Step-3 Stake ADA coins on Binance.
So, if you have selected the locked staking option, search for ADA in the “search coins” option. Here you can see that you can stake your ADA coins for one, two or three months. The longer you stake your coins for, the higher will be the profits. You can select your duration and then click stake and enter the amount to stake.
Defi stacking provides us with better profit margins but is available for a limited time and for limited coins at a time. You can look for staking options to invest in higher profit options.
How to Stake ADA on Yoroi Wallet
Staking Cardano on the Yoroi wallet is easier for beginners as it provides a simple click and select procedure to stake ADA coins.
Step-1 Open your Yoroi wallet Dashboard
Click on your Yoroi extension and select the Cardano wallet you have created earlier. Or if you don’t have a wallet yet, you can create a new Cardano wallet by following the steps in the Cardano mining tutorial.
Step-2 Select the Cardano Staking Pool
Now, select the option for delegation list and you will see a list of staking pools. The following information is provided along with the list to choose the best Cardano staking pools:-
- Pool Size
- Average Costs
- Number of Blocks
Step-2 Stake ADA Coins
You can select any Cardano staking pool and click delegate and then you can enter the amount of ADA coins to stake.
Now, remember you can always pull back your ADA coins that you have staked and can stop ADA coins from staking any time.
What is Crypto Staking?
Crypto staking is pledging your crypto coins to Blockchain Network. Staked coins are then used to process the transactions on the network.
Can we mine proof of Stake Coins?
No, Proof of stake coins can not be directly mined. Proof of Stake coins works on the concept of staking coins for processing transactions and earning profits.
How to stake ADA coins?
We can stake Cardano coins on Binance Earn with locked or Defi staking. We can also stake Cardano directly from Yoroi wallet.
Can you stake proof of work cryptocurrencies?
Yes, you can stake proof of work on all major crypto exchanges. Binance Earn offers an easy mechanism to stake proof of work crypto exchanges like Bitcoins, Ethereum etc.
The Post is only the views of the author and should not be taken as legal or financial advice.