Staking Crypto: Explained
Below you will learn about what staking crypto is and how it works.
What is staking?
The core concept of staking is similar to how one would earn interest on a (traditional) savings account. If you keep money in the bank, you generate interest over that money over time. This interest is being generated through money that is being lent out to borrowers, which gets paid back over time with interest. A part of that interest is being paid to you, as it was your money being used to facilitate that loan to the borrower. In other words, your money is being lent out to someone else. As a reward for letting that happen, you benefit from the interest paid over that loan once it is being paid back.
You might be wondering if the same thing happens when you stake crypto, because how else does it generate rewards?
The cryptocurrencies that allow you to stake your coins use a consensus mechanism called proof of stake. This mechanism ensures that all transactions involved in staking are verified and secured. The big difference here is not only that this happens automatically without a bank or payment processor verifying them. Additionally, the interest rate is also determined by factors such as network load, usage, and liquidity. That makes it so that the interest rates or yield is always calculated based on facts, rather than interpretations that can be subjective.
How does staking work?
Staking a certain amount in a cryptocurrency means locking up an amount that acts as a validator for the transactions. This strengthens the security and integrity of the blockchain network, and as a reward, the staked amount gets rewarded with minted cryptocurrency resulting from transactions made by other network users.
Where can I stake coins?
Staking can be done in various ways. A common way is to stake through a hardware wallet such as a Ledger. Through its user-friendly interface, some coins can be staked with just a few clicks. Less popular or very new tokens might require a third-party application and in some cases, technical knowledge in order to be able to stake. Another way is to find staking incentives through exchanges. Launchpool on Bitget is such an example. Bitget Launchpool is a platform for users to stake and earn new tokens for free. With Bitget launchpool you stand the chance of winning free tokens, mega earnings and a huge prize pool. Read more about Bitget Launchpool here.
What are popular coins that I can stake?
Ethereum: The biggest altcoin by market cap for a multitude of years and an ecosystem that allows building applications on the network itself. With its upcoming Shanghai fork upgrade, one can stake and unstake at will. Read more about Shanghai fork.
Cardano: A token meant to innovate that which Ethereum has started, with faster transaction speeds and cheaper fees. Read more about Cardano (ADA).
Polkadot: A groundbreaking project that allows different blockchain networks to connect and communicate efficiently with each other. Read more about Polkadot (DOT).
Bitget: BGB is the native utility token of Bitget that was introduced in 2021. BGB empowers the vibrant Bitget ecosystem that combines the best of CeFi and DeFi. The three best options for BGB holders include decentralized fundraising with Bitget Launchpad, yield farming with Bitget Launchpool, and secure saving with BGB Earn. Read more about Bitget Token (BGB).
What more do I need to be aware of?
Cryptocurrency remains an industry that is in rapid and continuous development. That means that at times networks get upgrades in order to progress and improve the network. Make sure you do your research and know the roadmap of the coins you are staking. At times it might happen that the actions or conditions required to stake might change as the networks develop.
Create an account and start staking on Bitget!
Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.
