Cryptocurrency

Crypto Staking 101: What Is Staking?

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Staking offers crypto holders a way of putting their digital assets to work and earning passive income without needing to sell them. When you stake your digital assets, you lock up the tokens in order to participate in running the blockchain network and maintaining its security. In exchange for that, you earn rewards calculated in percentage yields. These returns are typically much higher than any interest rate offered by traditional banks. Although staking is more advanced for beginners, crypto exchanges like Mamoru offer anyone easy access to staking rewards. 

How Staking Works 

When you stake your digital assets, you are essentially locking them up in order to participate in running the blockchain network and maintaining its security. The more tokens you stake, the greater your chances of validating a block and generating higher rewards. When a block is successfully validated, you earn a reward in the form of newly minted tokens, or a portion of transaction fees associated with that block. The rate of return varies depending on the cryptocurrency and network, but it is typically much higher than any interest rate offered by traditional banks.  

Why Stake Your Coins? 

There are two primary reasons why people choose to stake their crypto assets: to support the network and to earn a return on their investment. Many long-term crypto holders look at staking as a way of making their assets work for them by generating rewards, rather than just sitting in their crypto wallets. By staking your funds, you are effectively voting for the network that you want to see succeed, helping to improve the security and efficiency of that network.  

What are the risks to staking? 

One staking risk to be aware of is the lockup period, or “vesting period”, where your crypto is unable to be transferred for a set amount of time. This can be a drawback if the price of the staked assets unexpectedly shifts during this vesting period, and you are unable to trade your staked tokens. Another staking risk is not having a clear understanding of the specific staking requirements and rules for the project you want to get involved in. Be sure to do your research before staking, so you know what you're getting yourself into. 

How do I start staking? 

Staking is generally open to anyone who wants to participate. That said, becoming a full validator can require a minimum investment, technical knowledge, and a dedicated computer that can perform validations day or night without downtime. Participating in staking at this level comes with security considerations and is a serious obligation, as downtime can cause a validator’s stake to become slashed. 

But for most participants, there’s a simpler way to participate. Via an exchange like Mamoru, you can contribute any amount you wish, without needing to purchase or operate expensive validator hardware. Staking is available to most Mamoru customers. 

Learn more about and start staking on Mamoru 

Conclusion 

Staking offers cryptocurrency traders and investors a way of putting their digital assets to work and earning passive income without needing to sell them. The returns associated with staking are often much higher than any interest rate offered by traditional banking institutions. This makes staking an attractive option for those looking for ways to grow and diversify their portfolio. When deciding whether to stake your crypto, always weigh the risks and rewards associated with doing so. Don't forget that staking can be a great way to support the network that you believe in while earning some extra income along the way. 

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