Are you interested in the crypto universe? Are you looking for ways that you can earn a good income from this market? Then we have some cool options for you. There are multiple ways to earn passive income from this alternative investment market. Some of these are lending, staking, and mining. In this blog, we will be learning specifically about Crypto Staking or Proof of Stake.
Proof of Stake is a method of supporting the blockchain network. There are two ways through which a cryptocurrency supports a network, one is PoW (Proof of Work) and another is PoS (Proof of Stake). PoS does not require expensive machinery for staking the cryptocurrencies. To know more about Proof of Stake and how to stake digital currencies, read this short guide.
Proof of Stake: Meaning
PoS or Proof of Stake is a consensus method which is used for securing a blockchain and validating signatures on this network. The process of staking cryptocurrencies is important for the proper functioning of the blockchain. An owner of digital assets stakes his/her own coins when they want to participate in network validation. When coins are staked, they are rewarded with more coins that are proportional to the number of staked coins. Crypto owner staking their coins are known as ‘Forgers’.
Validation power of forgers relies on the number of staked coins. Higher will be the validation power when the number of staked coins is high. Proof of Stake is considered more secure than Proof of Work. Proof of Stake is a blockchain model that uses a different type of consensus algorithm compared to Bitcoin’s model which is based on Proof of Work.
Working of PoS
When Forgers (Crypto stakers) are ready for staking, they put their digital currencies in a wallet that is connected to the blockchain network. The wallet requires to be in connection with blockchain for each transaction. With the process of staking, forgers stake their assets running on that blockchain and these virtual currencies are used in transaction validation and creation of new blocks. Staking cryptocurrencies helps in securing the blockchain.
How to Stake Cryptos
Till now, we have learned what it means to stake digital currencies and how Proof of Staking Works. Next, we will look into how you, as a trader, investor or crypto owner, can stake cryptos. So, following are some steps that you need to follow in order to stake virtual currencies.
- Deciding on a Coin to Stake
In cryptosphere, you have an option to choose from over 350 digital assets for performing Proof of Stake. Search for these types of coins and decide on one coin that is most feasible for you.
- Downloading the Wallet
You need to have a software wallet for staking cryptos. The wallet will store your staked digital assets. Download the wallet from the website of the asset you are staking.
Some virtual currencies have specific requirements to start the process of staking. Usually, some coins have a minimum requirement of coins that you need to have in order to stake them.
- Choosing a Hardware
To stake cryptocurrencies, you can choose a simple computer. It is essential to choose a computer or any device that has an untroubled connection to the internet as some staking schemes require you to be connected with the network at all times. You also need to ensure that the device you are using uses less energy because the device will be connected to the network every time.
- Start Staking Cryptos
When you have completed the above steps, you are all set to start staking. Stay connected to the internet and network at all times and keep checking in between to confirm that everything is smoothly working.
Setup for PoS
PoS uses different setups and consensus algorithms for staking. Following are the setups that are used for verification of transactions and forging new blocks:
- Age of Coin- Forger is chosen for staking depending on the number of days and the no. of staked coins
- Randomized Block Selection- this model is designed to find a forger having the lowest staking size and hash value
- Inflation Amount- Here, an inflation rate design is added based on the number of staked coins. In this, more or less than 50% can be the cut-off number.
Advantages of Proof of Stake
After knowing all about PoS, how it works and how to start staking, we have listed below some advantages of staking virtual currencies:
- Inexpensive Equipment
Proof of Staking does not require using heavy and expensive equipment and mining machines. Staking can easily be done by a computer or a mobile phone.
- Less Consumption of Energy
In Staking digital currencies there is no requirement of expensive equipment that needs a huge amount of energy to function. So, PoS is very much efficient and eco-friendly.
- Decreased Risk of 51% Attack
No person could be holding more than 50% of overall Ethereum coins. This reduces the chances of a 51% attack.
So, after reading this whole guide, you are ready to explore the market and start Proof of Staking. Staking is a cheaper and efficient way of involving in the process of transaction validation on the blockchain network. It is an efficient and environment-friendly process of earning money from cryptocurrencies without putting much effort. For traders and investors, it is a great way to earn passive income from the world of cryptos.
Want to learn more about the Cryptocurrency World? Stay tuned with PCEX Member Blog.