Staking is the process of holding or locking cryptocurrencies in a target wallet for a specified period of time in exchange for rewards.
These locked funds help support the security and maintenance of certain blockchains. It is a process comparable to Bitcoin mining, but much less resource-intensive. Today, talk about how staking works. As we all know, Bitcoin relies on Proof of Work (PoW) for its consensus mechanism.
But other coins such as Cardano, NEO, and Ontology use a Proof of Stake (PoS) mechanism. Bitcoin’s Proof of Work system works it involves having miners solve complicated mathematical problems using specialized hardware to create blocks of verified transactions to be added to the blockchain.
Each time a miner successfully solves a problem and adds a new block, the system rewards them with a certain amount of Bitcoin. And so now it post 6.25 BTC per block reward to miners.
The solution or “proof of their work” is then shared and verified by other miners as they add the same block to their copies of the distributed ledger.
The Proof of Stake model is associated with the Proof of Work Instead of relying on expensive equipment and excessive computational work to secure the network, this PoS syetem simply requires participants to store and lock away some of their funds. Where PoW has miners, PoS uses validators. These are people who verify transactions and add them to the blockchain.
Similarly to miners, validators that do not perform appropriately risk losing some of their staked funds. Staked coins essentially function as collateral against bad behavior. On the other hand, validators that play by the rules and verify blocks honestly are compensated. Each time a block needs to be verified, the system randomly assigns the task to one of the validators.
How likely a validator is to be selected depends on how much they have staked. The more funds they’ve locked up, the higher the probability that they will be selected. In other words, just as miners with more computing power are more likely to solve a block’s mathematical puzzle, PoW validators with more coins staked are also more likely to be granted the right to verify a block and receive a reward.
Rules and conditions for validators vary across different PoS blockchains. Each project has its own preference in terms of technical requirements, minimum stake amounts, lockup periods, methods of selection, and reward calculation formulas.
Every PoS project, they all share a similar advantage over PoW. Because PoS does not require huge amounts of energy or specialized hardware, the mechanism is much more scalable. In fact, the Ethereum network is currently in the process of migrating from PoW to PoS through its ETH 2.0 upgrade. Which gonna actually happen in December.
Delegated Proof of Stake is a popular variation of the PoS that turns locked up funds into votes. Rather than having users with staked tokens taking on the role of validators themselves, these users instead elect delegates to perform the necessary services on their behalf.
The more funds staked, the more voting power someone has. Staking rewards are given to the delegates who then distribute these to their electors. This model allows a smaller number of validators to represent a larger number of participants.
This increases efficiency, lowers entry thresholds for electors, and lowers power consumption. However, there are some notable disadvantages around the network. and relies on a small group of validators, this means more centralization.
Another potential challenge arises when users that have very small stakes feel that their vote is too insignificant to count and choose to stop participating. Nevertheless, many popular projects such as EOS (EOS), Tezos (XTZ), and Tron (TRX) Thay all have adopted the delegates PoS right now. Staking pools are essentially groups in which coin holders combine their resources.
They stake as a unit and consequently have a higher chance of being selected as a validator and earning a reward. If a reward is received, it is then distributed to group members based on how much each participant added to the pool. Because organizing and maintaining a pool requires time and money, pool providers charge a fee that is collected from a participant’s share of staking rewards.
This extra cost is the price to pay as a staker to join the pool for the flexibility So it’s actually not a bad thing. It’s more convenient for you. Staking as an individual means keeping to a project’s minimal lockup times and required balances, Sometimes that can be quite high.
It May require you to stake a lot and it’s much easier to hit that mark if you in a pool Staking pools on the other hand generally do not have any withdrawal time limits and allow participation with much smaller initial balances. Staking is an excellent way to generate a passive income. It is like depositing money into a bank account that earns you interest. Unlike mining, it requires very minimal technical knowledge and setup. The first step involves choosing one of the many Proof of Stake coins available and buying in.
Yeah, you can find some Proof of Stake coins available on Phemex, like: Cardano (ADA) NEO (NEO) Ontology (ONT) EOS (EOS) Tron (TRX) Tezos (XTZ) OK, firstly you will need to have a wallet to hold the funds, Ledger is a popular option. Also you can download some software wallet on your mobile phone and desktop. If you use Ledger, you need to install Ledger Live on you computer.
That is the first step. After you installed it, You need to install the Tezos app. through the Ledger live manager. Follow the in-app instructions to add a Tezos account. Purchase some XTZ through a popular exchange such as Phemex and transfer to your Ledger.
Click the “Earn Rewards” button in the account section of your Ledger app and follow the procedures (delegate, choose a validator, and confirm). You’re done. Tezos’ current annual yield through ledger is about 6% minus fees. Of course, your final earnings will depend on how much you choose to stake. If you earn 6% per year. and you stake $100 That is not a lot.
The more you stake, the more you earn. It looks so easy to stake, and get passive income. I think it’s one way you can do it. The Proof of Stake mechanism is not only less resource-intensive and more scalable than Proof of Work, it also encourages more participation from people.
as far as in crypto and blockchain sector By simply locking up funds for a period of time, users can take part in the consensus and governance process of blockchains. A lot of people wanna take part in this industy. It offers an easy method to generate a passive income without the need for technical know-how or a large investment in specialized equipment.
Anyone interested in staking must perform their own due diligence. Because there are a lot of options. Most of them rely on the trust of others. You wanna always verify. It’s particularly important to pay attention to the smart contract the network employs, making sure that it is free of any bugs that might lead to losing the funds. You don’t know how to really contract.
Thank you so much. Bye.