2021 is being referred to as the Year of Decentralized Finance (DeFi), and one of the most significant products is crypto staking. With the number of proof-of-work (PoW) miners on a steady decline, that of those staking crypto coins to yield rewards has grown significantly. In January 2021, the value of total assets invested in decentralized finance networks hit $21-$23 billion. If you are thinking of joining the staking team, here is a comprehensive guide on how to go about it in 2021.
Staking: How Does It Work?
Staking is a method of participating in transaction processing in a proof-of-stake (PoS)-based blockchain by locking the coins in a selected wallet. It can be likened to crypto mining because the goal is similar – helping the network to reach consensus about transactions and rewarding participants. To start staking, you need three things:
- Being a member of a blockchain network that uses a PoS system of confirming transactions.
- A stake in the selected crypto network. This means buying the minimum or more coins of the selected blockchain and dedicating them for staking. Good examples of networks that use proof of stake are Ethereum (ETH) 2.0 and Algorand (ALGO).
- A computer that is dedicated to staking. This computer should have zero downtime.
The right to validate the selected blockchain’s transaction is pegged on several factors, and the main one is the number of coins locked on the wallet. Once you are selected to validate a new transaction and add a new block on the blockchain, a reward is added into your wallet. In addition to the incentives, proof-of-stake helps to make transactions faster.
The main benefit of crypto staking is the reward that you get. In addition, your stake helps to contribute to the efficiency and security of a blockchain network. When you stake more, you make the blockchain stronger and more resistant to attacks.
How to Select a Good Staking Platform
There are two methods of staking your coins. The first one, which many people find pretty challenging, is buying coins and dedicating a computer to the network. Because of logistics such as the internet and power disruptions, most people prefer working with staking platforms. So, here are some useful tips to help you identify the best platforms.
- Take some time to read the feedback of other stakers in the platform and only invest if they have positive reports to give.
- Look for a platform that is designed by a trustworthy developer. This can help you to avoid scammers in the industry.
- Check the details of the platform using third-party staking providers and Staking-as-a-service networks.
One of the staking platforms that have stood out and won the trust of users in the industry is Mantra Dao. It not only makes the process of staking easy, but you can commit your coins knowing they are safe.
As you can see, staking is emerging as a new way of earning some passive income, and there is no limit on how much you can make. So, do not be left behind as others use their assets to create new streams of revenue. However, you need to select and work with the best platforms.