Staking, which always maintains its popularity in the crypto world and offers earning opportunities, has always attracted the attention of investors. This method, which can be considered as an alternative to traditional financial instruments, both adds value to crypto assets and allows investors to earn additional returns. So, what does staking mean in detail and why does it attract so much attention? Let’s explore this innovative investment strategy and this concept that helps the development of the crypto ecosystem.
What Does Stake Mean?
Locking a certain amount of cryptocurrency in a wallet in order to participate in a cryptocurrency’s blockchain network and ensure the security of this network. “What does staking mean?” When looked at, it can be answered briefly as follows. This process is based on the Proof of Stake (PoS) consensus algorithm, which is one of the network verification mechanisms. This algorithm was developed as an alternative to the Proof of Work (PoW) algorithm used in mining.
Apart from this, there is also a service provided by cryptocurrency exchanges or wallet service providers called staking. On some platforms, this service may be launched under a different name or name. This service, provided by cryptocurrency exchanges or wallet service providers, does not include verification processes on the network, but users who stake their crypto assets are still rewarded. In this type of transaction, users’ cryptocurrency assets are locked by the platform at certain periods or flexibly. “What is staking?” The question can be briefly summarized like this.
When it comes to staking, two of the first concepts that usually come to mind are Proof of Stake (PoS) and Proof of Work (PoW).
Proof of Stake (PoW)
Proof of Stake (PoS) is a consensus algorithm used in blockchain networks of cryptocurrencies. This algorithm is used to verify blocks and create new blocks to ensure the security and integrity of the blockchain. PoS stands out compared to the Proof of Work (PoW) algorithm as a more efficient alternative in terms of energy consumption and decentralization.
Proof of Work (PoW)
Proof of Work is the first method that comes to mind when it comes to cryptocurrency mining. It was the first consensus algorithm used in blockchain networks and gained popularity alongside Bitcoin. The PoW algorithm requires miners to solve complex mathematical problems to ensure the security and integrity of the blockchain. This process is used to verify transactions on the network and create new blocks. Actually, it is not considered a staking method.
What are the Staking Types?
We took a basic look at what staking means in our previous title. Now we can examine this concept a little more closely. Staking can be accomplished through a variety of methods and strategies in the cryptocurrency world. Here are the types of staking and the features of each:
- Cold Staking: It is a method where staked cryptocurrencies are kept in an offline wallet. Storing cryptocurrencies in a wallet that is not connected to the internet makes this method especially advantageous in terms of security. It is considered more suitable for long-term investors.
- Masternode Staking: It is a method that requires operating a masternode by depositing a certain amount of cryptocurrency. The masternode performs certain tasks to ensure the security and operation of the network. The tasks here are more challenging compared to Proof of Stake, the amount of cryptocurrency that needs to be deposited is higher.
- Staking Pool: It is a method that allows users to earn more profits by combining their powers. Cryptocurrencies of different users are brought together and staking occurs collectively.
- Liquid Staking: It is a method that allows users to access liquidity without breaking the cryptocurrencies they have locked. Thus, those who stake can make transactions in DeFi (decentralized finance) applications.
- Flexible Staking: It is a staking model where users can withdraw the cryptocurrencies they have staked at any time. This method allows users to quickly respond to their liquidity needs. This type of transaction can be used not on the network, but by using a service provided by cryptocurrency exchanges or wallet service providers.
What are the Tips of Staking?
There are some tips to consider for a successful staking experience. Here are the important points you should consider when staking:
- Deciding on Cryptocurrency: The first step when staking is to choose the ideal cryptocurrency. Not every cryptocurrency is suitable for staking. The cryptocurrency to be staked should be decided by taking into consideration factors such as staking rewards, locking periods, and staking requirements.
- Determining Staking Platforms: There are various platforms for staking. Among staking platforms such as wallet, exchange, network-based, the one that best suits your needs should be decided. The ideal choice should be made by comparing criteria such as return rates, security features and user experience offered by the platforms.
- Prioritizing Security: Security is an important factor when staking cryptocurrency. A strong and unique password should be used to ensure the security of the wallet. It is recommended to enable two-factor authentication (2FA) if possible. and keep your wallet up to date. If you are cold staking, you can increase security by storing your wallet on an offline device.
- Consider Locking Periods: When staking, cryptocurrencies may need to be locked for a certain period of time. These lockout periods may limit access to staked assets. It is important to plan liquidity needs by taking into account lock-up periods and to have sufficient liquidity for emergencies.
- Research Return Rates: Cryptocurrencies and platforms to be staked may offer different return rates. It is necessary to investigate the return rates and determine the most beneficial ones. Of course, when doing this, the risk-return balance and how safe the cryptocurrency or staking platform is should be taken into consideration.
- The Robustness and Future of the Network Should Be Evaluated: The robustness and future potential of the network to be staked should be evaluated. Projects with a strong community, a solid technical foundation, and a good development roadmap are generally considered more reliable. The development process of the network and the past performance of the team should also be examined in this context.
- Staking Costs Should Be Taken into Account: Platforms and wallet service providers may charge certain fees for staking. Before staking, fee policies and costs can be examined and included in return calculations.
- Portfolio Diversification: When staking, more than one cryptocurrency can be preferred rather than a single cryptocurrency. Choosing different projects can be a precaution against market volatility and increase potential earnings.
- Staying Current: The cryptocurrency market can change quickly. It is important to have up-to-date information about staked projects and platforms. Developments, updates and potential risks should be followed and the staking strategy should be reviewed when necessary.
Advantages of Staking
Staking in the cryptocurrency world brings many advantages for investors. The main advantages of staking are as follows:
- Providing Return: Staking offers the opportunity to generate returns for cryptocurrency holders. Regular rewards can be earned on staked cryptocurrencies. These staking rewards are typically calculated as annual percentage returns (APR) and increase based on the amount you stake.
- Contributing to the Security of the Network: Staking increases the security of the blockchain network. Staking users ensure the security of the network and maintain its decentralized structure by participating in the verification processes of the network.
- Low Energy Consumption: Staking consumes much less energy compared to the Proof of Work (PoW) algorithm. At this point, it can be said that it has a more environmentally friendly attitude.
- Benefiting from Price Increases: The value of staked cryptocurrencies may increase over time during the normal market cycle. If such a situation occurs, a two-way profit can be achieved from both the increase in the value of the cryptocurrency and the staking rewards.
- Less Volatility: With staking, cryptocurrencies are locked in wallets. This may reduce price volatility as it will reduce the circulating supply of cryptocurrencies.
- Low Barriers to Entry: Staking does not require high technological knowledge or large capital. This encourages more people to participate in staking.
- Different Options and Diversification: Staking can be done for many different cryptocurrencies. This allows investors with staking to diversify their portfolio, that is, invest in different projects. This can help hedge against market volatility and increase potential earnings.
Are There Risks in Staking?
Staking contributes to both a cryptocurrency’s network and investors. So, is staking risky? Staking coins may also carry some risks. These can basically be listed as follows:
- Market Volatility: The value of staked cryptocurrencies may decrease and, as a result, staking rewards may also decrease.
- Lockout Periods: Staking transactions generally require a certain lockup period. During this period, your staked cryptocurrencies may not be instantly accessible. This may cause difficulty in meeting urgent liquidity needs.
- Technical and Operational Errors: As a result of technical or operational errors made during staking transactions, staking transactions may fail and owned cryptocurrencies may be lost.
- Delegation: In some staking models, users delegate their cryptocurrencies to validators or staking pools. In this case, it is important that the delegated verifier is trustworthy. An unreliable or malicious validator can steal staking rewards.
Understanding staking risks and taking precautions against these risks can help you have a safer and more informed staking experience.
How to Stake in Crypto?
In fact, the implementation of each type of staking is different. The determining factor here is whether the staking transaction will be done on the network, via a cryptocurrency platform, or by using a wallet service provider.
Staking processes for each cryptocurrency on the network may differ from each other. If coin staking is to be done on a cryptocurrency network, the instructions specified by the relevant cryptocurrency must be followed. If you want to use a wallet service provider for staking, the instructions provided by them should be followed. ICRYPEX cryptocurrency exchange is a platform preferred by many people for staking transactions, as staking transactions are carried out easily and offer satisfactory return rates.
H3- How to Stake on ICRYPEX?
- If you are not yet a member of ICRYPEX, create your account and log in for free.
- Click “Earn” under the “Earn” tab on the ICRYPEX website.
- After selecting the cryptocurrency and duration you want to stake, click the “Subscribe” button.
- Check the information on the confirmation screen and click the “Confirm” button after checking the “Earn User Agreement” box.
That’s it. Now, thanks to ICRYPEX, you can easily earn additional income from the crypto money you hold.
H4- How to Stake ICRYPEX TOKEN?
One of the advantages offered to users by ICRYPEX TOKEN (ICPX), the own cryptocurrency of the ICRYPEX cryptocurrency exchange, is the opportunity to stake. You can read our article about ICPX staking to learn how this process is done.
