I will ask you some questions before you decide to read this article.
Do you want to earn some extra crypto? Do you want to support some of your crypto projects and help them grow? Do you want to be a part of the future of decentralized financial systems? If you answered yes to any of these questions then you might be interested in crypto staking.
What is crypto staking?
Crypto staking is a way of earning passive income by using your existing crypto to participate in the operation and security of a blockchain network. Actually, it is same with opening account in the bank and deposit your money in the bank account then you can get interest. The different in here is interest that you get from staking crypto higher than interest that you can get from the bank. That's make many people like to staking their crypto.
How does crypto staking work?
Just imagine you get wallet to save your money but in this case is crypto not fiat money. Staking crypto means you put some of your crypto (digital tokens) into a wallet (digital wallet not the physical one), but it is not like a traditional wallet, it is a large computer program that help keep the digital money world run and safety.
As an illustration, you said to the computer program, "I put my money here for a while, please take care of it". then the computer program gives it answer "Ok, thanks for your help, I will give you a reward in return". This reward is extra crypto that the computer program will give to you because you already contributed to its task.
Commonly, you have to wait for a while before you can withdraw your crypto that you stake. We call that as a locked period. The locked period is different for different crypto, it can be daily, weekly, or even monthly. But nowadays in some platforms you can get staking without locking period. It means you can withdraw anytime. If you have some urgent need in short time, it it better to chose crypto with staking locked period daily or weekly, or even crypto with unlocking staking period.
But you are also aware that long term staking usually rewards with a higher interest rate. This is because risk of staking in longer period is bigger. One of crypto characteristic is an asset with high volatility in market. Price can go up and down rapidly every day. So be careful if you have plan to stake your crypto for long period of time. Please make a research first whether for the crypto that you want to stake or the platform that you want to use for staking.
Different crypto will change with different interest rate level. Higher the interest rate is given, more risky your crypto choice. This is similar with bank interest, small bank is usually offer a high interest rate compare with its rival bank.
Staking is one method to get crypto with easily and safely but there are many ways to get crypto out of there such as farming, airdrop, faucet, etc. Each of them have their advantages and disadvantages depend on who want to use it. If you are a risk-averse person, it is recommended to chose to stake rather than farming, etc.
There are many platforms to provide a beginner to start their journey in the crypto market like Binance, Gemini, Kraken , Coinbase, etc.
I will discuss many things about investment (including crypto) and entrepreneurship in my next article here. Hope you will enjoy reading my short articles.