If you're new to the world of cryptocurrency, you've probably heard the term "staking" being mentioned. But what exactly is staking, and why do so many crypto holders use it as a way to earn passive income? Let’s break it down in a simple way — and you’ll understand it in just 5 minutes.
What is staking?
Staking is the process of locking up your cryptocurrency to support the operations of a blockchain network — specifically those that use a Proof of Stake (PoS) mechanism. When you stake your coins, you help validate transactions and secure the network, and in return, you earn rewards — usually in the same cryptocurrency or another token depending on the network.
In simple terms: You let your crypto work for you and earn rewards like interest.
How Does Staking Work?
- Choose a cryptocurrency that supports staking (such as ETH, ADA, SOL, etc.)
- Transfer your coins to a wallet or platform that allows staking
- Your coins are used to help verify transactions on the blockchain
- You receive rewards as a percentage (APY) based on how long you stake
Benefits of Staking
- Earn passive income: You can earn rewards without buying or selling
- Support the network: Help maintain the blockchain’s security and operations
- Eco-friendly: Unlike mining, staking doesn't require high energy consumption
Things to Consider
- Lock-up period: Some tokens may be locked for a fixed period
- Price volatility: Coin value can fluctuate during the staking period
- Security risk: Choosing a reliable platform is essential to avoid hacks or losses
Conclusion
Staking is a smart and convenient option for long-term crypto investors who want to grow their assets passively. It’s not just about earning rewards — it’s also about being a part of the blockchain ecosystem.
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Source
https://www.coinbase.com/learn/crypto-basics/what-is-staking
https://www.bitpanda.com/academy/en/lessons/what-is-staking/