What is Proof of Stake? Earn Rewards by Staking

We are hearing "Stake your coins" a lot nowadays! But do we know what is staking or how we can earn passive income by stake our cryptocurrencies?

If you don't know, then this article is for you! I was also a newbie like you who was lost without proper guidance. Now I aim to help newbies in easy language so that they can understand all the basics of the decentralized world easily.

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If you are a newbie in blockchain and crypto, then I will suggest you read this article at first - What is Blockchain? Simplest Explanation

We know that we can mine the coin using the computing power of our hardware or other devices, which is a consensus mechanism called Proof-of-Work. Here miners have to spend a lot on electricity. Nowadays, many countries are looking for green cryptocurrency without spending a lot of electricity.

Now, What is Proof of Stake?

The other consensus algorithm that we're familiar with is proof-of-stake (PoS), a much better alternative to POF. Because of proof of work, you're spending so much money on electricity and hardware. And it might be harmful to the environment as well.

But in proof of stake instead of electricity and hardware, the token itself is the primary resource. So there are no minings of tokens, and all the tokens exist already. An example of a project that uses Proof-of-Stake is EOS.

Instead of setting up computers and hardware, here you stake your tokens on the network and lock them up. And because you lock them up, you get the voting power. So that, you can now add blocks to the blockchain. The reward is, if you do this successfully, you'll receive rewards in transaction fees. You'll also receive your staked tokens back. So this consensus helps people to maintain a healthy network.

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What happens if someone intends to manipulate the network in this system? Well, the punishment is you'll get severed tokens. This means if you're proposing bad transactions in the POS blockchain and other people see this, your tokens will be taken away from you. There'll be a monetary loss.

It is important to note, all of these rewards and punishments are monetary.

How Can Someone Earn Passive Income Through Staking?

If you're not staking your crypto holdings not earning rewards as a holder, it's like putting your savings in a bank and not taking any interest. Crypto staking can be a fruitful way to increase your crypto returns and earn passive income on cryptos that you don't want to sell.

We already know that only miners can earn through PoW(Proof of Work) by mining crypto like Bitcoin. But that left the investors like us who also want to earn by investing. But investors like you and me can't just start up a node of the blockchain and start earning loads of money. Mainly because investment minimums are high! Luckily though, we can participate in a staking pool where we can pool our investment with other small investors and hive them over to a service provider who can stake them for us. They will give us our rewards whilst taking a small cut for their service provided.

Crypto staking isn't available in all cryptocurrencies but only those built on Proof of Stake blockchains. Coins built on Proof of Work blockchains like Bitcoin can't be staked to earn rewards. But if you own Bitcoin, you can still earn some income on your holdings by other financing methods.

I have been holding XRP (Ripple) since 2017 and till now I am holding those coins. The sad part is I didn't know about staking at that time. Otherwise, I would have earned some passive income for holding my XRP coins.

Look at the screenshot to check how many rewards the Stakingrewards are giving per year just for holding and staking your coins. If I had staked 1000 xrp back in 2017, I would have earned 43.233 XRP per year as the annualized reward rate (APR) is now 4.32%. But May be that time rewards percentage was more as there weren't many investors back in those days.

Now look, I was holding my coins in exchange sites and those sites didn't give me anything for my holdings. And I missed a great chance to earn passive income. But better late than never. Now I have staked all of my holdings to some staking sites to get some rewards. And the good thing is I can unstake coins anytime I want. So, that's my suggestion to newbies.

I have another suggestion for all who want to earn passive income by staking. You guys can buy CUB token and stake it in the site name https://cubdefi.com. You can also stake other coins like ETH and earn CUB in return. Cubdefi is a new staking project by the @leofinance team, which has great potential. And Cub coin price is now only $0.66 (at the time of writing), which is near to all-time low. So, it's high time to grab this coin so that you can sell at a higher price soon.

I wrote a guide "How you can stake cub" on Leofinance a few months ago. I hope this guide will help you to buy and stake Cub tokens.

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I hope I was able to give some basic ideas about staking! So, if you are the guy who is holding coins, it's high time to stake your coins. Because there's nothing to lose on staking, only gaining!

Posted Using LeoFinance ^Beta