What Is Staking And How Can You Earn Passive Income From Crypto?

Cryptocurrency opens a world full of exciting wealth accumulation techniques. However, these techniques, being comparatively new and highly technological, often can easily overwhelm non-technical investors and common people.

That said, we keep updating our guides and constantly look for the latest passive crypto income techniques. We help you understand these techniques in layman’s language to help every crypto enthusiast and potential investor with the power to make informed decisions.

Similarly, today, we are sharing yet another of the latest techniques for passive crypto income: staking crypto.

We will simplify crypto staking and help you understand how it is connected to the Proof of Stake (PoS) consensus mechanisms. If you have crypto coins in your wallet and are wondering what to do with them or are contemplating selling them, we suggest you wait. 

Learn this passive crypto income technique and earn crypto interest to secure your investment for the future. It is one of the easiest and most reliable methods in the crypto passive income world. 

Crypto Staking: A Simplistic Viewpoint

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Everyone knows how fixed deposits work. You put a lump sum in the bank and forget about it. However, your bank remembers. It uses your deposit to loan money and earn interest from the same. In return, after you’ve kept your money for several years, you earn a good interest from the bank. The longer you keep your money, the higher your interest rate. 

Staking crypto functions in a similar way. Now, let us draw similarities between fixed deposits and crypto staking— 

– Your money: Your cryptocurrencies 

– The bank: Blockchain 

– Interest earned (money): Rewards earned (crypto) 

As we know, cryptocurrencies exist through a technology called the blockchain. It is a decentralized digital ledger that records and controls transactions and the creation of new crypto coins across networks.

Every blockchain has a consensus mechanism, a set of protocols that helps the different networks or nodes on that specific blockchain agree on the validity of transactions. 

Now, since we are talking about staking crypto, the consensus mechanism used in this blockchain is Proof of Stake (PoS). In the PoS blockchains, you can lock up your cryptocurrencies and gain the power to participate in the process of transaction validation. However, following that power comes a responsibility. This responsibility requires you to ensure the security of the blockchain. 

Staking functions based on integrity and honesty. Thus, if you neglect your responsibility of ensuring security by validating fraudulent transactions, you will lose your staked crypto. This process is called slashing.

On the other hand, when you maintain integrity and function well within the consensus mechanism protocols to validate transactions and create new blocks, you will get the reward. Usually, this reward includes freshly minted tokens of the same type and amount of crypto you staked. 

Crypto Staking: How You Do It?

The first step in staking tokens is investing in a cryptocurrency based on a PoS model blockchain. You can buy these currencies on any crypto trading or exchange platform. The image below lists some top PoS blockchain crypto coins and their current prices. 

Remember that certain PoS protocols fix the minimum token value you need to stake when staking crypto to run validator software. For instance, if you want to stake on the Ethereum network, you need at least 32 Ether (ETH). You can also opt for the more flexible liquid crypto staking to solve the minimum value restriction on the Ethereum blockchain. However, the latter process is not entirely safe, bringing us back to the Bedrock incident of 2024. 

Once you have the required number of cryptocurrencies, you must follow the steps in the infographics to begin the crypto staking process. 

To find the best exchange platform for staking crypto, you can check these top 5 lists below: 

Crypto Staking: Benefits & Risks

If you’re ready to start staking crypto, it’s time to quickly scan through the pros and cons of this passive crypto income technique.

Since every investment plan has its own share of positives and negatives, thorough research is the only way to make the right decision. So, learn about cryptocurrencies and how they work on PoS blockchain networks. 

Staking vs. Mining: Which Is Better For Earning Crypto?

Why stake crypto and lose liquidity if you could mine fresh crypto coins? This is a common question that comes to mind. However, the answer to that depends on several factors— 

1. What are your crypto goals? 

2. Do you have the hardware and energy resources to support crypto mining? 

3. What is your risk tolerance level? 

4. And, of course, are you a tech nerd? 

Even though you can earn potentially higher rewards through mining, you must have inexpensive electricity and hardware support to make that happen. Hence, the ROI of crypto mining is quite questionable. Moreover, crypto mining has a huge environmental impact, which you can greatly reduce through staking. 

To stake crypto, you simply need a regular computer with a stable internet connection. You can enjoy a steadily high income by increasing your staking asset value if you have sufficient funds. 

Moreover, your technical capabilities play the most important role. While staking is for everyone, mining is limited to those with high technical knowledge of the blockchain and those who can solve mathematical problems on Proof of Work (PoW) networks. 

Staking Pools: An Alternative To Solo Staking 

If you’re scared of solo staking or lack the funds for it, staking pools are what you need. 

With solo staking, you validate transactions and create blocks independently. This can lead to larger rewards but also demands a hefty upfront investment, technical know-how, and plenty of time. 

Conversely, staking pools allow multiple participants to pool their resources. Hence, if you lack the capital or expertise for staking, this collaborative crypto-staking technique helps you secure your asset and the network. One great part of stacking pools is finding several charge-free pools to increase your ROI. 

However, weighing the potential rewards against the fees is important when deciding on the best strategy for your staking journey. 

Conclusion

Staking crypto means an opportunity for everyone to earn passive income while contributing to the security and efficiency of blockchain networks.

Once you understand how it works, you can use it to earn securely and systematically from your crypto assets. Embrace the responsibilities that come with it and earn rewards for your integrity. 

With the crypto world evolving, staking has emerged as a distinct technique that has attracted several apprehensive investors around the globe. Its commitment to security stands out for those who have remained doubtful about decentralized finance.