The crypto markets seem to be recovering from a winter spanning over two months, brought forth by fear, uncertainty, doubt and fuelled by the crisis between Russia and Ukraine. But did you know, there are several ways on earning income through crypto despite bear markets?
Staking is one such process.
Staking is a process through which users can earn incomes from the blockchain even when crypto markets are not performing well. It is noteworthy to mention that staking is available only for currencies native to blockchains following the proof-of-stake protocol.
What is the proof-of-stake protocol?
The proof-of-stake protocol is the consensus mechanism that allows the processing of transactions and creating blocks on the blockchain. A consensus mechanism is a method of validating entries on the blockchain while keeping it secure from cyber-attacks. Tezos, Cardano, Dash, Solana, Polkadot etc are some cryptocurrencies that use the Proof of Stake protocol.
What is Staking?
Staking is the process by which owners of cryptocurrencies stake their tokens to validator nodes. Validators gain incentives for building blocks, which they then transfer to the users who have staked their tokens on the nodes. The voting power assigned to each validator node is directly proportional to the number of tokens staked on it.
When a block of transactions is ready to be processed, the proof-of-stake protocol of the blockchain selects a validator node based on its voting power to review the block. The validator verifies the accuracy of the block's transactions.
The validator suggests receiving rewards in the form of tokens on uploading blocks with accurate information. This reward s passed on to the users who had staked their cryptocurrency on the validator node. Also, it is interesting to note that, if a validator suggests adding a block with incorrect information, the node would be penalised and would lose some of its staked holdings.
How to stake?
Users can start earning passive income by staking their cryptocurrencies on exchanges like CoinDCX.
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