What Is Crypto Staking and How Does It Work?

how to stake crypto

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  1. Some blockchains have minimum staking amounts, which may vary depending on the network.
  2. Crypto staking can involve committing your assets for a set period of time during which you might not be able to sell or trade them.
  3. Staking and trading are different strategies with their own risk-to-reward profiles.
  4. In exchange for locking up your assets and participating in the network validation, validators receive rewards in that cryptocurrency known as staking rewards.

When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility. You can lock-up a variety of tokens or contribute your stake to a validator pool on a token’s native chain in the Crypto.com DeFi Wallet. Ultimately, deciding to stake your cryptocurrency may come down to whether you feel confident that it’s a good investment over the long term. Other details you can look at include the level of fees or commissions.

The STAKEaway: How to Stake Crypto and Make Money

As of this writing, it is one of the top ten largest cryptos in market cap, with $8.9 billion. Polkadot uses a complex architecture of multiple chains to avoid the high fees and congestion plaguing other blockchains like Ethereum. Launched in 2020, the blockchain has zoomed to the top 15 cryptos list with a market cap of $5.1 billion. If you have PoS crypto investments sitting idle, staking is an option to earn additional income. It is similar to earning interest on a fixed deposit but with the potential for higher interest and risk. Staking is possible exclusively on blockchains that employ the Proof of Stake (PoS) consensus algorithm.

how to stake crypto

This makes it easier for users to participate in staking and access the benefits of staking rewards without sacrificing liquidity. Staking rewards vary depending on factors like the amount, the length of time the cryptocurrency is staked, and the demand for the cryptocurrency. In a PoS blockchain, active users put up a small amount of crypto (the “stake”) to be considered for block verification. The chain will then select a random staker to authenticate a block and earn more crypto in return.

How Crypto Staking Works

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Staking through a pool or through an online service does not carry such requirements. It requires the proper computing equipment and software and downloading a copy of a blockchain’s entire transaction history. Bhat says it’s good to pick an established pool, though you might not want to pick the absolute biggest.