What is staking in crypto and why do people do it?
Let’s take a closer look at staking in crypto. With crypto staking, you earn money by holding coins or tokens in your wallet. On Proof of Stake blockchains, rewards based on minting new coins are awarded to those who stake money according to the size of their holdings. You can also combine your holdings with other investors’ funds in a stake pool. As the pool earns payouts, you receive a share in proportion to the size of your contribution to the pool. Your money never leaves your wallet and it is never exposed to risk, making betting crypto a very safe investment. However, you are not allowed to withdraw your money during the wagering period. Wagering periods range from one day to one month or more. You can find staking options on cryptocurrency exchange sites. Some crypto wallets also have staking features. The amount you earn varies depending on market conditions and the currency you stake. Investors generally report equivalent annual percentage returns of 7 to 25 percent, which is comparable to what investors hope to earn in the stock market – without risking their holdings. This makes staking a desirable source of passive income. It’s no wonder so many investors are asking what staking crypto is all about.
What is staking in crypto and how does it work?
Staking should not be confused with lending, although it is similar. Decentralized crypto exchanges rely on automated market maker systems that allow you to lend money temporarily to liquidity pools within the AMM. Some refer to temporarily locking the funds in the liquidity pool as staking, but technically, this is lending. However, the result is the same: You earn interest for funds you promise not to withdraw for a certain period. Staking and lending is like buying a government-issued Treasury bond, which returns your principal investment plus interest in exchange for the right to use your funds for the duration of the bond. What then is staking in crypto? It is a way of earning passive income from the crypto funds in your account. It is just that simple.
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