If you’re a cryptocurrency investor, there’s a more likely chance that you might have heard about crypto staking. The idea behind staking cryptocurrencies is that it allows you to earn passive income. Several cryptocurrencies also use it to verify or confirm their transactions. Unfortunately, people often confuse the concept of staking with crypto mining. While both can offer yields surpassing what’s available from a basic savings account, the principles of crypto staking are straightforward irrespective of its somewhat complex terminology. Staking your crypto can be quite confusing initially, but it gets easier once you understand it. In this post, we will share three steps with you on how to simplify your crypto staking journey.
1. Invest in a Cryptocurrency that Utilizes Proof of Stake
The first step in crypto staking is investing in the right cryptocurrency. Note that not all cryptocurrencies offer crypto staking. A cryptocurrency that verifies operations with proof of stake is required. Here are some notable cryptocurrencies that allow for staking and a brief description of each.
- Ethereum (CRYPTO: ETH) is the earliest crypto with a blockchain that can be programmed so developers can use it to build apps. Initially, Ethereum used a proof of work system. Now, it’s more of a proof-of-stake model.
- Cardano (CRYPTO: ADA) is an ecological cryptocurrency. It was created in peer-reviewed research and established via evidence-based methods.
- Polkadot (CRYPTO: DOT) allows several blockchains to integrate and work with each other.
You have to begin by understanding any proof-of-stake cryptos that grab your attention. Then, you need to understand how it works, the staking process involved, and their potential staking rewards.
2. Transfer Your Cryptocurrency to a Blockchain Wallet
After your crypto has been purchased, it will be accessible in the exchange where you bought it. Various exchanges feature their independent staking programs with specific cryptocurrencies. In this case, crypto can be staked precisely on the exchange. If not, you will have to transfer your funds into a blockchain wallet. This is considered the safest way to store cryptocurrency. When you have gotten your wallet, select the option to deposit crypto and then choose the crypto you are transferring. This will develop a wallet address. Use that wallet address to move your cryptocurrency from your account to your blockchain wallet.
3. Use a Staking Pool
Although staking works differently with every cryptocurrency, a staking pool is still beneficial. Most crypto traders use staking pools by merging their funds in them to have a higher chance of gaining rewards. However, studying the staking pools accessible for the crypto you have is essential. Here are a few factors to consider.
- Reliability: You cannot profit while the servers of your staking pools are non-operational. Pick a staking pool that is operational 100% of the time.
- Reasonable Fees: Many staking pools charge a minimal share of your staking rewards. These fees depend on the cryptocurrency, but it is usually 2% to 5%.
- Size: There is a lesser chance for smaller pools to be selected to verify blocks. However, they offer more rewards because the rewards don’t need to be divided as much.
Stake your crypto in the pool you’ve selected through your wallet. This is the last step to take to start receiving rewards.
Cryptocurrency staking is an advisable means of earning passive income for those who have crypto assets they don’t intend to use anytime soon. The steps explained in this post will help you simplify your crypto staking journey.
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The content is for informational purposes only and may include the author’s personal opinion, and does not necessarily reflect the opinion of TheCryptoBasic. All Financial investments, including crypto, carry significant risk, so always do your complete research before investing. Never invest money you cannot afford to lose; the author or the publication does not hold any responsibility for your financial loss or gains.