The Beginner Guide to crypto staking/Nigerian Investors

The Beginner Guide to crypto staking/Nigerian Investors

You’ll probably have hundreds of thousands of Nairas worth of crypto sitting idle in your crypto wallets, hoping that it will increase in value over a long period.

How about if I tell you that you can earn more crypto with the assistance of your idle crypto while waiting. The beginner Guide to crypto staking will explain how to do just that and we provide profitable crypto to start with.

What is Crypto Staking?

Just like Traditional financial institutions, Crypto staking is a process whereby an investor lock up their cryptocurrency for an agreed period, In return, earn staking rewards.

Crypto staking is an innovation that many believe to be a better alternative to the excessive power demand resulting from Mining – A proof-of-Work protocol that is used to validate transactions in POW protocol cryptocurrencies such as Bitcoin, Litecoin, Dogecoin among others.

With so many consensus mechanisms out there such as Proof of information, Proof- of – weight, Practical Byzantine Fault Tolerance algorithm (PBFT) and so on, the proof-of-work and proof-of-stake are the most prominent.

The cryptocurrency that practice the proof of stake consensus mechanism relies on staking (locking up a portion of an asset in circulation) to validate the transaction created within the blockchain and mint new tokens.

How does crypto staking work?

How Crypto staking works is that you purchase proof of stake coins, then you look for mobile wallets or Crypto exchange that offers the coin you’ve purchased staking features, follow through the process and start earning passively.

Key takeaways

Each Proof of stake protocol coin has its prerequisite e.g the amount of the minimum token to be staked, the minimum contract duration.

Staking rewards-'Annual per year' percentage of a particular coin varies across all staking service providers ( Exchanges, staking pool and wallets)

In crypto staking, the higher the staked tokens, the higher the return-staking reward.

Crypto staking is only available for a coin that uses a proof of stake consensus mechanism.

To partake in staking, you will need to sign off the right to use your coin over a given period.

The pledge token will then be used by the network, to add new blocks and mint new cryptocurrency coins.

The staking rewards are usually With the same cryptocurrency being staked I.e if you stake Ethereum, rewards will be paid in Ether.

Although a few blockchains pay their stakeholders with Cryptocurrency that is different from the one being staked as a reward.

Coins that have been staked will still be in your custody but you have no control over them.
To be in charge of your coin, you will need to wait till your staking tenure is completed or you can choose to unstake.

Benefits of staking to Blockchain.

Crypto staking adds a new verified transaction (block)into the blockchain and with the aid of the old staked token, new tokens are minted/created, there is more to it than what has been said.

If lots of investors coming to the network get tied in it, the given coin will increase in worth due to two reasons; limited supply and most investors are not getting off the network.

With the increase in value, it benefits the investors as well as the block chain

Crypto staking benefit to Investors

Asides from assisting the blockchain in transaction validation and minting new tokens, staking can be beneficial as a means to generate an income passively with a small amount of capital.

Crypto staking is a great investment choice for investors who hate to check the chart repeatedly.

Disadvantages of crypto staking

Just like any legit investment crypto staking comes with risks. One of the conceivable harm associated with staking is the potential price fluctuation of the coin being staked.

Staked coins are still liable to volatility within the crypto market.

Hence, explanation of why one needs to stake coins that are most likely to increase in value in the long term.

Slashing is another risk of staking.

Slashing is a protocol built to punish stakers who violated the staking terms such as going offline or double signing.

Two methods to get involved with staking
Investors who believe in the buy and Hodl strategy and loves to earn interest why do so can participate in staking either as Delegators or validators.

Validators: Becoming a Validator require a level of technicality to bolster a server that verifies transaction on the Network.

Rewards will be given depending on how many coins you freeze in the Network. You can outsource coins from other holders, in return, rewards are split based on how much they contributed.

As a validator, you should bear in mind that your main focus is to ensure the validating software is running smoothly.

If anything compromises the effectiveness of its validation within the blockchain traced to you will result in your total staked cut off.

Delegators: Delegators are mostly investors who have no technical expertise to run full nodes and would like to participate in crypto staking.

They sign off the right to their coins to validators in return receive their share of the staking rewards.

The Delegating role of staking is quite risky as you will be trusting a third-party service provider in managing your funds.

If the validators misbehave on the network, he might have the funds delegated to him get slashed.

This is why delegators need to make findings when picking a validator

Here are

How can I make a profit?

As you probably might have realized. The two way to make money from crypto staking is either to become a delegator or validator.

To become a validator is a little bit expensive as it required technical proficiency, regular electricity and so on, but it is much more profitable compared to Delegating.

In crypto staking, there are two sources from which earnings are gotten.

  • Rewards from Block validation
  • Transaction fees

Rewards from Block validation are shared among investors based on total tokens contributed.

In most cases, Validators deduct service fees before distributing staking rewards to Delegators.

Another source in which validators/delegators get credited is via transaction fees.

Every network charges a substantial amount of fees for any given transaction made in the blockchain. These total fees are shared between validators depending on the strength of each validator.

Then, in each validator pool, rewards are further shared among delegates who participated.

Frequently Asked Questions

When is the right time to stake?

Although no one can accurately tell when the time is right to stake. But experts believe that when you’re not planning to make use of crypto any time soon, it is wise to lock up your crypto assets and earn more crypto.

What is the most profitable crypto to stake?

The best cry assets to stake must offer high staking rewards and the potential to increase in worth over a duration of time. Here are a few examples, Etherum, Cardano, Tezos, solana etc.

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