Cryptocurrency: Understand staking in just 3 minutes!

In contrast to mining of cryptocurrencies, which require a significant investment in equipment and significant technical knowledge strike is a mechanism that allows you to generate passive income by simply holding cryptocurrencies in a purse. Explanation.

What is staking?

Very simply, this concept means “stacking” or “staking”. The holder of the cryptocurrency will participate in transaction validation operations within a network of blockchain. To do so, the investor will block a certain number of his cryptocurrencies. In return, he will receive rewards in the form of percentage returns.

How does staking work?

First, select the cryptocurrency you want to bet on. As a result, it is necessary to examine the specifics of this effort, potential return, reward payout frequency as well as the duration of blocking of funds.

This process must take place via an exchange platform, ie. en ” exchange or a cryptocurrency betting provider. Each can offer different or additional services.

Illustration of the betting section on the Binance exchange platform

As shown above, the investor can choose to bet BNB (Binance’s cryptocurrency) for twenty-one days at an estimated return of 52.34%. It only requires 0.001 BNB minimum starting bet.

No matter what cryptocurrency you are betting on, the investor must be very careful in choosing their platform to bet on their digital assets. In fact, many scams regularly appear that promise staggering returns.


What is it used for?

For some investors, staking is the ideal solution to generate passive income in the same way as the interest rates for money placed in a bank account.

Cryptocurrencies are still a very risky asset class waiting to be regulated. Gold, staking provides the opportunity to diversify its assets by seeking profitability in the short / medium term on a host of cryptocurrencies like Neo, Tezos, BNB, Cake, Zil …

To help the investor, there are internet sites that provide various data. This allows you to compare bet rates, expected profitability or even predict interest rates.

also read 3 minutes to (finally!) Understand DeFi, Decentralized Finance!

Effort: pros and cons

Effort is one of the essential tools for cryptocurrency investors. In fact, if this mechanism offers many benefits, it is necessary to know the risks associated with its use.

  • The dividends offered can be very significant, out of proportion to a traditional financial investment (regulated savings account, life insurance, SCPI, etc.).
  • As these returns are not correlated with monetary policy, they may remain high even in periods of falling interest rates.
  • Staking requires no special IT resources or technical knowledge.

On the side of the disadvantages, we mainly find:

  • The counterparty to the locking of funds. In times of very high volatility in the cryptocurrency market, it is difficult to recover your bet coins without a high cost or without a certain waiting period. On the other hand, if the cryptocurrency dives, the rewards offered can quickly become irrelevant.
  • There can be a minimum deposit threshold, the blocking period can also last for months or even years.
  • Gains arising from investment are taxable as capital gains and therefore income tax.

Conclusion:

Effort of cryptocurrency is one simple and secure method to make the investor’s various cryptocurrencies work. This mechanism can complement a more sustained trading activity or can simply be a solution for long-term venture by regularly generating interest.

Today, more and more regulated platforms and benchmarks offer betting services. The effort opportunities continue to multiply and by investing in investments, the investor contributes to the development of the cryptocurrency ecosystem.

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