29-oct-2022

Greetings dear users!

Anyone familiar with the practical realities of the cryptocurrencies industry will be familiar with the concept of staking. Perhaps you are under the spell of some very mistaken beliefs that must be corrected immediately.

Staking is an essential component of Blockchain, and it's also an excellent method to make passive money in the cryptocurrency space. It ensures the safety of Blockchain networks, gives regular people a voice in the administration of cryptocurrency ecosystem, and does alot more besides ( as we will discover).

What is staking in crypto?

When most people hear "staking", they probably think of gambling. The term "stake" is often used in the gambling industry to refer to the amount of money or other valuables at risk. If your bet on a result succeeds, you will get a payout that is a multiple of the amount you wagered.

However, if you pull out your investment, the water is null and void, and you will not get any payouts regardless of whether or not the bet was successful.

In the Blockchain world, staking works a little differently. The proof of stake consensus process was original inspiration for the name "staking". It's important to remember that the word "staking" is being employed in more fluid and potentially misleading ways. In this piece I will define staking and dispel any myths or misunderstanding s that may have arisen around this phase.

Let's start with proof of stake, which is where it all started.

PoS

Proof of stake (PoS) network staking historical roots

Multiple consensus techniques exist for securing a consistent state of distributed ledger, and proof of stake is only one of them. Users delegates, validators, developers, etc, are just some actors that may take part in proof of stake Blockchain network. Validators and delegates are required for staking.

User must first secure the network's native asset in a smart contract to become validators in a proof of stake network and earn incentives. Staking is what happens when you do this. In addition to protecting their wealth, validators must also maintain an accurate copy of the network's distributed ledger.

Furthermore, in many cases, staking requires the locking of several assets. To participate as validators in the future Etherum proof of stake network Beacon chain, for instance, individuals will need to lock at most minuscule 32 ETH.

The systems validators are paid with tokens generated via the protocols inflationary process. The same holds for validators, which may be punished if they break the rules of the network. By staking the validators are incentivized to be trustworthy and adhere to the laws of the network.

Staking requires users to keep currencies in a non-custodial wallet and deposit them into the staking contract, usually for a certain amount of time.

CentralizedCentralized

centralized exchanges ( we will go into this in. A moment) let users take part in staking indirectly by pooling their money with those other users. A key point to remember is that betting on centralized exchanges is handled in a custodial manner. That's right; centralized exchanges are taking on the role of a trusted third party regrading the security of tokens. Centralized staking may be both more accessible (by lowering the barrier to entry) and more cumbersome (requiring users to pay a commission and transfer ownership of their tokens)

Even with PoS staking, there is widespread misunderstanding that all networks are organized similarly.

Let's talk about those misconceptions

Wait? Won't be article long if I write about misconceptions? Awh let's make it's two parts will write article on misconceptions tomorrow I don't want to bore you and if I write about misconceptions it will be so long that no one will be willing to read it haha so, will write about misconceptions and exchanges in another article.

That's all for today, Thank you for taking sometime and reading it, hope you have learnt something new from this article, if you think this article was interesting and contains alot of information then do not forget to support, like, and share your valuable thoughts on this topic. Would love to read your thoughts.

Stay blessed, stay positive, and be safe

Free images are from unsplash

-KatinessEverdeen