To give an easy-to-understand definition of cryptocurrency staking , we can compare this process to a financial investment. It is, in essence, immobilizing assets (in this case: virtual currencies) over a specific period, in order to produce interest, as one would do with a savings account.
The practice of staking cryptocurrencies is similar to mining, this activity which consists of validating transactions in order to receive, in return, cryptocurrencies. For example, “mining” Bitcoin allows you to earn bitcoins. The problem is that this process is complex, very energy-intensive, and requires investment in powerful and expensive equipment.
“ Crypto staking” is simpler than “mining”, and allows you to add value to your digital currencies by freeing yourself from these many constraints. All you need to do is hold a cryptocurrency portfolio, immobilize a certain number of tokens (crypto units) in a “staking pool” (generally a dedicated platform), and let the network work. To do this, you must “stake” all or part of your portfolio, hence the term “staking” which refers to the act of “staking” something.
For those who hold cryptocurrency, staking has three main advantages :
Staking is a way to generate income with your virtual currencies passively. In this way, it is a good alternative to trading, which requires closely monitoring the evolution of assets.
Staking allows you to generate interest, paid at a frequency defined in advance. However, the average return can be very high, with some cryptocurrencies promising up to 30% annual interest (like Kava). These rewards are paid, most of the time, in the network's original currency. During this time, you continue to benefit from the natural evolution of the price of the assets placed in the “staking pool” .
Crypto staking contributes to the security and efficiency of the blockchain. By locking up tokens, you help make it more resilient and improve its transaction processing speed. In certain cases, you can even receive “governance tokens” and give your opinion on the evolution of the blockchain.
