Staking is one of the easiest ways to generate passive income and grow your KGO holdings. In this article, you will learn the basics of staking, the advantages and the risks associated to it, as well as to where to stake your KGO.
What is Staking?
Staking is the process of holding cryptocurrency to support the operations of a blockchain network through a reward-driven process. In short, staking simply stands for locking crypto in a wallet for a fixed period to earn rewards on it. The reward earned from staking varies depending on the length you lock it and on the reward percentage (known as APY, Annual Percentage Yield) offered by the platform providing the service.
The overall objective of staking is to provide security to the network of transactions and is typically done in blockchains that use Proof-of-Stake (POS) as a consensus mechanism. In contrast to Proof-of-Work (PoW), which requires the network of computer to solve complex mathematical equations and use large amounts of energy to validate transactions, POS needs the participants of a network to lock up or stake a predetermined amount of coins in the blockchain’s native currency to authenticate transactions and add data to the blocks.
The general idea is that the more wallets staking, the more secure the network is. The rewards associated with verifying a transaction is intended to work as remuneration for works completed to that objective. However, the minimum staking requirements can be extremely high for some crypto, making it inaccessible for most people. Staking pools are then a good solution to meet these requirements, as they enable stakers to combine their stakes and split rewards.
Advantages and Risks of Staking
One of the major advantages of staking is that it guarantees returns and is a predictable source of income.
It is easy to encounter staking contracts that generate high yields of 12% or more, while the least generous staking coins still generate a yield of more than 5%. In contrast, the most generous savings account will only offer you 1-2% APR, which is barely above the rate of inflation in most countries.
Also, participating in crypto staking does not require specialized equipment. In fact, it is much cheaper, more environmentally friendly and more energy-efficient to do than PoW mining.
Staking coins in a bound wallet has one drawback: market volatility. You will not be able to trade during the lock-up period and could face big fluctuations in the token price. Although this may not be a problem when the value of the token increases, it can lead to losses when the price falls.
Where Can I Stake My KGO?
Staking KGO is very easy and can currently be done on three platforms:
(For a step-to-step guide on how to stake on Catex.io, see this tutorial.)
(For a step-to-step guide on how to stake on Cointiger, see this tutorial.)
(For a step-to-step guide on how to stake on SparkDefi, see this tutorial.)