unlike Mining Of the cryptocurrencies that require large investments in equipment and significant technical knowledge, mask It is a mechanism that allows you to generate passive income just by keeping cryptocurrencies in the wallet. Explanation.
What is staking?
Quite simply, this concept means ‘stacking’ or ‘caching’. The cryptocurrency holder will participate in transaction verifications within a network of blockchain. To do this, the investor will block a certain number of his cryptocurrencies. In return, he will receive a reward in the form of a percentage of returns.
How does staking work?
At first, you have to select the cryptocurrency you want to participate in. as a result of, It is necessary to study the conditions for this storageAnd potential returnAnd Reward payout as such The duration of the freezing of funds.
This process must be done via the exchange platform, i.e. “ exchange or a cryptocurrency storage service provider. Each may offer different or additional services.
Illustration of the staking section of the Binance trading platform
As explained above, an investor can choose to participate in BNB (Binance’s cryptocurrency) for a period of twenty one days with an estimated return of 52.34%. It requires only 0.001 BNB minimum to start betting.
What do you use?
For some investors, staking is the perfect solution for generating passive income in the same way as interest earned on funds placed in a bank account.
Cryptocurrencies are still a very risky asset class waiting to be regulated. He went, Staking offers the possibility to diversify its assets by seeking profitability in the short/medium term On many cryptocurrencies such as Neo, Tezos, BNB, Cake, Zil…
To help the investor, there are Internet sites that provide various data. This allows you to compare staking rates, expected profitability, or even project compound interest.
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Staking: Pros and Cons
Staking is one of the primary tools for a cryptocurrency investor. Indeed, if this mechanism offers many advantages, it is necessary to know the risks inherent in its use.
- The returns offered can be very large and disproportionate to traditional financial investment (structured savings account, life insurance, sustainable intensification of crop production, etc.).
- Since these returns are not correlated with monetary policies, they can remain high even in periods of low interest rates.
- Staking does not require any special IT resources or technical knowledge.
Besides the disadvantages we find mainly:
- The counterparty to lock the funds. In times of extreme volatility in the cryptocurrency market, it is difficult to redeem your stacked coins without high cost or without a certain waiting period. On the other hand, if the cryptocurrency drops, the rewards offered can quickly become irrelevant.
- There may be a minimum deposit, and the ban period may also last for months or even years.
- Gains from staking are taxed as capital gains and therefore subject to income tax.
Cryptocurrency staking is a file Simple and secure way to make different cryptocurrencies held by the investor. This mechanism can complement a more sustainable business or it can simply be a long-term betting solution by generating interest regularly.
Today, more and more regulated platforms and standards offer staking services. Staking options continue to multiply and By betting on staking, the investor contributes to the development of the cryptocurrency ecosystem.