What is Staking?

cobogo
4 min readApr 21, 2022

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Web3 allows Content Creators to regain control over their work and their communities, and staking can be a tool for that.

I know what you are probably thinking. “Oh great, not another crypto term!”. But the truth is, if you’re considering investing in crypto, this is a term you can’t run from, and you’ll probably hear it a lot. At first, it may seem like you need to learn many different things before getting into crypto, and that is true, but once you get the hang of it, you’ll see it’s pretty easy. In this article, I will explain the technical part of what staking is, and then I’ll go through what it means to stake for an investor in simple terms.

What is Staking in Crypto?

Staking refers to the process of locking your crypto assets to support a blockchain network and validate transactions. This validation is called “proof-of-stake”, a consensus mechanism for processing transactions and creating new blocks in a blockchain that works by having nodes (the computers that participate) set aside a certain amount of their holdings to validate the new blocks created.

It happens as follows: the network uses your assets to produce and validate new blocks on the blockchain, where information is recorded. By allowing your assets to be used as validators, the network rewards you, and the type of reward will depend on the network. Your assets, that is, your tokens, will still be in your possession, and you’ll be able to unstake them whenever you want.

Why is it a good idea?

Now with the technicalities aside, what does that mean in simple, intelligible terms, especially for someone who’s not that attuned with crypto lingo? It basically means that you’re depositing your money into a savings account that pays you interest just for having the money there since they contribute to making the bank system safer. You can withdraw it anytime you want. The principle is the same: in traditional finance, banks pay you interest because they use your money for loans and investments, and in crypto, the network rewards you because you’re putting your tokens/coins to “work”. Simply put, staking allows you to earn interest on your crypto assets, making them work, instead of just leaving them idle in your wallet.

Just like any other investment, staking has its pros and cons. As already mentioned here, one of the main benefits is the ease of earning interest on your cryptocurrency holdings. Depending on the network, these interests can be much higher than what you would get in any type of traditional investment. In addition, you don’t need any equipment like you would for crypto mining, which makes it more eco-friendly. On the other hand, crypto prices are volatile, so your staked assets can suffer a significant price drop that outweighs the interest you earn on them.

There are two ways in which you can stake cryptocurrency. You can do it using a crypto exchange as a middleman, or you can join a staking pool, interacting directly with smart contracts, which is the focus of this article. A Staking Pool is a Smart Contract where holders deposit their tokens, combining their resources in order to increase their chances of earning rewards. For that, the rewards are split among the many participants in the pool.

Staking and the Creator Economy

With these attributes, it’s not hard to imagine how staking can benefit Creators in the Creator Economy. The leading problem creators from all kinds of areas have to face today has to do with Creative Industries capturing their value and hoarding it in centralized platforms. As explained in our first article, Web3 allows Content Creators to regain control over their work and their communities, and staking can be a tool for that.

At cobogo we have designed a unique staking mechanism using our native token, CBG. The fan (who is also an investor) deposits their CBG tokens in the Staking Pool of the Content Creator they want to support, and both the fan and Creator get rewarded for it, in CBG tokens as well. The fan keeps the initial amount staked and can withdraw it any time they want, and still gets to sustainably support their favorite Content Creator.

If you want to learn more about Staking and cobogo, join our Discord or read more about it in our documentation.

About cobogo:

cobogo is an aggregator of protocols that has the goal of funding Content Creators sustainably through their own community. It is a dApp that leverages Web 3.0 to monetize Creators while maximizing their growth and community building abilities.

Website | Documentation | Discord | Twitter | Telegram

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