Staking pools are very similar to mining pools, they are just for proof of stake instead of proof of work. As with Bitcoin, pooled mining has distinct advantages over solo mining. Mainly in the advantage of smaller more frequent payments compared to larger less frequent payments. Frequent and predictable payments allow miners the ability to better calculate profitability and scale. Staking pools are relatively new, but it is likely they become a big part of proof of stake mining.
Bitcoin (BTC), the first generation of cryptocurrency. The original decentralized blockchain product in a way, revolutionized our world. However it failed to take care of the issue of energy consumption or take into account the impact this will have on our environment. This is due to the nature of Proof of Work (POW).
As the world of cryptocurrency evolves, Proof of Stake (POS) coins have become very common. With these coins, energy consumption is very minimal in order for a transaction to be verified. There are also very few barriers to entry and most anyone can begin staking. It can even be very profitable.
Does Staking coins in pools yields higher profits? The answer is mixed but depending on the fee for pooled staking probably yes. The compounding effect of many small payments usually more than pays for the fee taken by the staking pool. Which makes pooled staking more profitable than solo staking. This article is out to focus on these Staking Pools. The main reason for Staking Pools is to reap the highest profits from staking. It’s function is identical to Mining Pools which are used when dealing with POW coins.
How do Staking Pools work?
The general concept is that the bigger a staking pool is, the higher the chances of picking this staking pool and verifying a block.
1st Person: This person stakes a wallet that has 1000 ADA coins. He prefers to go solo and stake by himself. When there is a block that needs to be mined, the blockchain searches for the ideal staking wallet for this process. In such a scenario, the chances are very slim that this 1st Person’s wallet will be selected to validate this block.
2nd Person: The 2nd Person has a perfect understanding of what a staking pool is. This person participates in a staking pool by investing a number of his coins into it. Due to the fact that the value of the staking pool wallet is higher than the other wallets, the chances of rewarding this wallet for the resolution of a pool are much higher. Take for instance that this staking pool contains more than a million ADA. This increases the chances of this pool’s selection for the verification of the block.
The 2nd Person’s chance of earning higher profits just by participating in a staking pool has increased. The profits are distributed among the participants of this pool even though a percentage of this profits might be collected by the pool services as service charges.
Should you participate in a Staking Pool?
This depends solely on what you need. If your wallet contains a good number of staking coins, then it might not be advisable for you to participate in a staking pool. For those who have a low number of coins in their wallet, a staking pool is the best way through which you can gain more coins.
Where do you join a Staking Pool?
This process is specific to each coin. There are 3 well known staking pools services
You can view which coins they support on our staking coins page
You can also see this guide on how to earn more money through staking. We have listed ideal staking coins in this guide too. We highly appreciate your opinion on the concept of staking pools. We are all ears!