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What is Cryptocurrency Staking?

Staking is a popular decentralised mechanism for token holders to earn interest on their holdings while contributing to the network. First theorized in 2012 by Sunny King and Scott Nadal in their Whitepaper for Peercoin, staking has now become synonymous with decentralised finance.

In today’s article, we will explore what is Staking and how token holders can earn passive income through staking.

What is Staking?

At a very basic level, staking simply means locking of a user’s idle cryptocurrency assets for a certain period of time. The locked assets are then used for block validation and to achieve consensus.

For locking their assets, users are rewarded a certain amount of new tokens of the network.

Why is Staking Needed?

To understand how the concept of staking originated we need to understand the limitation of Proof-of-Work consensus (PoW) algorithm and how staking solves these limitations.

PoW consensus algorithm, which is used in both the Bitcoin network and the current version of Ethereum network, is generally slow. That is because the “miners” are solving a computationally hard puzzle to achieve consensus. And this has led to network scaling issues. Moreover, PoW algorithms consume a lot of energy.

To combat the high energy costs of PoW, and the general scalability issues of PoW, a different algorithm known as Proof-of-Stake (PoS) algorithm was introduced. The algorithm was popularized by Vitalik Buterin as a scaling solution for Ethereum.

Proof-of-Stake (PoS) works around this limitation of achieving consensus while keeping the network secure and decentralised by introducing the concept of staking. Anyone who wishes to “mine” new tokens can stake their existing tokens and participate in the transaction validation process. Upon successful transaction validation, the user who staked their tokens is rewarded with new coins. And upon validation of a malicious transaction (like double spend), the user will lose some or all their staked tokens.

This mechanism of PoS ensures that the network is open for all while penalising and removing any malicious validator.

Apart from security, the major advantage of PoS consensus is that it is fast. Instead of all computers in the network validating a transaction, PoS requires a handful of validators chosen at random to validate a transaction. This way transactions can be validated almost instantly.

Staking In DeFi

While Staking has been generally used for transaction validation on PoS consensus based networks, decentralised finance (DeFi) projects have found new use cases regarding Staking.

One of the first major use cases of staking in a DeFi project is in the role of governance. Token holders can stake their tokens and take part in the governance of the project thus ensuring a certain degree of decentralisation. Sushiswap is one such project that used decentralised governance through staking.

Another major use case of staking is in the use of issuance of new tokens. Instead of the project team holding a majority of the tokens and releasing it to the public, staking allows the tokens to be locked and issued fairly.

With Ethereum 2.0 just around the corner, we will see more use cases of staking in the world of decentralised finance. Centaur too has its own native staking product known as Centaur Staking. The Centaur Staking V1 was released on 26th October and was a massive success. A total of 80 Million CNTR tokens were staked in V1.

Centaur Staking V2

On November 24th, we launched Version 2 of our native staking platform called Centaur Staking V2.

You can stake your idle CNTR tokens and earn a passive income of 3.75% monthly.

Staking website — https://staking.cntr.com/

Read more — Centaur Staking V2

What is Centaur?

Centaur is a revolutionary project in the DeFi space that aims to serve as a bridge between the decentralised finance sector and the traditional financial system. While leveraging crucial features of the blockchain, this project is also utilising the fail-safe elements of centralised systems. Centaur is offering semi-decentralised lending, asset management, and digital payments to the public.

For more information, please take at a look at our:

· Official Website

· Telegram Discussion Group

· Telegram Announcement Channel

· Twitter

·Whitepaper

· Testnet Block Explorer

· Liquidity Pool (Ethereum Ropsten)

Signing off,

Centaur

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The bridge between decentralised and traditional finance

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