ExMasters Degree: The Erudite Investor - Why Staking is the Smart Way to Invest in Crypto

Off-chain Cryptocurrency Staking Explained

We get it — investing in cryptocurrencies is a stressful and demanding endeavor. It takes time, it takes practice; it takes enormous dedication — and even then, a temporary market correction can wipe out your investments in one fell swoop. Surely, there’s a better way to earn passive income from crypto?

Some years back, the answer to that question used to be ‘MINING’! But ever since miners began using specialized equipment and have monopolized that lucrative opportunity, retail investors have been pushed out of the market, their cheap notebooks — now cold-to-touch — retired from endless computation without reward.

But times change, and new opportunities are unveiled. A recent one is Staking, a new way to earn passive income from crypto and supplement your income from trading with little to no risk.

What is Staking?

From the user’s perspective, staking is the equivalent of holding money in a savings account and earning interest. If you’re only interested in the practical aspect of staking, that is all you need to know. Of course, if you’re an enthusiast, then you’ll find the theoretical underpinnings of staking to be far more intriguing.

Proof-of-Work vs. Proof-of-Stake

If you’ve been around, you must already know that the Proof-of-Work consensus mechanism governs some cryptocurrencies such as Bitcoin — new blocks are added to the blockchain by miners, who compete in solving complex mathematical puzzles.

Nevertheless, as environmentalists have been pointing out for years, mining demands a lot of wasteful computational power. Setting aside the enormous impact of purposeless energy consumption has on climate change, the amount of computational power required also means that most blocks are mined by huge Mining Farms, not individual miners.

The Proof-of-Stake protocol is different. Staking can be thought of as a less resource-intensive, more decentralized alternative to mining. In a blockchain network based on the Proof-of-Stake protocol, users are rewarded for locking up (or “staking”) their coins in a cryptocurrency wallet to actively participate in the transaction validation, thus preserving the security and integrity of operations.

Typically, the larger the stake, the higher the chance of being chosen as the block validator and earning a small transaction fee. But even as the Proof-of-Stake process is weighted according to the staked wealth — it’s also randomized, encouraging a greater number of users to run nodes on the network, leading to a more decentralized blockchain. Blockchain networks that use the Proof-of-Stake protocol can thus be secured with minimal energy consumption and setup.

ExMarkets has just opened off-chain staking pools, where you can make your crypto assets work for you. If you would like to earn passive income through staking, visit ExMarkets.com/Staking.

Trade. Master. Profit.