How to stake crypto for passive income

One serious disadvantage of investing in cryptocurrencies is that this investment method lacks the effect of compound interest. Unlike other investment assets, such as stocks, owning cryptocurrencies doesn’t generate income. Cryptocurrencies do not pay dividends, and to make a profit from investing in them, you need to sell them for more than you bought them. However, this has started to change with the advent of Proof-of-Stake cryptocurrencies. In this article, we’ll talk about cryptocurrency stacking as a way to earn income. So, if you want to learnhow to stake your crypto, this article is for you.

What is crypto staking?

Staking is a mechanism that replaces mining in cryptocurrencies based on Proof-of-Stake (PoS) and similar consensus algorithms. It’s the process of storing funds in a cryptocurrency wallet to provide validation for transactions on a blockchain. Essentially, it consists of locking in a certain amount of cryptocurrency for a period of time to receive rewards.

How crypto staking works

In PoS cryptocurrency networks, the chance of being allowed to add a new block to the blockchain and being rewarded for this is proportional to the number of coins that the validator locks in for this purpose as a stake. This chance may be influenced by additional parameters, such as the age of the stake. The reward for adding a block in PoS networks usually includes commissions for all transactions included in that block.

It’s worth noting that unlike Proof-of-Work (PoW) cryptocurrencies, where validators are called miners, in PoS cryptocurrency networks, they are called forgers.

Staking is much easier and more affordable than mining. Essentially, the user only needs to buy a PoS cryptocurrency and lock it on a wallet that supports staking.

How to earn with crypto staking

The following are the main ways to make money from staking:

• Become a validator. This is the most effective but also the most difficult way. Not only does it require some IT knowledge, but it also has a higher financial entry threshold, as many cryptocurrencies have restrictions on the minimum amount of coins to be staked.
• Join a staking pool. This is simpler than becoming a validator. Essentially, a staking pool is a PoS version of a mining pool. In order to start staking cryptocurrency this way, all you need to do is find a reliable staking pool and connect your cryptocurrency wallet to it.
• Register on a cryptocurrency exchange that supports staking. Probably the easiest way. You need to find a cryptocurrency exchange that supports staking, create an account there and transfer the cryptocurrency you are going to stake there. The downside is the fees charged by the exchange and the fact that storing cryptocurrency on exchanges is traditionally considered less secure than storing it in your own crypto wallet.

In general, the sequence for staking is as follows:

1. Explore the cryptocurrencies that offer staking and choose the one that suits you best. This is the most difficult part of the process because a mistake can be costly. Avoid choosing a cryptocurrency based solely on the size of the reward. Remember: the main income from cryptocurrencies usually comes from capital gain, not from staking rewards. On top of that, the high reward is useless if the drop in the price of the cryptocurrency itself causes you to lose more than you earn by staking. So, as with simple cryptocurrency investments, research carefully the cryptocurrency you plan to buy for staking. As for staking rewards, you can find them at www.stakingrewards.com.
2. Buy the cryptocurrency of your choice. This is probably the easiest part of the process. There are many ways to acquire cryptocurrency nowadays. One of the most reliable is buying on a cryptocurrency exchange.
3. Stake your cryptocurrency. This part depends on which staking method you choose. If you choose to use a staking pool, select one, make sure it’s legitimate, connect your crypto wallet to it and follow the pool’s instructions. If you prefer to use a crypto exchange for staking, find one that has a staking option for the cryptocurrency you are interested in, create an account and transfer your cryptocurrency there. You will then need to find a staking page or something similar. If you’re having trouble, check out the help section and FAQs.

Risks of crypto staking

Of course, staking as an income-generating method carries its own risks.

• One of the main risks of staking is the high volatility of cryptocurrencies. A fall in the price of a cryptocurrency can not only offset all of the profits from staking but actually lead to considerable losses.
• The risk of fraud. When choosing a staking pool, check its legitimacy carefully. Otherwise, you could run into scammers.
• Regulatory risks. Regulatory decisions can not only cause cryptocurrency prices to fall but can also have a whole range of negative effects on the entire crypto industry.

Useful links

The original story was published on the official StormGain site blog

Learn about StormGain more on the website: https://stormgain.com/

Telegram: https://t.me/StormGain

Twitter: https://twitter.com/StormGain_com

DISCLAIMER: Any opinions, news, research, analyses, prices, or other information contained on StormGain_crypto is provided as general market commentary and does not constitute investment advice. StromGain_crypto, StormGain, its employees, partners, or contributors will not bear any liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.