Crypto staking can be a great way to make some good profits from your crypto investments. We already had a look at what exactly is staking in crypto, and how it works. And although it seems fairly easy to stake in crypto, it comes with many risks, as well as with many benefits, of course.
Proof of stake
Staking is available for cryptocurrencies that use proof-of-stake protocol.
Proof-of-stake is a consensus mechanism, used by blockchains to validate transactions. This is actually one of the most popular consensus mechanisms used by cryptocurrencies, because of its efficiency and the opportunity it gives participants to earn rewards.
Staking in crypto - Pros
Here are some of the main benefits of cryptocurrency staking:
It is among the easiest ways to earn interest on your crypto holdings;
There is no equipment needed for crypto staking;
You will be supporting the security and efficiency of the blockchain;
It is environmentally friendly (unlike crypto mining);
As you might guess, one of the main benefits of crypto staking is that the interest rate can be really great. Sometimes it is possible they reach about 10% to 20%. It surely is a great investing strategy, and all you need is a cryptocurrency that uses proof-of-stake protocol.
Staking in crypto - Cons
Of course, there are some risks in crypto staking, you need to understand before you start:
Cryptocurrency prices are highly volatile and can go up or down very fast. This means that if yours staked assets suffer a large price drop, this would impact your earned interest.
You must lock up your coins for a given amount of time. During a minimum amount of time, you won’t be able to withdraw or use your staked crypto assets.
Unstaking crypto also takes time. You would have to wait about seven days or longer.
As mentioned, there is a big risk of cryptocurrencies prices going down, and you must always keep that in mind.
Also, there are many crypto projects offering high rates to entice investors, which end up crashing. This means that if you don’t want to risk much, it might be a good idea to go for cryptocurrency stocks instead.
When to and when not to go for cryptocurrency staking?
As we already said, unstaking your cryptocurrencies usually takes time. This means that if you plan to trade it in the future, stacking might not be such a good idea. Of course, if you decide to do so, you don’t have to do any additional work, and you will just be earning more crypto.
If staking sounds good to you, but you don’t have any cryptocurrencies yet, you would probably want to do research among cryptocurrencies which are worth investing in. You will find many cryptocurrencies that offer staking, but as we always suggest, you must do a good research to see if a given currency is a good investment or not. Buying cryptocurrency for staking is only a good idea if you are thinking of long-term investment.
Moreover, the proof-of-stake consensus mechanism is great for both cryptocurrencies, and crypto investors. Investors can make passive profits from crypto staking, and cryptocurrencies can process many transactions at minimal costs.
As we already said, crypto staking can be a great way to use your crypto investments and collect some passive income. However, before you invest in any cryptocurrency, do a good research, and never invest more than you are willing to lose.
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