2020 was considered the year of decentralized finance (DeFi), and one of the biggest players in this phenomenon is crypto staking. After the breakout of the COVID-19 pandemic in 2020, many people turned to cryptocurrencies and DeFi platforms for loans, investment, transfer of value, and staking. In this post, we take a closer look at staking to answer two key questions, “What does crypto staking entail?” and “How do you select the best coins?”
What is Staking?
Crypto staking is the process of locking your cryptocurrencies to their respective blockchains for a reward. In blockchain networks that use proof of stake (POS) consensus protocols, the nodes that help to confirm transactions are those that have some coins committed for that work. The lovely thing about crypto staking is that you are not selling your coins.
See: instead of leaving them to sit idly in your wallet, why not use them to generate some passive income through staking?
How Do You Stake Your Coins?
There are two main methods that you can use for crypto staking. The first and we must indicate it can be pretty challenging, is staking the coins directly from your wallet. This method involves turning your computer into a node so that it can help with the staking process. First, you will need to install the blockchain client (call it program) on your computer and then link it to your wallet. Finally, lock your coins on the network. In addition, you need to do the following:
- Ensure the computer is always on for the entire period of staking.
- Have full-time internet throughout the staking period.
- It is a good idea to have a high-performance computer.
- Some background in computing will also come in handy.
For most people, these conditions, especially keeping computers and the internet on for months or years, are never easy to follow. This is why the next method, coin staking, through decentralized finance platforms, is a better idea. This method involves sending your coins to the staking platform to pool them together with others to get more chances of confirming as many transactions as possible.
Selecting the Best Crypto Coins to Stake
Now that you know what staking is all about, it is time to acquire the coins for staking. So, which coins do you select? The secret is to identify a cryptocurrency with potential for growth so that in addition to staking rewards, you will also enjoy value appreciation (check Mantra Dao). First, the coins must be using the proof of stake (POS) protocol. Here are additional considerations:
The Crypto Community
A big part of any crypto success is determined by its following, and you should be on the lookout for the one with a large and loyal community.
These are people with a lot of genuine interest in the crypto coin. You can learn more by visiting different forums that talk about the respective crypto coin. Youtube channels and client feedback can also provide additional insights. A forum that breaks down the technical concepts of the coins can be a good place to start.
Do Some Fundamental Analysis
This means looking at the foundation of the selected coins. So, go under the hood and learn about the team behind the crypto coin, the ambitions, current projects, and strengths. For example, some names such as Vitalik Buterin (founder of Ethereum) and Dr. Gavin Wood (co-founder of Ethereum) inspire a lot of confidence in the blockchain networks, especially Ethereum.
So, which is the team behind your preferred coin? What are the undergoing projects?
The Technology used in the Blockchain Network
The underlying technology is also an important determinant of a crypto coin’s success. If the technology is outstanding, the coin will be more competitive. For example, Ethereum has stood out in the market because of its unique technologies, such as smart contracts and Ethereum virtual machine (EVM).
If you want to stake correctly and safely, working with experts will be a good idea. This is only possible through DeFi platforms. They have professionals to manage the setup and are better equipped to protect the coins in the pool.
One of the leading DeFi platforms today is Mantra Dao. Visit them today to start staking and enjoy passive income.