Cryptocurrency Staking and Crypto Staking Rewards

We can hear more and more crypto investors asking the question “What is crypto staking?” This new trend has emerged recently and is taking the cryptocurrency world by storm. Staking crypto coins is often seen as a response to the ever-growing energy demand of crypto mining. 

Crypto mining is performed via Proof-of-Work (PoW) protocols used by Bitcoin (BTC) and other blockchains to validate transactions. By contrast, validating transactions with crypto staking is done through a different protocol called Proof-of-Stake (PoS). It involves buying and setting aside cryptocurrency. This protocol is significantly less energy-consuming thanks to partially eliminating the need for intensive crypto mining to keep the blockchain secure.

To date, Proof-of-Stake protocols have been adopted by Ethereum (ETH) and many other blockchains. PoS powering these networks is a welcome and timely response to growing environmental concerns caused by the increased adoption of cryptocurrency mining. Keep on reading and find out what staking crypto is and the rewards and opportunities it bears.

In essence, staking crypto is a process of buying and setting aside cryptocurrency, which turns the investor into one of the network’s active validating nodes. The buyer simply has to hold these coins to join the network’s security infrastructure and get an according compensation.

Crypto staking rewards come in the form of interest paid to the token holder. The rates vary depending on the network and several other factors, such as supply and demand dynamics. PoS-based networks also often employ different varieties of PoS protocols:

• group staking (staking pools)
• staking providers
• fixed staking
• cold staking

The idea behind these is to democratize access to the staking space and the opportunities it offers. This allows even retail investors with small numbers of coins to benefit from crypto staking.

As you may have deduced by now, to start cryptocurrency staking one needs to first buy some tokens in a network. After you buy the tokens for staking, you need to lock the holdings - each particular network has its own procedure for that. Most often, crypto staking is a pretty straightforward and streamlined process, so you won’t have problems with it - just follow your wallet’s instructions.

Any experienced crypto staking investor will tell you that a VPN (Virtual Private Network) service is a must when staking tokens. VPNs, such as VPN Unlimited, grant investors access to numerous advantages:

• VPN Unlimited encrypts your web traffic (the data your device sends through the internet). This ensures that even if your data gets intercepted, it will be impossible to decipher and read.
• The VPN also masks your IP address behind the virtual IP of a VPN server. This prevents IP tracking by any third parties to ensure the complete anonymity of your crypto operations. 
• An important thing to keep in mind if you want to try your hand at crypto staking is that not all networks support PoS protocols. And those that do are often restricted to (or in) certain locations. So you’ll need VPN Unlimited to get an IP address in the location where a PoS exchange is available.
• A privacy-oriented VPN, like VPN Unlimited, doesn’t store your activity logs and supports the Kill Switch feature to further boost your security and anonymity.

With certain crypto exchanges, you’ll have different staking options to choose from. One such option is called staking pools, where multiple investors’ coins are staked together. The more tokens are staked, the more transactions this node is assigned to validate. This increases the node’s ranking, which endows them with higher compensation, which in turn increases the investors’ crypto staking rewards. The promise of a higher income has caused staking pools to become a popular option for cryptocurrency staking.

Another type of crypto staking involves staking coins for a fixed period, aptly called fixed staking. It yields higher crypto staking rewards, yet is also riskier and less convenient. The opposite of that is called flexible staking, where the investor can withdraw their coins at any given point, yet pays for this convenience with a cut to their interest rates.

Crypto staking offers plenty of benefits to crypto investors, which has allowed it to grow in popularity lately. It offers attractive interest rates to holders - from 6% in well-reputed crypto networks, such as Ethereum (ETH), to 100% in smaller ones, like PancakeSwap (CAKE). 

However, any kind of investment comes with its risks, and crypto staking is no exception. Multiple factors affect the security and performance of staked cryptocurrency:

• Cybersecurity incidents. You may end up outright losing your tokens staked within a certain online wallet or exchange
• Damage to cold storing hardware. To eliminate the threat of cybersecurity incidents, some investors resorted to cold staking, where you store your tokens on a hard drive or another piece of hardware. This poses a threat in itself, as the crypto assets will be lost if you damage or lose your cold storing hardware. 
• Price downturn. With crypto staking, you dedicate to locking your investments - which could result in significant losses if the price of your crypto asset plummets. You won’t be able to liquidate your holdings to trim your losses and will thus risk a portion of your principal.
• Validator node uptime. If your validator node is unable to process transactions to the full capacity, it will be penalized by the network. This will in turn diminish your staking income. 

That’s not to dissuade you from crypto staking, as it still is quite a prominent investment option. But be sure to assess the potential income, network’s reliability, and current market conditions. This will give you an understanding of what kind of risk/reward ratio to expect from crypto staking in your blockchain.