For those in the crypto world, ‘staking’ must be one of the most frequently mentioned terms. This article will discuss what staking means, how it works and some of the possible benefits of staking tokens.
Compared to mining, staking is less resource-intensive which involves holding funds in a cryptocurrency wallet to support the security and operations of a blockchain network. Simply put, staking is the act of locking cryptocurrencies to receive rewards.
In staking, the right to validate transactions is baked into how many tokens are ‘locked’ inside a wallet. However, just like mining on a PoW (Proof-of-Work) platform, stakers are incentivised to find a new block or add a transaction on a blockchain. Apart from incentives, PoS (Proof-of-Stake) blockchain platforms are scalable and have high transaction speeds.
This is similar to receiving interest for holding money in a bank account or giving it to the bank to invest. Token staking gives currency holders some decision power on the network. By staking tokens, you gain the ability to vote and generate an income.
The standard methods for staking are usually holding tokens in your wallet or locking them in a smart contract (masternodes). Some tokens added randomisation to the process of staking and voting so that bad players have a hard time manipulating outcomes. The process can be similar to a lottery in which the number of crypto coins you hold is equivalent to holding a given number of lottery tickets. Staking systems can also allow delegation in which each individual delegates their voting rights and earned income to a trusted party. Those delegates then earn all the rewards for block validation and pay their loyal supporters some form of dividends in return for their vote.
Some of you may have also heard of the term ‘cold staking’. Cold staking refers to the process of staking on a wallet that’s not connected to the Internet. This may be done using a hardware wallet, but it’s also possible with an air-gapped software wallet.
Networks that support cold staking allow users to stake while securely holding their funds offline. It’s worth noting that if the stakeholder moves their tokens out of cold storage or to a new address, they’ll stop receiving rewards. Cold staking is particularly useful for large stakeholders who want to ensure maximum protection of their funds while supporting the network.
One of the major benefits for staking tokens is that it removes the need for continuously purchasing expensive hardware and consuming energy.
The system offers guaranteed returns and a predictable source of income unlike the proof-of-work system where tokens are rewarded through a mathematical process with a low probability of paying out. Another benefit is that the value of your staked tokens doesn’t depreciate unlike with ASICs and other mining hardware. Staked tokens are only affected by market price fluctuations.
Though staking tokens has so many benefits, it is important to bear in mind that staking isn’t entirely without risk. If you would like to start staking, make sure you understand all of the risks as this is a relatively untested technology. Once you feel like you know the basics, you can start staking by experimenting with minimum amounts with particular staking protocols and staking rewards. Always remember to pick a project that resonates with you and one that you expect will be around far into the future. After all, by staking, you’re helping to make that project become a success.
The WadzPay Token (WTK) is a utility token that allows users to make transactions at E-Commerce or Retail merchants using the WadzPay payments infrastructure. WTK is the crucial element of the WadzPay ecosystem as it allows users to access different products and services via a staking mechanism. By staking WTK, members can earn compensation through WTK-based rewards earned from WTK that they stake and have access to exclusive WadzPay Platform related service.