In general terms, cryptocurrency staking is the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. By committing their funds to a network, stakers can earn rewards for supporting the network's security and stability.
What would Staking mean on the Ethereum Blockchain?
In order to stake on Ethereum, users must have a digital wallet that supports staking and some funds in a staking-compatible cryptocurrency, such as Ether (ETH). Once they have these, they can choose a staking pool or a validator and start earning rewards for supporting the Ethereum network.
Ethereum uses a proof-of-stake (PoS) mechanism, which allows users to earn rewards for staking their ETH and supporting the network. The transition to PoS that occurred in 2022 is expected to improve the scalability and security of the Ethereum network and make it more energy-efficient compared to PoW-based networks.
What is the difference between staking and mining?
Staking and mining are two very different ways of supporting the security and stability of a blockchain network. In mining, users use their computing power to validate transactions and create new blocks on the blockchain, while in staking, users hold funds in their cryptocurrency wallets to support the network. Unlike mining, staking does not require users to have specialized hardware or consume large amounts of energy.
How do I start staking?
To start staking, you will need to have a digital wallet that supports staking, and some funds in a staking-compatible cryptocurrency. Once you have these, you can choose a staking pool or a validator, depending on the type of cryptocurrency you are staking, and start earning rewards for supporting the network. If you'd like to find out more about how Guild of Guardians previously participated in staking, please check out our Medium articles here:
What are the risks of staking?
As with any transaction on the blockchain, there are risks involved with staking cryptocurrency. For example, if the value of the cryptocurrency you are staking falls, you may end up losing money. Additionally, if the network you are staking on is hacked or otherwise compromised, your staked funds may be at risk. It is important to carefully research the cryptocurrency and the staking platform you are considering before deciding to stake your funds.
How much can I earn from staking?
The amount you can earn from staking depends on several factors, such as the type of cryptocurrency you are staking, the amount of funds you are staking, and the current market conditions. It is important to keep in mind that staking rewards are not guaranteed and may vary depending on market conditions.