Cryptocurrency is evolving with all sorts of unique mechanisms offering impressive and sustainable financial services unprecedented in human history. Staking is one such tool in the Cryptosphere that you must better understand and utilize.
Like many things in Crypto, Staking can be a complex or straightforward purport according to the knowledge you want to comprehend. Basically, Staking is a means of gaining compensations for hodling some digital asset for a period.
Staking is the method where users of a Blockchain/Crypto network put crypto-assets at stake; therefore, the expression ‘staking’ to accomplish responsibilities for the Blockchain. In return, the network rewards the asset owner with more Cryptos.
Blockchain projects like Ethereum, Dash, Smartcash, Decred, PIVX, and others first pioneered Staking. It is more popular today thanks to the admirable growth of the decentralized finance sector.
A Consensus Mechanism is a fault-tolerant device employed in a Blockchain to agree on a particular network element between distributed nodes. They are protocols that ensure all nodes are operating with each other and match on transactions that are verifiable and added to the Blockchain.
There are several Consensus Mechanism in Cryptosphere now. But the most popular of them are Proof of Work (PoW) and Proof of Stake (PoS).
Bitcoin, the firstborn of Cryptocurrencies, utilizes the Proof of Work Consensus Mechanism, which requires miners to validate all transactions in the network. However, Proof of Stake doesn’t require miners.
With PoS, minting new coins is done through those who stake their coins or tokens through the wallets. This mechanism ensures the new coin supply without the need for miners.
GDEFI uses the PoS mechanism; therefore, we have staking services where stakers receive rewards for locking up their coins for a certain period without selling or moving them to another wallet.
Securing A Network
Moreover, Staking is an active way of securing the Blockchain through the proof-of-stake consensus protocol. Accordingly, the device ensures the security of the network from attacks.
Hence, when someone stakes their tokens in a network, it is a means of securing the network. That is one of the reasons stakers receive rewards for staking their assets.
Bolstering Token Price
The value of every Cryptocurrency comes from the economic principle of Demand and supply. The more people are demanding that token or coin, the more its value goes up.
Similarly, the more people are selling the coin; its value will go down. So staking aids in the growth of and price of a currency, since stakers lock it for some time to receive passive income, it bolsters the price in an upsurge trajectory.
Crypto projects have moved from Initial Coin Offering (ICO) to Initial DEX Offering to raise money for their developments. The move has consequently seen the rapid growth of launchpad networks in the space, providing platforms to raise capital.
Some of these networks offer Guaranteed Allocation to get investors exclusive participation in private and presales of tokens before others can access public sales. To have such a privilege, you will need to stake a certain amount of the native tokens of the crowdfunding platform.
Liquidity Pools have become very popular in the DeFi space because of their significant role. Their function is unique and novel in the industry since it allows individuals to make available their idle assets for other uses and receive interest.
Lending and Borrowing protocols utilize Liquidity Pools to provide funds to the users of their platforms. The funds that people stake in a network are made available to traders to borrow for their activities.
Staking Offers Passive Income
Staking has become very prominent in the Crypto market due to its critical role in the space. Prior to its advent, digital assets owners were just hodling their assets in wallets without any gains.
However, they can today put their assets to good use by staking it to receive passive income. In the traditional financial world, this is comparable to a savings account.
Check out the GDEFI Staking services, which have an attractive APR on our website. It is coming soon to our community and anyone who wants to join our community-led economy where every voice is part of the decision-making process.