Crypto holding is a term that is commonly used among cryptocurrency investors. If you are new to the world of cryptocurrencies, you may not be familiar with the term, but don’t worry. We will go through the activity and list all the good and not so good points. Read on to learn more about cryptocurrency staking.
Crypto staking is the act of staking your crypto tokens to validate transactions on the blockchain. This improves the security and integrity of the platform, and in return, you get a reward. Every transaction on the blockchain must be verified by the nodes to create a ledger. Since no central authority is involved in cryptocurrency transactions, it is up to users to maintain the ledger. It is for this reason that cryptocurrency staking enters the scene.
People commit their tokens to the platform, showing their willingness to verify transactions. The protocol chooses a single person to verify the transaction, who records it on the blockchain. But regardless of who verifies the data, the protocol rewards all willing participants because they contribute to the quality of the blockchain.
If you are looking for cryptocurrencies to bet on, you should understand that not all cryptocurrencies are available for betting. Only tokens/coins that use a proof-of-stake mechanism to reach consensus on the network allow people to stake their tokens.
Suppose your token uses other consensus mechanisms like Proof of Work or Proof of Capacity. In that case, you cannot bet your chips. If you have decided to stake your cryptocurrencies, it is essential to know the type of mechanism your token uses to achieve consensus.
Is it worth betting on crypto?
These are some of the benefits of staking cryptocurrency, which is what has given this activity such a boom:
passive income
Crypto staking has gained so many fans because it acts as a great source of passive income. Once you lock your tokens in the platform, you don’t lose them. Instead, you are rewarded with more tokens for taking care of upgrading the platform. It’s similar to keeping money in a bank: You earn interest because the bank can use it to create more money.
Improve security
People are slowly getting used to the idea of cryptocurrencies because of the security it promises. Although it is easy to duplicate data digitally, blockchain technology does away with that. When you wager and choose to validate transactions, you further enhance the security of the platform.
Use crypto tokens
Not all countries and/or financial institutions recognize cryptocurrencies. This poses a problem for holders because they must use their tokens. This is the reason why crypto casinos are on the rise. For example, when you bet BTC on crypto casinosyou get special bonuses for using Bitcoin for your transactions.
Plus, your rewards are credited to your account via cryptocurrency, ensuring your asset stays active. Crypto gambling is becoming popular among the masses due to the great deals that are offered by the casinos. But gambling allows you to use your tokens without having to spend them.
Is it safe to stake cryptocurrencies?
Reading the benefits mentioned above, you are probably thinking of staking your tokens the first chance you get. But all that glitters is not gold, so check it out closely. Staking can have great advantages, but it is necessary to consider all aspects before considering it safe.
Technically speaking, staking is safe, because the blockchain ensures that there are no security leaks. Your data and tokens are completely secure, so you can be sure that your tokens will find their way back to you.
But concerns arise when you realize that the market risk of staking cryptocurrency will not go away. The high volatility of cryptocurrencies has discouraged many people from trying these tokens. It could also discourage people from gambling because you could stake your tokens at a higher value. However, the value has been reduced by the time you receive your reward. You must bear the loss and hope that the value does not go any lower.
If you want to stake your crypto tokens, it would be best to search for crypto platforms, because it is the easiest way. The best crypto wallets for staking include Binance, ZenGo, Gemini, Coinbase, and Kraken, among many others.
Consider joining a stake pool, where multiple validators allocate their tokens to a single node. Since there are more people, the amount of tokens to bet on would be higher. As a result, the rewards would also be higher. The rewards are then shared proportionally among the validators.
The best cryptocurrencies to bet on in 2023
As mentioned above, not all cryptocurrencies are available for staking. Your token must use a PoS mechanism for verification if you wish to stake it. Here are some of the best cryptocurrencies to bet on in 2023:
Tie
Tether is one of the largest cryptocurrencies on the market. It has a large market volume, which substantially reduces liquidity risk. Returns on staking on Tether have been known to go as high as 12.3%. There are also no lock-in periods, which means you can “take out” your coins whenever you want.
ethereal 2.0
Ethereum initially used the Proof of Work mechanism, which meant that it was impossible to stake the tokens. But recently, it merged its system with Proof of Stake, which would drastically reduce its power consumption. Betting on Ethereum results in an annual return of 5% to 20%, which any other token can hardly match.
Binance
Binance, apart from being one of the largest crypto exchanges in the world, is also a popular crypto token that you can bet on. Staking crypto Binance offers an average annual return of 6% to 9%, but if you’re lucky, rates can go as high as 30%. The lock period is only seven days; You can undo your tokens quickly.
Solarium
Solana is a popular token among cryptocurrency investors due to minimal transaction fees and fast transactions. The average annual return is between 7% to 11%. Solana has a very short reward period of 2-3 days, which is great news for people who want to claim rewards immediately.
Cryptocurrency staking risks
We already tried to answer the question you had in mind: “Is it safe to stake cryptocurrencies?” But in this section, we will discuss, in detail, the risks that people need to take if they are involved in cryptocurrency staking.
Market risk
It’s no secret that cryptocurrencies are highly volatile assets. While it may attract many people due to the potential high returns, it is necessary to pay attention to market risk. If the value of the token increases, great for you and you will make a profit. But if the value of the tokens falls when you stake them, you have to take the hit and accept the loss.
Liquidity risk
Liquidity is the characteristic of an asset to convert into cash as quickly as possible. Cryptocurrencies are highly liquid as they can be exchanged for fiat currencies on most cryptocurrency exchanges. But when you stake your tokens, you can’t liquidate them according to your needs. Therefore, it loses liquidity and has to bear the liquidity risk.
lockout period
If you are staking crypto with a fixed lockup period, you cannot access your tokens during that time. This means that even if you forecast a drop in the value of the tokens, you cannot sell them. Ultimately, you would be at a disadvantage if there is a fixed blackout period for gambling.
Validator Costs
As someone who validates transactions on the blockchain, you would have to take a lot of responsibility. You must be online all the time and verify each transaction correctly. If you make a mistake, you will have to pay the penalty. Running your device 24/7 to keep the node online means you have to bear electricity charges as well.
Crypto Gambling Tax
While it may not be a risk, people are required to pay taxes on the returns from their bets. Each region has different rules, so you need to check if you have any other charges or just the tax on your returns.
These are some risks that people should take if they are involved in cryptocurrency staking. People can go on and on about how safe it is to stake cryptocurrency. However, ignoring the associated risks will not be a good idea.
Conclusion
Like everything else in the world, cryptocurrency staking has advantages and disadvantages. So that you don’t get a rosy picture of cryptocurrency staking, we have listed the good and the bad. While it is true that gambling can be a form of passive income, you cannot ignore the fact that there are financial and security risks associated with gambling.
A safe way to deal with the risks of cryptocurrency staking would be to use a reputable cryptocurrency wallet. Numerous crypto wallets and platforms promise users a more accessible and secure way to stake their crypto tokens. Ultimately, it looks at whether you are confident that the project will succeed and whether you are willing to take risks to reap the benefits.
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