Staking: what it is, how it works and how to make money

Cryptocurrency stacking is the delegation of one's tokens to a service, or one's own host, to verify transactions in blockchains using the Proof-of-Stake consensus algorithm. In exchange for providing their tokens, users are rewarded with additional tokens, similar to receiving interest on a bank account.

In simple words, the user locks some of his funds and gets rewarded in the form of interest for the mere fact of owning coins, without performing any actions. 

Because you must store and lock your tokens to be allowed to verify transactions and receive additional tokens for doing so, the network incentivizes them to act in the best interest of the network and prevent malicious influence. If malicious influence occurs, tokens can be burned.

Proof-of-Stake (PoS) is a consensus algorithm used by some cryptocurrencies to validate transactions and create new blocks in the blockchain. In PoS, validators, stackers, are chosen to create new blocks based on the amount of cryptocurrency they own and have blocked. The more cryptocurrency a stacker has, the more likely he or she will be selected to create the next block and receive a reward.

The use of PoS and stacking in the cryptocurrency network leads to a number of benefits, including reduced power consumption compared to the Proof-of-Work (PoW) algorithm used in Bitcoin, and increased network security by encouraging honest and transparent behavior.

Also, the Proof-of-Stake algorithm does not involve any mathematical calculations or other operations, so it is considered environmentally friendly and affordable.

In the PoS blockchain network, validators are selected to create new blocks and validate transactions based on the amount of cryptocurrency they own and are willing to block as collateral. The more cryptocurrency a validator blocks, the higher its chances of being selected to create the next block and receive a reward.

Validators have a clear and simple incentive to act in the best interest of the network, since their pledged cryptocurrency can be destroyed or lost if they behave in bad faith or try to manipulate the system. This creates a safer and more efficient network because validators have a direct stake in its success.

Steaking providers are platforms that allow cryptocurrency holders to participate in steaking without the technical knowledge and infrastructure required for single steaking. Such providers pool the funds of multiple participants to increase the chances of rewards and distribute rewards among participants based on their contributions to the pool.

Providers usually charge for their services, which depends on their individual terms as well as on the specific cryptocurrency. Some providers offer additional services, such as automatic redistribution of rewards and support for multiple cryptocurrencies.

This is convenient because this approach promotes diversification and saves time.

Stacking and mining are two ways to validate transactions and maintain the integrity of the blockchain network. However, there are significant differences between the two processes.

Mining involves solving complex mathematical problems to validate transactions and add them to the blockchain. This requires significant computing power and energy consumption. Miners are rewarded with new coins as well as transaction fees.

Stacking, in turn, consists of storing a certain amount of a particular cryptocurrency in a specially created wallet for a certain period of time. This helps confirm transactions on the network and maintain the security of the blockchain. In exchange, users receive additional coins or tokens, as well as the right to vote in the management of the network (however, the latter is not a priority for many, as the vast majority of users are still interested in just earning additional passive income).

One of the main differences between mining and steaking is the level of energy consumption. Steaking is a more environmentally friendly alternative to mining because it requires significantly less energy.

There are several different types of steaking, each with its own characteristics and benefits:

• Online staking: the most common type of staking in which users delegate their authority to a betting pool or validator node. 
• Offline Stacking - Users store their coins on a cold wallet that they keep at home or in another secure location, but they can still participate in stealing. This is a more secure method because it reduces the risk of hacking or theft that can occur when coins are stored in hot wallets.
• Partial Stacking - Users can lock only a portion of their coins, keeping the rest liquid and available for trading or other purposes. This allows users to balance rewards and available funds needs.

Fixed staking is a method of participating in cryptocurrency steaking in which a participant fixes a certain amount of coins (steak) for a certain period of time. There is a precisely defined period of time for which the participant fixes their steak. This period can range from a few weeks to several years, depending on the rules of the particular protocol. Fixed steakings often attract investors willing to commit to long-term periods. Depending on the terms, participants may receive different types of rewards, such as interest or additional tokens. If a user has put their funds into this type of staking, they also receive a fixed fee. These types of contracts usually offer a higher percentage, making this option attractive for those looking to maximize their income.
An example of this type of staking is ETH 2.0: a user who wanted to become a validator had to fund his wallet with 32+ ETH.

The Ethereum 2.0 network uses the Proof of Stake (PoS) consensus algorithm, which requires validators to lock their tokens to be eligible to participate in the transaction validation process. Validators who validate transactions correctly receive rewards in the form of ETH.
The interest rate, ranging from 2% to 20% per year, depends on the total volume of blocked coins used in the steaking. Interestingly, ETH 2.0 steaking requires more investment than traditional mining - the entry threshold is much higher.

Indefinite staking is a method of participating in cryptocurrency staking where there is no explicitly set period of time for which the user locks their coins. Unlike fixed staking, where participants choose the period for which they lock their assets, perpetual staking provides the flexibility to withdraw coins at any time without penalty. This means that a user who has invested in this type of staking can withdraw their funds at any convenient time: after a day, a month or a year. Depending on the project, perpetual staking can provide a constant interest rate or have variable rates depending on market conditions. As a rule, remuneration in this type of steaking begins to
begin to arrive in the first day after opening the contract, but it is impossible to withdraw them at once, the payments are usually made once a month. Indefinite staking attracts those who appreciate flexibility and the possibility to always have access to their assets. Coins on perpetual staking bring passive income, but at the same time can be available to the user at any time.

DeFi-stacking is a form of staking introduced as part of decentralized finance (DeFi). DeFi is a variety of services based on blockchain technology, covering a wide range of services including lending, insurance, gamification and more. DeFi projects are based on smart contracts that automatically execute transactions according to predetermined terms. DeFi steering differs from traditional steering in that it involves third parties. For example, organizations or individual users can borrow coins from the owner with interest, effectively extending credit.
Many DeFi protocols offer flexible terms for steaking, such as no minimum amounts, the ability to add or withdraw funds at any time. In addition, typically in DeFi steaking, a user's earnings are credited daily, and each user can withdraw their funds at any time, subject to profit. DeFi steaking participants can receive interest in the form of new tokens or additional cryptocurrencies. Also, this type of staking is often more profitable than traditional staking: in DeFi-staking, the interest is higher and the entry threshold is lower. As a rule, in traditional staking it is difficult to earn even 10% per year, while in DeFi the user can expect annual returns of even 100%+. It depends on the specific cryptocurrency and the chosen investment term.

• Stacking allows cryptocurrency holders to earn passive income, simply for the mere fact of owning coins. This can be especially attractive to long-term investors who believe in the potential of a particular cryptocurrency.
• Income is tied to dollars - not rubles or other national currency.
• Unlike trading or investing, staking helps reduce volatility in the cryptocurrency market. This is because staking encourages investors to hold their coins for a longer period of time, which helps stabilize the price.
• Stacking helps increase the security of the cryptocurrency network by encouraging investors to retain and validate transactions on the network. This increases the stability of the network and its resistance to hacker attacks.

• As with any cryptocurrency investment, there is always a risk of volatility. The value of a cryptocurrency can fall quickly, leading to losses. But this is not a direct disadvantage of stacking as a technology.
• When funds are blocked, they cannot be used until the deadline has passed. This means that the stager cannot access his or her funds during that time, even in the event of an emergency.
• Some stacking protocols may require a minimum level of participation in the network, such as a minimum number of tokens that are blocked. This can be a disadvantage for the smallest investors who lack the funds to meet such requirements.

• Ethereum (ETH) is the second largest cryptocurrency by market capitalization and offers a reward of 4-5% per year. Assuming Bitcoin is gold, Ethereum can be considered silver. Its notoriety and reliability make up for the relatively low income that can be generated by steaming.
• Cardano (ADA) is a third-generation blockchain offering rewards in the neighborhood of 3% per year.
• Polkadot (DOT) is fairly new, but has already become a favorite for many cryptocurrency, offering rewards of up to 10% per year.
• Cosmos (ATOM) is a decentralized, independent blockchain network that offers the ability to earn about 9.7% per year.
• Tezos (XTZ) is a smart contracts platform that offers participants the opportunity to earn rewards of up to 11% per year.
• Avalanche (AVAX)-a breakthrough blockchain platform offering rewards of about 8% per year.

• One of the most convenient and understandable options is steaking on a crypto exchange. This option is not available on all exchanges, but it is still present on most major exchanges. Each platform offers its own steaking options for different assets with different percentages.
• There are special platforms for steakinag. This type of steakinag is often referred to as soft steakinag. Some of the most popular platforms are Stake Capital and MyCointainer.

• Stacking on hardware wallets is a very interesting option. Each wallet has its own unique address on the blockchain to accept coins. While steaking on hardware wallets, it is critical to keep the coins on the same address to ensure blockchain continuity and avoid loss of rewards. Of all the options available, Ledger and Trezor wallets provide the best interest for steaking.

In order to deposit coins into staking on the WhiteBIT exchange, you should go to the "Products" tab and find "Cryptodeposit" there.

In front of you will appear the options that the exchange offers for steaking cryptoassets. Remember that in order to invest these or those coins in steaking, they must be in your account.

After you have decided on the asset, click "Put into Staking". Then you can see all the information about this plan: choose the amount to invest, the plan from 10 to 360 days. In addition, a very convenient feature on WhiteBIT is instant cancel of staking: if you suddenly decide that you want to take the coins back, you press the "cancel" button and your funds will be returned to your balance.

The WhiteBIT cryptodeposits exchange offers a large number of assets to invest in, as well as very favorable rates that beat most other crypto exchanges. In addition, the interest you get from the tokens you have pledged remains stable until the end of the chosen deposit term. 

Very interesting is the possibility to deposit USDT Tether into the USDT staking: if you have a free stablecoin and you don't know where to invest it to get Xs for sure, the cryptodeposit from WhiteBIT can be a great solution: the exchange offers 18.65% APR for your USDT. By laying down USDT, you don't have to worry about the fact that while the tokens are in the pool, their price will rise and you won't be able to sell them, as the price of USDT is always $1. By investing $5,000 for a year, you will get a free $932 at the end of the plan.

Steaking is another interesting way of earning income, and you don't have to do much to earn income from it. Staking is indeed a fairly reliable and stable income option with relatively low risks. The overall profit depends on the specific cryptocurrency chosen, the length of time you participate, and the type of steaking. Different participants can expect different percentages of income, but everyone will get their reward in the end. This method of earning is appreciated for its stability and lack of need for specialized equipment (unlike mining). However, as with any investment decision, it is important to carefully research the specific terms of steaking, and to keep monitoring the terms on a regular basis, especially if you are participating in steaking with flexible return percentages. Steaking can be particularly interesting for hodlers who have bought certain assets as a long-term investment and are simply keeping them in their wallet: in this case, steaking can be a nice option to increase the amount of these assets and earn money on coins that would have already been lying around for the amount of time the investor was counting on. 

When working with steaking, it is crucial to realize that there are risks involved, and many people underestimate them! Steaking coins at high % can be dangerous, as was the case, for example, with TerraUSD (UST) steaking. People steaked large sums in a supposedly safe steiblcoin and had no way to sell the coins, which depreciated in the future. Many people would like to get out of steaking and exchange their coins for money, but couldn't.
Another important point that for some reason is not often talked about is that once you see a coin that is in steaking rise, you run the risk of being unable to lock in profits. It's not commonly talked about, but steaking is a risk in a bull market, because the ability to lock in profits is extremely important.