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Why Staking Can Be A Great Way To Generate Passive Income

Among the large number of tools for making a profit in cryptocurrencies, the leading position is occupied by staking. It was implemented 10 years ago for a PPC asset, as a method of providing a reward for proof of ownership.

Posted: 25th July 2022 by Finance Monthly
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Staking has several definitions. This is an alternative to cryptocurrency mining, which involves receiving a reward for the fact that the user blocks or holds an asset in a crypto wallet.

Sometimes staking is also called mining without much difficulty. Its popularity began to grow rapidly with the spread of blockchain technology, the emergence of a large number of exchanges and projects offering to engage in staking.

As a rule, the staking service is offered by leading crypto exchanges, since they have the appropriate technical base. Also, you can stake coins on DecimalChain. In addition, staking helps to increase the value of domestic currencies of crypto exchanges. Currently, staking has several varieties.

What types of staking are implemented at the sites at the moment?

Fixed

It is characterised by the fact that users pre-indicate for what time period they will place tokens. You can choose different dates, but then it is forbidden to change them. This type of staking involves a fixed passive income. As a rule, the percentages of fixed staking are higher than those of other types.

Staking without deadline

The deadline for the token blocking period is not specified. Users can unlock tokens at any time. Percentage is accrued as long as the tokens are on the balance. Most often, in this type of staking, the reward is awarded a day after the contract was opened. The reward is paid once every few weeks. Most often, such staking is preferred by those who do not want to freeze digital assets for a long time.

Decentralised staking

Its difference from all the others is that other subjects take part in it. For example, it can be a company or a user who takes an asset from the holder at a certain percentage. In fact, they are given a loan. Such staking is attractive because you can quickly withdraw funds, passive income is higher, it can exceed 90% per annum, and a low entry threshold. Payments are guaranteed to everyone since smart contracts are used.

Every year the number of users using staking as a way of passive earnings is growing. This is due to the complex advantages of staking.

Why is staking considered a profitable way to generate passive income among others

  • Staking does not involve the use of expensive equipment, for which you will have to pay more money and additionally pay for electricity costs. This implies another advantage of staking – the absence of an entry barrier.
  • Staking is completely democratic, that is, there is practically no barrier to entry. It is enough for a user to be a holder of a certain number of tokens to block them on his wallet for a certain period of time. Of course, there are exchanges where you need to buy several hundred tokens to engage in staking. However, now there are so many exchanges on the market that the user can choose the one where it is enough to buy just a couple of coins to start staking.
  • Staking provides another profitable opportunity for customers. Thanks to him, they can get the right to vote in making decisions concerning the further promotion of the exchange. The more tokens a user has, the more significant his vote will be.
  • Staking allows you to receive remuneration exceeding the percentage in bank deposits. At the moment, the vast majority of banks offer a small perecentage of the deposit, no more than 4-8%. Unlike such deposits, betting pools offer higher interest rates per annum, from 10 to several hundred%. It all depends on what conditions are offered for staking on the platforms. As a rule, they are an order of magnitude better than those of banks.
  • Staking is currently tax-free, which makes it even more attractive for novice investors. It is possible to participate in several betting pools at once and receive much more income.
  • Staking is extremely simple in its architecture. That is why it is so often used by novice investors. A few simple steps to block and hold a token on the platform, review the rules for obtaining passive income on the exchange, and that's it.
  • Staking involves minimal risks. The risk lies only in the fact that it is possible to reduce the value of the virtual asset. If a user is a member of several staking pools at once, then even if the price of one asset falls, you can still receive passive income on the other.
  • Staking guarantees passive profit every month. You can even calculate the corresponding percentage of income using special calculators. 

How is it possible to engage in staking?

The user needs to register on a platform offering staking. Next, you should purchase a certain number of coins, accept the terms of the site, set a staking period and keep cryptocurrencies in your wallet. Moreover, you can do it alone or become a member of the staking pool.

Pools are advantageous because they allow you to stake if you need to invest a significant amount in the purchase of assets. With the help of a pool, the entry threshold becomes lower. At the same time, it should be noted that the pool charges a commission fee.

Are there any risks of losing passive income when doing staking?

Everyone who is engaged in trading on the cryptocurrency market knows that digital currencies are quite volatile. Therefore, the task of traders and investors is to minimise the risk of losing a deposit during trading sessions. Staking differs from all other types of income generation in that the risk of losing invested funds is extremely low. If the user participates in several betting pools at once, then the risk of losing profit is actually zero.

Summing up

Thus, staking as a passive income tool is becoming more and more popular among participants of the cryptocurrency market. Minimal risk, regular payments, a large selection of platforms and conditions, high profitability exceeding bank deposits at times, and ease of use make staking one of the best and safest tools for making a profit.

Users can engage in staking on their own or enter into staking pools, thereby further increasing passive income. The number of platforms offering staking is constantly growing.  

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