One of the biggest benefits of staking with crypto space, is the passive income that you can earn. However, as with all investments, staking with crypto space has its advantages and disadvantages. Staking has it’s benefits and drawbacks for its users, but also the general crypto scene.
Before deciding that you want to start staking with crypto space, we would recommend that you do your research. Take your time to understand the different modes of participation. Then look at how your preferred mode of participation within the crypto space contributes to the improvement or destruction of that cryptocurrency.
Right now, staking is gradually growing in popularity. This is especially the case within newer blockchain projects. So, let’s look at why some developers gravitate towards staking as a way of ensuring security within their networks. We will also look at whether cryptocurrency staking is good or bad for cryptocurrencies as a whole.
Is Staking Good For Crypto?
Staking is good for crypto. However, it is also bad for crypto. But, as we mentioned earlier, there are pros and cons to all investment opportunities. You just need to see if the good outweighs the bad for you, personally. Many investors agree that crypto staking offers far more good, than bad. This is what we look at in this blog post.
How Is Staking Good For Crypto?
One of the biggest problems for many of the more established blockchain networks is that the consensus mechanism they use is limited. This means that even with their high levels of popularity, they can not achieve a certain level of speed. One of the reasons that crypto staking was introduced was to help solve this network speed problem.
Many crypto experts believe that staking actually contributes to the decentralised blockchain networks. In turn, this makes it easier for community members to participate in both the governance and transaction validation of cryptocurrencies. Interestingly, the initial investment and ongoing charges are reduced when it comes to staking. This makes it more accessible to the wider population.
• Environmentally Friendly
One of the biggest criticisms that blockchains get is that they are not environmentally friendly. It is felt that some blockchain technologies actually contribute to the degradation of the environment. However, this is not true for the blockchain networks that use crypto staking. Some mining networks consume a lot of energy. The source of this energy may or may not be non-renewable energy. However, the networks that have adopted staking as a consensus mechanism has sidestepped this landmine. That is because a crypto staking infrastructure is far less energy intensive. In turn, this makes is more environmentally friendly.
• Passive Investment
Staking is thought to be a more passive investment for those investors looking to participate in the blockchain economy, but don’t want to put a lot of effort in. This is socially the case when crypto staking is compared to other consensus mechanisms. It is dependent on the network and how much you want to participate, either as passive or active. However, you can effectively invert in your blockchain network. You will also never have to deal with the maintaining of your investment. This can be done for as a long as you want to stay involved.
Many investors are attracted to crypto staking as it means not doing a lot of work but getting rewards for your staked crypto. It’s really attractive to passive investors. This can only mean good things for the network and the world of crypto as a whole.
Does The Value Of Staked Crypto Increase?
In short, yes! Staked cryptocurrency assets can increase in value. However, there is a possibility that the value of these crypto assets can decrease as well. There are factors that can affect the value and quantity of staked crypto. These are as follows:
Generally speaking, the more that an investor stakes, the higher the chances of creating the next block chain are. In turn, this increases the investors chances of being rewarded. Over time, the initial crypto stake of the investor will have increased in value too.
• Market Action
Crypto assets are notorious for their wild price movements. It is not unusual to see 20%+ rallies or corrections on a daily basis. Crypto assets are extremely volatile. However, according to historical data most cryptocurrency assets have seen appreciating values with intermittent drawbacks. That said, staked coins are subject to locking periods. This means that there is a chance that they could rise or fall. This would be dependent on the direction of the way that the market action leans. Most blockchain network have introduced staking as a consensus mechanism. This means that their staking policy incentivises good behaviour from the nodes that participate. Misbehaving or maliciously behaving nodes risk losing all or some of their crypto staked assets.
The measure of usefulness of staked coins in known as utility. Dependent on the platform you chose to stake your crypto coins or crypto assets, you may find you can use your coins for other purposes. This is even the case if those crypto coins are locked and limited against movement from one wallet to another. One example of this is that the crypto coins can be used as security to get a DeFi loan.
The Benefits Of Staking With Crypto Space. We have looked at the benefits to staking for crypto earlier in this blog post. Now, we look at the benefits of staking to the network. It is worth noting that most of these benefits to staking with crypto space apply to networks using staking models and the crypto community.
Crypto staking is how blockchain networks maintain their integrity. The blockchain network allows crypto stakers to participate in transaction validation. They are also involved in network governance, which increases the security for crypto users.
It’s a good idea to think of staking like maintaining your traditional bank account. In the way that you deposit funds into your bank, you then receive interest at the end of a stated period. It is similar to staking. However, the main difference between staking rewards and bank account interest is that staking rewards can be far more generous in their rewards. Some blockchain networks will pay out as much as 20% in annual rates. On average, traditional financial institutions will offer annual rates of as little as 4-6%.
• Low Entry Barriers
When you compare crypto staking to crypto mining, for example, crypto staking has minimum entry barriers and a very low entry barrier. Some blockchain networks will require as little as a few pounds’ worth of native cryptocurrency. You can then start crypto staking.
• Environmentally Friendly
While we have already touched on this benefit as point of staking being good for crypto, being environmentally friendly is also good for investors. As the world rapidly changes, we are reminded to of our carbon footprint and to do little things to protect the planet. Crypto staking offers planet protecting investors an environmentally friendly investment opportunity. The mechanism of staking causes the usage of very little energy. This means that high computational power isn’t need, making it much better for the environment than crypto mining, for example.
• Straightforward Cold Staking
Another benefit of staking with crypto space is that you can stake the cryptocurrencies cold. This means that you can get connected to the internet the entire time. Generally speaking, it means that you can leave your crypto currencies in your crypto wallet without worrying about them. Like going on holiday and leaving your wallet and spending money in the hotel safe for example.
• Completed Through Exchanges
Staking of cryptocurrencies can be completed through exchanges with ease. There are some really sturdy crypto exchanges out there on the market that make staking in the crypto space possible. However, not all crypto exchanges offer this. As we have stated in previous blog posts, take your time to shop around when choosing the right crypto exchange for you. Make sure it meets all your needs and offers everything you require.
• Extra Income
Through staking in the crypto space, you can diversify your digital assets. You can also reduce your transaction fees on a blockchain too. If you are looking for a way to make extra income, then staking in the crypto space is a very efficient way of doing this. A lot of investors have increased their net worth by investing and encashing cryptocurrencies. Some of these investors have reinvested their money to purchase more crypto coins and earn more profits from their investments.
Overview Of The Benefits Of Staking With Crypto Space
Staking is an excellent investment opportunity for investors looking to earn passive returns from cryptocurrency. The investment of staking in the crypto space come with many bonuses. These include allowing blockchain networks to scale their throughput and enable more participation in network governance.
As with all investment opportunities, there are drawbacks to. As a potential investor it is important you are aware of these to. For example, the market, liquidity, slashing and security risks are all things that could affect your investment and crypto staking.
However, crypto staking is not unlike most investment opportunities. It has its benefits and its drawbacks. As an investor, it is important that you consider all the benefits and the drawbacks, as you would with any other investment opportunity. Take the time to consider your investment goals and if staking into the crypto space works for you, your investment and your investment goals.
Want to know more abut crypto investing or crypto staking and how it could work for you? Call our friendly UK based team of crypto experts now. They will be happy to answer any questions you have and offer advice if needed.