Like so many other aspects of the cryptocurrency industry, staking can be a complicated or simple idea depending on how deep you can go into the subject. For many investors and traders, the main concept that approaches staking is the fact that it represents a way of earn rewards as a reward for holding certain cryptocurrencies. It is useful to understand a little more precisely how this activity works.
How does staking work?
If a cryptocurrency you own allows “staking” it means that you can staking part of your funds and earn a reward equal to a percentage rate paid over time. This is typically done through a “resource staking group”, comparable to an interest-bearing savings account.
Staking therefore allows you to obtain rewards forholding activity of some cryptocurrencies. This is only possible for cryptocurrencies that use a mechanism called “proof-of-stake”, which ensures that transactions are verified and secure without the need for a bank or payment processor to act as an intermediary. The blockchain makes good use of staking cryptocurrencies: they become part of the verification process and pay rewards to those who hold them, similar to savings accounts, which pay interest to custodians.
Users who have held a cryptocurrency for a long time see staking as a way of leveraging their assets, using them to generate rewards rather than letting them gather dust in their wallets. Staking also has the advantage of contributing to the security and efficiency of the blockchain projects you support. By staking part of your funds, you make the blockchain more resistant to attacks and consolidate its ability to process transactions.
It should be borne in mind that staking often requires a period of blocking or “vesting”, during which your cryptocurrency is not transferable for a certain period of time. During this time you cannot trade staking tokens even if the prices change. Before you start staking, it is important to research the specific staking requirements and rules for each project you are interested in participating in. Furthermore, it is still possible to incur losses if the value of the cryptocurrency in fiat currency falls, generating a higher loss than the rewards received from staking.
How to start staking
Staking is normally open to anyone who wants to participate but may require a minimum investment of a substantial amount as well as technical knowledge. However, for most users there is an easier way to participate. Bitpanda, the European digital investment platform, allows you to contribute with the amount you can afford and create a group of staking resources. This method lowers the entry threshold and allows investors to start earning rewards without specific technical preparation.
Thanks to Bitpanda Staking, all investors have the ability to earn an extra 18.4% annualized return (APR, Annual Percentage Rate) on a select crypto portfolio, with a simple tap on the app or web platform. To date, nearly 4 million Bitpanda users can obtain weekly rewards on their assets, without specific technical preparation and with the security offered by the high regulatory and compliance standards of the fintech unicorn. All of this, with some innovative features.
No lock-in and warm-up period
All assets staked on Bitpanda do not have a lock-in period, i.e. a constraint, and are therefore accessible at any time. This means that users can access their staked cryptocurrencies whenever they want. And since there is no warm-up period, investors start earning from the moment they stake their chosen crypto, until the moment they stop staking.
Bitpanda users will receive rewards on staking assets once a week, regardless of how the specific blockchain disburses the rewards. And the rewards will in turn be automatically staked, so that users can grow them over time. With Bitpanda Staking, the community will receive rewards starting from the first week of staking.
At the moment, 15 assets (between cryptocurrencies and tokens) are available for staking on Bitpanda: ADA, TRX, XTZ, SOL, DOT, MATIC, ATOM, GRT, KSM, NEAR, AVAX, AAVE, EGLD, FLOW and KAVA. Each cryptocurrency will offer a different reward. Bitpanda’s intention is to add new assets during the year.