Introduction to Staking
Staking is a way to earn passive crypto income by simply holding cryptocurrency.
How Staking Works
In decentralized networks, any participant can modify the distributed database. Every new block in the database must be verified to prevent manipulation. Cryptocurrencies were designed to secure the blockchain against data tampering and double-spending issues.
Consensus Algorithms
To ensure blockchain security, the creation of cryptocurrencies is controlled by consensus algorithms: Proof-of-Work (PoW) and Proof-of-Stake (PoS).
Proof-of-Work (PoW)
PoW, widely known as crypto mining, depends on the power of the equipment. Miners calculate the hash (key) for a block, which is then verified by other miners.
Proof-of-Stake (PoS)
Staking allows a protocol to randomly assign a network participant the right to validate the next block. Participants must lock a certain number of coins in staking to become validators. The chance of selection increases with the number of staked coins. Unlike PoW, the selection depends on the number of staked coins, not the speed of solving tasks.
Availability
Staking is available only for cryptocurrencies with blockchains operating on the PoS algorithm.