What Is Staking?

What Is Staking?

 

Introduction

You may think of staking as a less resource-intensive alternative to mining. It involves holding funds in a cryptocurrency wallet to support the security and operations of a blockchain network. Simply put, staking is the act of locking cryptocurrencies to receive rewards.

In most cases, you’ll be able to stake your coins directly from your crypto wallet, such as Trust Wallet. On the other hand, many exchanges offer staking services to their users. biexm Staking lets you earn rewards in an utterly simple way – all you have to do is hold your coins on the exchange. More on this later.

To get a better grasp of what staking is, you’ll first need to understand how Proof of Stake (PoS) works. PoS is a consensus mechanism that allows blockchains to operate more energy-efficiently while maintaining a decent degree of decentralization (at least, in theory). Let’s dive into what PoS is and how staking works.

 

 

What is Proof of Stake (PoS)?

If you know how Bitcoin works, you’re probably familiar with Proof of Work (PoW). It’s the mechanism that allows transactions to be gathered into blocks. Then, these blocks are linked together to create the blockchain. More specifically, miners compete to solve a complex mathematical puzzle, and whoever solves it first gets the right to add the next block to the blockchain.

Proof of Work has proven to be a very robust mechanism to facilitate consensus in a decentralized manner. The problem is, it involves a lot of arbitrary computation. The puzzle the miners are competing to solve serves no purpose other than keeping the network secure. One could argue, this in itself makes this excess of computation justifiable. At this point, you might be wondering: are there other ways to maintain decentralized consensus without the high computational cost?

Enter Proof of Stake. The main idea is that participants can lock coins (their “stake”), and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block. Typically, the probability of being chosen is proportional to the amount of coins – the more coins locked up, the higher the chances.

 

 

This way, what determines which participants create a block isn’t based on their ability to solve hash challenges as it is with Proof of Work. Instead, it’s determined by how many staking coins they are holding.

Some might argue that the production of blocks through staking enables a higher degree of scalability for blockchains. This is one of the reasons the Ethereum network is planned to migrate from PoW to PoS in a set of technical upgrades collectively referred to as ETH 2.0.

 

 

Who created Proof of Stake?

One of the early appearances of Proof of Stake may be attributed to Sunny King and Scott Nadal in their 2012 paper for Peercoin. They describe it as a “peer-to-peer cryptocurrency design derived from Satoshi Nakamoto’s Bitcoin.”

The Peercoin network was launched with a hybrid PoW/PoS mechanism, where PoW was mainly used to mint the initial supply. However, it wasn’t required for the long-term sustainability of the network, and its significance was gradually reduced. In fact, most of the network’s security relied on PoS.

 

 

What is Delegated Proof of Stake (DPoS)?

An alternative version of this mechanism was developed in 2014 by Daniel Larimer called Delegated Proof of Stake (DPoS). It was first used as a part of the BitShares blockchain, but soon after, other networks adopted the model. These include Steem and EOS, which were also created by Larimer.

DPoS allows users to commit their coin balances as votes, where voting power is proportional to the number of coins held. These votes are then used to elect a number of delegates who manage the blockchain on behalf of their voters, ensuring security and consensus. Typically, the staking rewards are distributed to these elected delegates, who then distribute part of the rewards to their electors proportionally to their individual contributions.

 

The DPoS model allows for consensus to be achieved with a lower number of validating nodes. As such, it tends to enhance network performance. On the other hand, it may also result in a lower degree of decentralization as the network relies on a small, select group of validating nodes. These validating nodes handle the operations and overall governance of the blockchain. They participate in the processes of reaching consensus and defining key governance parameters. 

Simply put, DPoS allows users to signal their influence through other participants of the network.

 

 

How to stake on biexm

In a way, you could think of holding your coins on biexm as adding them to a staking pool. However, there are no fees, and you can also enjoy all the other benefits that holding your coins on biexm brings!

The only thing you have to do is hold your PoS coins on biexm, and all the technical requirements will be taken care of for you. The staking rewards are usually distributed at the start of each month. 

 

You can check the previously distributed rewards for a given coin under the Historical Yield tab on each project’s staking page.

 

 

 

Closing thoughts

Proof of Stake and staking opens up more avenues for anyone wishing to participate in the consensus and governance of blockchains. What’s more, it’s an utterly easy way to earn passive income by simply holding coins. As it’s getting increasingly easy to stake, the barriers of entry to the blockchain ecosystem are getting lower.

It’s worth keeping in mind, though, that staking isn’t entirely without risk. Locking up funds in a smart contract is prone to bugs, so it’s always important to DYOR and use high-quality wallets, such as Trust Wallet. 

Be sure to check out our staking page to see which coins are supported for staking and start earning rewards today!