PROOF OF WORK VS. PROOF OF STAKEProof of stake, proof of work, and proof of information are regarded as bodies that govern the crypto-assets same as how we have rules that guide our traditional financial institutions Proof of Work and Proof of stake are both called consensual mechanisms because they close the deal of any transaction within their blockchain Proof of work has been in existence since the creation of the primary blockchain in 2009 by Satoshi Nakamoto, it involves the utilization of mining to validate a transaction with the assistance of advanced machines which is sort of expensive and energy-consuming. The computer or miner as they are referred to uses Pow to compete with another to feature block of a transaction to the blockchain, that is how a transaction is confirmed, and if successful they’re paid in cryptocurrency
The downside of proof of work
Proof of work (Pow) is threatened by the 51% attack:Nowadays computers can not mine, this subject only big investors like large industries to shop for an advanced machine, like ‘Asics’, for the aim of mining. Supposing that quite half of these mining industries that validate transaction gives a wrong ledger, you are at risk of losing your coins. Since machine beats machine, in POW each time, there is a transaction, miners will love to validate it, so they can get the mining reward, therefore the more advanced machines tend to be, the quicker to validate a transaction, Miners that can not complete a transaction are left with absolutely nothing despite attempting. The time and electricity used in this process are wasted. In a short period, a miner can run into a loss!
The birth of the saviour ‘proof of stake’To combat the above scenarios, Scott Nadal and Sunny King came up with a perfect idea where we don’t need to depend on these big investors for their hardware to validate transactions in a blockchain, so they developed an algorithm that makes transaction validation convenient and can be done by anyone, the algorithm is called Proof of Stake consensual mechanisms
So what is the Proof of Stake consensual mechanisms?Unlike proof of work, Proof of stake (Pos) needs you to possess a particular amount of cash in the form of crypto to partake, therefore the more crypto you’ve got, the greater your chances of you getting nominated to confirm a transaction within the blockchain. This gives you a significant share of the staking reward. Proof of stake only picks the nominated staker to verify a transaction, after completing the confirmation, other stakers will cross-check, and they also receive a fraction of staking reward percentages. Yes! You don’t have to compete among your fellow stakers before getting your staking reward. The proof of stakes approach eliminates the necessity for mining extravaganza
The big difference!The difference between the two is that in pow, mining rewards are distributed based on the miner’s work. The number of transactions validated is equivalent to mining reward, but in POS, the stake rewards are based on how many coins you stake higher your staked coins, the greater your percentage reward!
How much can I make from staking?Your staking reward depends on these key elements Contract duration: If the length of your contract is long your reward increases as well Your investment: the higher your capital the larger your returns – the more coin you stake, the higher your chances to be selected to create a block that will validate the transaction hence improving your staking reward! Your staking services provider: If you considering a validator who has technical skills to assist your stake, a small percentage of your profits will be removed as payment by your staking service provider(SSP). Example of SSP includes Staked, Chorus One, Trusted Wallet, Tezero Capitals, and Exodus, among others. Coin Preference: each cryptocurrency has a different annual per yield (APY) given to its staker. At the time of writing this article, you can earn 23%+ APY for staking Binance coin ( BNB, and annual per yield (APY) for staking some coins varies from 6%- 30%, These coins include Algorand (ALGO), Kava (KAVA), Tezos (XTZ), Cosmos (ATOM), and Tron (TRX)
BENEFITS OF STAKINGRecently, Iran announced a ban on the mining of cryptocurrency due to its high energy consumption after the cities suffered unplanned blackouts. For developing countries, mining cryptocurrency can do more harm than good! Staking has its benefits like
- It removes the necessity of buying expensive hardware and consuming energy
- It guarantees returns and a reliable means to earn passive income unlike Mining where you might run into a loss
- Your staked coins’ value doesn’t depreciate compared to mining hardware. The staked coin value is only affected by market value fluctuations
- An intense drop in the cryptocurrency staked market price – Since you can’t sell your coins, you’re at the mercy of the crypto market, and an investor can lose a considerable amount of his investment.
- Another obvious risk is that your staked coin wallet or exchange gets hacked or liquidated. The tendency for this scenario is high in an exchange like Binance, Coinbase, etc
- Staking coin isn’t completely harmless but compared to trading, the danger is very low, especially when using a wallet that may be tough to hack
- But it’s advisable to stake the coins you believe will survive the dip
How to stake a coin in a wallet?Nowadays it is easy to stake coins using the wallet, it requires three simple steps.
Choose a wallet that supports the coin you want to stake:Wallets offer a different coin to the stake, for instance, you can stake the following coins within your Trusted wallet;(Algor ALGO), Kava (KAVA), Tezos (XTZ), Cosmos (ATOM), and Tron (TRX), whereas some wallet doesn’t support Tezo staking. So you would like to surf the web to select the required coin that you simply believe has potential and therefore the wallet that supports it.
Understand the coin you investing in deeply…
Download the walletFor Android users, you’ll download the software wallet from the Play Store, if you considering using a desktop, you can download the software from the official website wallet of your choice.
Start stakingAfter your wallet found out is completed, buy your coin and click on the staking option within the wallet to start out
What are the Best cryptocurrency staking wallets for beginners in 2021?
A wallet at it is best must possess these four key characteristics Must be current - the crypto world is evolving in no time, and you can't avoid being overlooked Must support a good sort of coins Must have no history of technical issues like hacking, etc... Good interface should be one of its prioritiesConsidering the aforementioned characteristics, here are your best staking wallets :
Atomic wallets :The atomic wallet has proven itself over the recent years to be one among secure, trusted, and decentralized wallets out there, With supported reviews and user commendations, you cannot fail to use it. Their software is available in desktop and mobile versions Its multi-cryptocurrency Wallet – it supports over 300 cryptocurrencies to be store Here are the cryptocurrencies you can stake in Atomic wallets : ATOM, XTZ, VET, NEO, KMD, ALGO, TRX, ONT The atomic wallet allows you to delegate your crypto(dPos) with no fee to ease the staking process for users who have no staking technical skills, They charge zero fees for the services
Trust walletThis is my favourite wallet I have been using it for over a year now without experiencing any issues. Trust wallet is secured, trusted, and straightforward to use. The popular exchange platform, Binance backed this wallet for its excellent services. It’s available for mobile users online. The following coins can be staked within the wallet; Algor (ALGO), Kava (KAVA), Tezos (XTZ), Cosmos (ATOM), Tron (TRX), Callisto (CLO), and TomoChain (TOMO). Check the official trust wallet website to ascertain if the list is updated.
Ledger Hardware wallet.Ledger is a safe, secure and portable hardware wallet. It supports good sorts of coins that can generate passive income, for example: Tezos (XTZ), Kava (KAVA), and Cosmos (ATOM). You can store over 1,000 coins on this hardware! Check out Ledger’s official site to get one.
Binance Exchange walletBinance is one of the foremost popular exchanges in cryptocurrency markets They support staking sorts of Proof of stake coins which include their coin (BNB) Since Binance is an exchange platform, it permits the user to trade with the staking coin The problem with an exchange wallet is, that it’s risky to keep your crypto there for a long period because exchange wallets are more exposed to hacking or cyber-attacks. Staking coin supported by Binance includes; Binance coin (BNB), Algo (ALGO), Tezos (XTZ), Cosmos (ATOM), Solana(Sol) To get started with Binance staking click here.
ExodusSimilar to how to trust wallet support mobile version only, the Exodus staking option is available only on desktop It’s a good pick for smallholders who just want to stake comfortably and obtain a good staking rate Exodus is a secure and reliable multi-cryptocurrency wallet You can variety of altcoins such as Algorand, NEO, Tezos, VeChain, Cardano and Cosmos. To get started with Exodus click here.
I’m a pharmacist by profession, but my passion for cryptocurrency has led me down a different path. I’ve been staking crypto for years, and I’m always eager to learn more about this exciting and ever-changing field.