Staking is a process in which cryptocurrency holders volunteer to take part in validating transactions on the blockchain by locking up their digital assets for a set period of time. Staking is only possible on “proof-of-stake” blockchains, such as Ethereum, Tezos, Cosmos, Solana, Cardano, and others. Staking helps ensure that only legitimate data and transactions are added to a blockchain, and participants who stake their assets act as a guarantee that they are acting in good faith and as a disincentive to violating the protocol rules. In exchange for staking their digital assets, participants receive rewards calculated in percentage yields, which are typically much higher than any interest rate offered by banks.

To begin staking, you first have to own digital assets that can be staked. If you’ve already bought some, you’ll need to transfer the coins from the exchange or app you bought them on to an account that allows staking. Most of the bigger crypto exchanges, such as Coinbase, Binance, and Kraken, offer staking opportunities in-house on their platform, which is a convenient way to put your coins to work. Staking is a good option for investors interested in generating yields on their long-term investments and aren’t bothered about short-term fluctuations in price.

The primary benefit of staking is that you earn more crypto, and interest rates can be very generous. In some cases, you can earn more than 10% or 20% per year, making it a potentially profitable way to invest your money. Additionally, staking is a way of supporting the blockchain of a particular cryptocurrency, which can help contribute to its security and efficiency. However, its important to remember the downsides of owning and trading crypto, ones that can potentially outweigh what in many cases is a nice perk of holding a coin and earning staking rewards.