Staking has been a significant aspect of blockchain technology and cryptocurrency since it was first introduced in 2012, and its popularity among users has risen drastically, in no small part due to the higher-than-average interest rates promised for staking coins.
However, many know about the process of staking, how staking rewards come about, or even the purpose of staking. Well, let us start by examining the Proof-of-Stake (PoS) mechanism.
First introduced by Sunny King and Scott Nadal as an alternative to the predominant Proof-of-Work (PoW) mechanism at the time, it aimed to solve the issues of high energy consumption of blockchain mining. Most often, the process is facilitated by users holding coins in a wallet to validate transactions on a blockchain, and, similar to mining rewards, receive staking rewards for “locking” their cryptocurrencies.
Moreover, the Proof-of-Stake concept successfully addresses the threat of 51% attacks, which the Proof-of-Work mechanism is vulnerable to, as users who control 51% of the total amount of staking coins is dis-incentivised to conduct the attack as it would lower the value of that coin.
While the idea of staking does resolve the inherent issue with utilizing the Proof-of-Work mechanism, it is not without its disadvantages. In choosing to stake their cryptocurrencies, users cannot withdraw their coins to another address for that period, which may be disadvantageous given the high volatility of the cryptocurrency markets.
Staking is typically done on platforms utilizing the Proof-of-Stake mechanism for consensus, such as cryptocurrency exchange platforms like BiKi, and has also emerged in Decentralized Finance (DeFi) networks. These platforms combine the staking coins of its users, referred to as Staking Pools, resulting in a larger pool of coins than an average user can amass. Generally, the larger the Staking Pool, the higher the chances that the Staking Pool will be chosen to verify a block, leading to more rewards for the users.
For users not intending to actively trade their cryptocurrency, staking provides an avenue to gain profits without much effort. As the number of HODLers increase, we can expect to see more users choosing to stake their coins, mainly through the platform of their choice. Staking is poised remain an integral part of blockchain technology for the near future, as more are realising the benefits of staking coins, leading to increased adoption.
The BiKi Mining Pool is a staking pool popular amongst BiKi users, providing most reliable service and some of the highest expected annualised rates for staking coins, coupled with state-of-the-art security measures that ensure user’s funds are always safe.
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