{"id":27717,"date":"2021-10-29T05:32:52","date_gmt":"2021-10-29T09:32:52","guid":{"rendered":"https:\/\/101blockchains.com\/?p=27717"},"modified":"2025-07-16T07:20:49","modified_gmt":"2025-07-16T11:20:49","slug":"staking-crypto","status":"publish","type":"post","link":"https:\/\/101blockchains.com\/staking-crypto\/","title":{"rendered":"What is Staking Crypto?"},"content":{"rendered":"

The domain of crypto itself is quite complicated and difficult to understand for many experienced tech professionals. Among the many confusing elements in the crypto space, staking is also a complicated topic when you dive deeper into it. In the most basic sense, <\/span>staking crypto offers a crucial approach for earning rewards through holding specific cryptocurrencies<\/a>. However, staking is much more than just the simple definition outlined here.\u00a0<\/span><\/p>\n

With the recent upsurge in demand for decentralized finance or DeFi<\/a>, people are interested in discovering the significance of cryptocurrency staking in driving the growth of a completely new assortment of crypto assets. The following discussion offers you a detailed introductory guide on <\/span>staking cryptocurrency and how it works. In addition, the discussion would also reflect on the advantages and risks associated with cryptocurrency staking alongside an outline of the best cryptocurrencies for staking.\u00a0<\/span><\/p>\n

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The Popularity of Crypto Staking<\/b><\/h3>\n

Before diving into an understanding of cryptocurrency staking, it is reasonable to wonder about the question \u2018<\/span>is staking crypto worth it\u2019. As a matter of fact, crypto staking has witnessed a prolific rise in recent times with occasional surges in the number of users staking cryptocurrency for earning yield farming rewards or fixed interest. Furthermore, the number of miners associated with PoW or proof-of-work<\/a> blockchain networks has started to reduce drastically.\u00a0<\/span><\/p>\n

As a matter of fact, major exchanges such as Coinbase and Binance providing staking services to users could achieve APYs as high as 30%. Therefore, it is quite clear that such exchanges hold massive quantities of staked cryptocurrencies. As of September 2021, the total worth of assets staked on Binance Smart Chain amounts to more than $6.1 billion. Furthermore, the total value of assets staked in DeFi protocols<\/a> or the TVL (total value locked)<\/a> amounts to more than $86.59 billion. Therefore, you can clearly notice a formidable growth in the demand for <\/span>staking cryptocurrency, which drives many discussions around staking.\u00a0 \u00a0 \u00a0\u00a0<\/span><\/p>\n

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What is Crypto Staking?<\/b><\/h2>\n

Now that you know about the necessity of cryptocurrency staking, you would obviously wonder about \u2018<\/span>what does staking crypto mean\u2019. The best way to find the answer to this question reflects on the definition of cryptocurrency staking. It is a process in which users would lock their funds in a cryptocurrency wallet<\/a> for participating in the maintenance of operations on a Proof-of-Stake<\/a> or PoS-based blockchain network. You can find some similarities between staking and crypto mining<\/a> as both of them help in achieving consensus<\/a>. At the same time, both staking and mining involve rewards for participating users. Staking crypto is almost the same as depositing money in a bank for earning \u2018interest\u2019 or the rewards for deposits.<\/p>\n

From a technical perspective, users would delegate a specific number of tokens to the governance model of a blockchain<\/a>, thereby taking the tokens out of circulation for a specific period of time. The protocol of the specific blockchain network locks up the investor\u2019s holdings, just like the money deposited in a bank. The assets of the investor locked in the protocol offer many prolific benefits to the network. First of all, staking cryptocurrency could increase the value of tokens due to the limited supply. Furthermore, staking also enable the use of tokens for blockchain governance<\/a> with networks using the Proof-of-Stake consensus mechanism.\u00a0<\/span><\/p>\n

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Difference between Staking and Mining\u00a0<\/b><\/h3>\n

With a clear impression of \u2018<\/span>what does staking crypto mean\u2019, you could most likely wonder about the uniqueness of staking. How is it different from the process of mining used for validating and verifying transactions before adding them to the blockchain? The primary difference between staking and mining crypto largely focuses on the underlying blockchain consensus mechanism<\/a> used for validating transactions. Mining is common in the case of Proof-of-Work or PoW consensus mechanism, noted prominently in Bitcoin<\/a>. On the other hand, staking is ideal for blockchain networks with Proof-of-Stake or PoS consensus mechanisms, like in the case of Ethereum 2.0<\/a>. Let us take a look at the following differences between mining and staking crypto prior to an understanding of how staking works.\u00a0<\/span><\/p>\n