What is Staking?
Staking is a process by which users lock or 'stake' cryptocurrencies on a blockchain network to support its operation and security. This mechanism is primarily used in blockchains that operate under the Proof of Stake (PoS) consensus model, an alternative to the Proof of Work model that uses less energy. By staking, users deposit a certain amount of cryptocurrencies in a compatible wallet, which gives them the right to participate in transaction validation and, in return, receive periodic rewards, usually in the form of more cryptocurrencies.
Staking not only generates passive income but also strengthens the network by incentivizing active participation. The more tokens staked, the greater the chances of being selected as a validator and receiving rewards. Although it is less risky than other forms of cryptocurrency investment, staking is not without risks, such as market volatility or potential penalties for dishonest behavior. Nonetheless, it is an attractive option for those looking to earn returns while holding their digital assets.
