What is Staking in Crypto? Learn how the process of Proof of Stake works

The crypto markets and especially Bitcoin took a big tumble downwards in price when Elon Musk announced that Tesla would stop accepting payments in Bitcoin due to the increasing environmental impact and high energy consumption needed to sustain Bitcoin mining. Many crypto developers have been working on creating an effective alternative to Bitcoin's Proof of Work (PoW) solution to mine coins. As a result, the concept of Proof of Stake (PoS - also called staking) was born. Staking is being adopted by many emerging cryptocurrencies and has already been implemented by many. Read on to know what is staking in crypto. 

What is staking in Crypto? 

In order to understand staking, readers first need to understand how Proof of Work (PoW) works. Proof of Work is the protocol used in Bitcoin to mine new coins. A set of crypto miners compete to mine the next block of Bitcoin by solving extremely complicated mathematical equations or problems. The miner that solves the equation reserves the right to mine the next block of Bitcoin, creating a new Bitcoin in the process. However, this process is very energy-intensive and the energy consumption to mine Bitcoin exceeds the energy usage of some smaller countries. As an alternative, Proof of Stake (PoS) or staking was created. 

How does Staking work? Staking meaning explained 

Staking works on a completely different concept, where miners don't need to solve increasingly complex mathematical equations to mine coins. This effectively removes the majority of the energy required that is used to solve these equations, making Proof of Stake inherently environmentally friendly. In the Proof of Stake method of mining crypto, the right to mine a cryptocurrency is given to the miner with the most number of the same coins. In the process of Staking, people who own a cryptocurrency that uses Staking, lock in their coin in their exchange or their online wallets, which is then used by that cryptocurrency network to mine new coins. In simple terms, staking is the act of locking cryptocurrencies to receive rewards in the form of new coins. 

Staking is highly energy-efficient when compared to Bitcoin's PoW method of mining. It solves the environmental issues that Bitcoin mining creates and gives passive income to coin holders. The crypto market is slowly turning towards adopting PoS as a more widely used form of mining as more and more existing and upcoming cryptocurrencies are using PoS as the method of mining. Even Etherum has planned to switch from PoW to PoS, in an update called the Ethereum 2.0 update. 

DISCLAIMER: The information provided on this website is for educational and entertainment purposes. The information provided on this website does not constitute investment advice, financial advice or trading advice. Republic World does not recommend purchasing any cryptocurrency. Crypto markets are highly volatile and crypto investments are risky. Readers should do their own research on cryptocurrencies and consult their financial adviser before making any crypto investments. 

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