Wether you're new to crypto or whether you've been in crypto for a while, staking is a term you'll often come across.
What is staking?¶
In simple terms, staking means locking up your digital assets in order to earn rewards. These rewards are earned as your assets are put to work by verifying transactions in Proof-of-Stake networks, mostly through validators. In return for participating in consensus, "stakers" or "delegators" receive rewards from the networks (via validators), which either come from token issuance or from network fees.
Why would I stake my tokens?¶
Staking can be a great way to generate passive income, especially because some networks offer high interest rates for staking.
But before you get started, it's important to fully understand how staking works.
How does it work?¶
On networks that use a Proof-of-Stake (PoS) consensus mechanism, validators are responsible for processing new transactions as well as for voting on and adding new blocks to the blockchain. Token holders can participate in the network and earn rewards by delegating their tokens to stake with one of the hundreds of validators who run, maintain and secure the blockchain. This is a more energy-efficient alternative to the original Proof-of-Work (PoW) model that is used by Bitcoin for example.
So with staking, token holders assign some or all of their tokens to one or more validatos, which helps increase those validators’ voting weight. Delegating your tokens to a validator however typically does not give the validator ownership or control over your tokens, although there are exceptions, for example when you stake via a centralised exchange or staking platform. With AUDIT.one however, staking is always fully non-custodial, so you always stay in control of all your staked tokens that you may have chosen to delegate. What you're essentialy doing is putting your assets to work, and you're free to unstake them later if you want to trade them again. Do bear in mind that the staking process often implicates an unbonding period before your tokens become liquid again.
How do I get started?¶
If you want to stake your tokens, you don't necessarily have to become a validator yourself, which requires running and maintaining complex infrastructure. You just have to look for a validator you trust and delegate your assets to that validator. Pro-rated to their total stake, validators take turns in writing new blocks to the ledger, for which they get block rewards, which they then pass to delegators, often after deduction of a validator fee or commission.
Check out our network overview page to get started on staking and earn your own passive income!