While cryptocurrencies like bitcoin depend on mining, others use a different method, called staking. Generally speaking, staking consists of locking some cryptoassets and receiving “rewards” according to factors such as the amount left on the platform.
Blockchains that work with staking work with the so-called Proof-of-Stake (PoS) — in contrast to bitcoin’s Proof-of-Work (PoW). In PoW, mining requires significant energy consumption, and its hardware is at a considerable cost. In this type of blockchain, mining is the process that verifies and validates the new currency blocks.
Staking waives investment in equipment
However, in PoS the locked assets are responsible for generating the blocks and verifying and validating them. Validation is done by a consensus algorithm that uses cryptocurrencies locked in staking. The implementation of this may vary from one system to another. And while PoW demands to invest in hardware for mining, PoS demands that cryptocurrencies be reserved for the process.
The process also allows creating staking pools. In these cases, there is a union of currencies holders who pool their resources to raise the chance of the blocks being validated—and consequently, they receive the reward for the process. This value is then divided among the participants according to the amount with which they collaborated.
Cryptocurrency staking exceeds US$ 30 billion
The figures give an idea of the size of the staking market. On the day we wrote this report, there were more than US$ 30 billion locked in staking around the world. On the same day, the global crypto market cap was nearly US$ 891.5 billion.
Among the platforms with staking services, there are exchanges, wallets, decentralized options, or not. On this list are, for example, Allnodes, Blox Staking, Aave, Atomic Wallet, and Cake DeFi.