In the world of cryptocurrencies, there’s generally two ways in which a currency can support the network. This includes Proof of Work, the method by which currencies such as Bitcoin confirm transactions, and Proof of Stake, an alternative method that offers the benefit of providing not only faster transactions times but also uses less electricity. These currencies also tend to have cheaper transactions because of these factors.
While proof of work utilizes the hashing power of a computer’s GPU in order to confirm transactions and mint new assets, a POS setup does this by instead taking into account the weight of a wallet’s investment in the network. The logic behind this idea being that those who are heavily invested in the network will not endanger it in any way so as to negatively affect their investment.
Proof of Work cryptocurrencies are increasingly finding that they are in dangerous territory due to the level at which the cost to operate a mining rig are rising. The hardware and electricity required to confirm transactions has become very expensive, often discouraging smaller miners from participating. This is obviously very dangerous, as it allows a very small number of people to potentially control the entire network of a large cryptocurrency.
POS does not come with any of these requirements, and that gives it an opportunity to allow more people to participate in confirming transactions. It’s also much easier to get started with staking than it is with mining, which often requires not only a large amount of hardware but also specialized software and a good deal of knowledge of the process to get started.
Your ability to stake will instead be based on how many coins you own and how long those assets have been in your wallet, versus other investors participating in the network and their own personal wallet weight.
Investors who are interested in earning some money to aid their favorite proof of stake cryptocurrencies will be relieved to know that it’s pretty easy to get started. You don’t need any special hardware or mining software to earn money, and it’s typically very easy to learn to do.
The first step is, of course, finding a coin that you’d like to stake. Sometimes it can be hard to find lists of assets which allow staking, but there are many sites that give out masternode statistics. In many cases, these projects also allow staking without owning a node. You can use this information to get started and even get an idea of what type of return you can expect.
While you can begin staking with any number of coins, in most cases it could take you a very long time to mint anything if you don’t have a high enough wallet weight. Usually, if you look around in the project’s social media channels someone will be talking about their average return, but if not you can actually get a good idea of how many of them you will need by using the explorer. Most projects have a public wallet explorer, and if you click on enough addresses here you’ll soon be able to see the average stakes people are getting based on their balance.
After purchasing your coins from an exchange you’ll need to send them to the project’s official wallet. This is typically the only one that will allow you to earn anything. Third-party providers like Jaxx or Coinomi will not be able to provide you with any stakes.
Create a strong password and make sure it is something you remember. If you lose this then you will not be able to regain access to your funds. You may want to write this down on a sheet of paper and keep it somewhere safe.
Most wallets will require you to unlock it for staking. This is typically found in the settings menu, and after entering your password your balance will begin minting new assets.
Keep in mind that most currencies have a waiting period before you can become eligible to begin earning rewards. This varies greatly between projects, and it could be a few hours, but it could also be a week. You’ll need to look for documentation that is specific to your investment to be sure about this.
You’ll also need to keep the program running in order to earn rewards. In some cases, you may be able to still stake opening it only periodically, but running it all the time is typically the best option.
Finding good proof of stake currencies can be hard sometimes. Most aggregator sites do not denote what algorithm a coin uses. Many times you’ll need to verify manually that a coin allows for staking, but you can often start by using services that report the returns of masternodes. Many of these projects also allow for staking, and it can be a great start to finding solid projects that offer their investors good returns.
When choosing a proof of stake asset it’s important to remember that the currencies that offer the highest percentage are not always the best. In fact, many times this just means that there will be a large number of coins constantly being dumped on the market, making it hard for your stakes to maintain their value.
High supply assets also tend to require a huge number of coins in order to begin staking. Sometimes requiring millions of tokens in order for you to acquire enough weight to participate on a regular basis. The best currencies will strike a good balance between return and required investment. If you plan to use this for income rather than a speculative investment, then you may also want something that tends to keep a steady value.