Earning opportunities in the cryptocurrency and blockchain space (or Web3) extend a lot further than simply offering one-time investments in a range of cryptocurrencies—most of them dubious at best.
Opportunities to generate profits and earn passive income in the Web3 space are rife. Of all the ways to generate profits in the blockchain arena, staking is perhaps the easiest to grasp and execute.
Staking sees holders put their coins to work by locking them up for a period of time on their native network (ETH on Ethereum, for instance) in order to earn passive returns. In traditional banking terms, staking could be thought of as a high-yield savings account.
Let's take a look at how and why staking works, and examine one of the most accessible ways for cryptocurrency holders to generate passive returns on their existing investments.
What Is Staking?
Typically a feature of Proof-of-Stake (PoS) blockchains, staking contributes to network security and efficiency—the more coins are locked up on the network, the more safely and efficiently they run.
Whereas Proof-of-Work (PoW) blockchains like Bitcoin derive security and robustness from their hashrate (the weight of all the computational power from Bitcoin's miners), PoS blockchains derive security from the number of coins which are staked, acting as a buffer against potential attackers, who would have to own a majority of the coins in order to execute fraudulent transactions on the blockchain.
The network rewards those who contribute to its security by issuing more coins according to the 'weight' of their stake, i.e., the number of coins and length of time they were staked.
It should be clear that staking is more than just another passive income opportunity, but also a way for investors to support the operations of their chosen projects and invest in their future success.
How Staking Works
The actual staking process is typically no more complicated than sending an email and can be done in just a few clicks.
It usually involves connecting your cryptocurrency wallet to the network you're staking on, selecting a node operator to stake your coins with, and that's about it.
Node operators perform similar functions to miners on PoW blockchains like Bitcoin, processing and confirming transactions in blocks while being rewarded with a portion of the block rewards for their success and efficiency.
Different node operators may carry different reputations, and will also offer varying APY percentages, so a would-be staker should examine available node operators and find one that offers the best deal.
Examples of Staking in Web3
Staking has grown in popularity to such an extent in recent times that thousands, if not millions, of blockchains, platforms, exchanges, and third-party apps now offer some form of staking service.
From blockchains like Ethereum, Polygon and Binance, to centralized exchanges like Coinbase, to internet payment protocols like Paypal—staking is now regarded as a viable product offering among mainstream players.
Additionally, there's an entire continent within the world of Web3 known as decentralized finance (or DeFi), where variants on the staking process (known as yield farming) continue to flourish on apps like Uniswap, PancakeSwap, and others.
Other examples can be seen in multi-faceted blockchain projects such as bitsCrunch, a blockchain and NFT analytics platform that takes aim at the blockchain forensics and data realm. Through its use of artificial intelligence and machine learning, bitsCrunch has successfully cut the cost of performing blockchain forensics from tens of thousands per year, to just a few dollars a month.
In February the bitsCrunch mainnet was launched and staking was made available for the first time, meaning coin holders could delegate their tokens to operators to contribute to network security and decentralization.
A prime example of some of the extravagant rewards on offer for stakers in the Web3 space, bitsCrunch offered APY rates of up to 100% for stakers who got involved during the first month, dropping to 50% and 25% for the second and third month respectively.
bitsCrunch's native $BCUT token exists on both Polygon and Ethereum, giving coin holders from both blockchains an opportunity to earn passive income.
Conclusion
Staking has emerged as one of the most common and simplest ways to capitalize on one's crypto holdings and leverage them to generate ongoing passive income regardless of broader market conditions.
With both mainstream exchanges and decentralized applications alike offering staking, there are numerous options to choose from, and the individual investor must consider their own circumstances and preferences, as well as the varying APY returns offered by different node operators.
If they do so, they can get on board one of the most potent passive income opportunities available in the finance world today.
