Staking (from the word *stake* — “share,” “bet”) is the process of supporting the operation of a blockchain by holding cryptocurrency in a crypto wallet or on a specialized platform (exchange, DeFi platform) in order to earn rewards in the form of cryptocurrency.
The staking process involves “placing” (or “freezing”) cryptocurrency to support the blockchain network, generate new blocks, and facilitate transactions. The cryptocurrency owner provides their tokens to a platform or exchange for a specific period (ranging from 30 to 180 days). In return, the owner receives a reward in the form of tokens, typically paid in the same cryptocurrency.
In other words, staking is a type of deposit expressed in cryptocurrency.
The process of cryptocurrency mining and ensuring the correct operation of the blockchain is called **Proof-of-Stake (PoS)**. Therefore, staking is only possible for cryptocurrencies that operate on the PoS protocol, such as Kava, Cosmos, Ethereum, and Near. For Bitcoin, this format is not possible because it operates on the **Proof-of-Work (PoW)** protocol. This means that mining in Bitcoin is done through the work of miners, not through staking.
If Bitcoin staking becomes available, it will typically not exceed 1%, and such an option is provided individually by the platform or exchange.
There are several types of staking:
1. Fixed Staking
In this variation, the owner provides their tokens for staking or “freezing” for a fixed period. This can range from 30 to 180 days, depending on the exchange. The longer the staking period, the higher the fixed reward percentage.
Can tokens be withdrawn early? Yes, but if the owner decides to withdraw tokens before the end of the period, they will receive them within 24-48 hours and will not receive the reward for the entire period. (For example, if tokens are locked for 60 days but withdrawn on the 46th day, the 1 token accumulated for the remaining 14 days will not be paid out.)
2. Flexible Staking
In this type of staking, owners can freely manage their assets. This type of staking does not require freezing assets: the owner can withdraw tokens at any time without losing the accumulated rewards. However, this type of staking offers a very low reward percentage. Flexible staking can also periodically change the reward percentage. For example, today USDT on staking might give 7% per year, but tomorrow the percentage could be higher or lower. Rewards are calculated daily.
3. Liquid Staking
In this form of staking, the locked tokens can be used as collateral to receive a loan or other financial instruments within the decentralized finance (DeFi) sector.
In the next part, we will look at a practical example of how and where to stake coins, and we will analyze whether it is profitable and worth staking your tokens.
