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Glossary

Staking Pool

November 21, 2023 - Around 3 mins mins to read

Understanding Staking Pools

A staking pool is a collective effort by multiple stakeholders in a Proof-of-Stake (PoS) consensus network to consolidate their staking power. In PoS networks, the decision-making and computational power are determined by the amount of assets held. Staking power is directly proportional to the percentage of total assets staked.

Since individual network participants often lack significant resources to stake on their own, they opt to contribute their power to a staking pool. These pools are typically managed by administrators or pool operators who oversee the maintenance of nodes/validators.

When participants join a staking pool, they lock their assets into the pool and cannot access them until they redeem them or the staking term expires. This process enhances network security and facilitates the verification and validation of new blocks. Stakers are rewarded with a portion of the earnings from block rewards.

The more assets a participant stakes, the higher their chances of receiving rewards. Staking pools also encourage longer staking periods, as participants who keep their assets in the pool for an extended period have a greater likelihood of earning rewards or receiving a larger share of the eventual rewards. These rewards are typically estimated and expressed as Annual Percentage Yield (APY).

DeFi Staking Pools

In decentralized finance (DeFi) protocols, staking pools, also known as savings, operate similarly to PoS staking pools. However, they are project-specific and utilize native tokens specific to their respective protocols. For example, PancakeSwap, a Binance Smart Chain (BSC) protocol, offers CAKE staking pools, which use its native token. Additionally, PancakeSwap hosts multiple staking pools for projects available on BSC.

DeFi staking pools also serve the purpose of locking liquidity into the protocols to ensure there are sufficient assets to meet the needs of the DeFi ecosystem.

Rewards in DeFi pools include a share of the revenue generated from the protocols, such as fees and commissions. This is why APY percentages in DeFi staking pools can be higher compared to regular PoS staking pools.

Investors in both types of staking pools face certain risks, with the most significant being adverse price movements in the staked assets that could offset the earned APY. For instance, earning a 40% APY but experiencing a 50% price drop over a year would result in a net loss.

Author:

PlasmaFinance is a DeFi dashboard that aggregates the most popular decentralized finance protocols from multiple blockchains. The PlasmaFinance platform provides robust analytics, user-friendly tools, and access to the most profitable DeFi yields across any protocol.

PlasmaFinance incorporates a suite of DeFi products, including its own PlasmaSwap DEX, advanced trading and gas optimization tools, fiat on/off-ramp for DeFi, as well as an IDO launchpad, SpacePort.

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Coincu

Glossary

Staking Pool

Understanding Staking Pools

A staking pool is a collective effort by multiple stakeholders in a Proof-of-Stake (PoS) consensus network to consolidate their staking power. In PoS networks, the decision-making and computational power are determined by the amount of assets held. Staking power is directly proportional to the percentage of total assets staked.

Since individual network participants often lack significant resources to stake on their own, they opt to contribute their power to a staking pool. These pools are typically managed by administrators or pool operators who oversee the maintenance of nodes/validators.

When participants join a staking pool, they lock their assets into the pool and cannot access them until they redeem them or the staking term expires. This process enhances network security and facilitates the verification and validation of new blocks. Stakers are rewarded with a portion of the earnings from block rewards.

The more assets a participant stakes, the higher their chances of receiving rewards. Staking pools also encourage longer staking periods, as participants who keep their assets in the pool for an extended period have a greater likelihood of earning rewards or receiving a larger share of the eventual rewards. These rewards are typically estimated and expressed as Annual Percentage Yield (APY).

DeFi Staking Pools

In decentralized finance (DeFi) protocols, staking pools, also known as savings, operate similarly to PoS staking pools. However, they are project-specific and utilize native tokens specific to their respective protocols. For example, PancakeSwap, a Binance Smart Chain (BSC) protocol, offers CAKE staking pools, which use its native token. Additionally, PancakeSwap hosts multiple staking pools for projects available on BSC.

DeFi staking pools also serve the purpose of locking liquidity into the protocols to ensure there are sufficient assets to meet the needs of the DeFi ecosystem.

Rewards in DeFi pools include a share of the revenue generated from the protocols, such as fees and commissions. This is why APY percentages in DeFi staking pools can be higher compared to regular PoS staking pools.

Investors in both types of staking pools face certain risks, with the most significant being adverse price movements in the staked assets that could offset the earned APY. For instance, earning a 40% APY but experiencing a 50% price drop over a year would result in a net loss.

Author:

PlasmaFinance is a DeFi dashboard that aggregates the most popular decentralized finance protocols from multiple blockchains. The PlasmaFinance platform provides robust analytics, user-friendly tools, and access to the most profitable DeFi yields across any protocol.

PlasmaFinance incorporates a suite of DeFi products, including its own PlasmaSwap DEX, advanced trading and gas optimization tools, fiat on/off-ramp for DeFi, as well as an IDO launchpad, SpacePort.

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