What Is Staking & How It Works?
Cryptocurrency staking is when a user holds and locks up a certain amount of cryptocurrency tokens to support a proof-of-stake network’s operations. Those staked tokens validate transactions and create new blocks in the blockchain. Stakers gain staking reward, or “yield.”
Staking mechanics
Crypto staking refers to a user’s participation in validating nodes and potentially staking pools. The staking flow goes like this:
- Getting tokens: First, stakers get tokens native to the proof-of-stake (PoS) blockchain. A staker can buy ETH from an exchange using fiat currency to start staking on the Ethereum blockchain.
- Locking up tokens: Stakers lock up or “stake” their tokens by sending them into a wallet or smart contract. These tokens are temporarily held as collateral and cannot be spent or sent while they are staked.
- Taking part in consensus: Stakers engage in the consensus process by running their validator nodes or providing their tokens to other validators.
- Gaining rewards: In return, stakers receive rewards or a “yield” of additional cryptocurrency tokens.
Where does yield come from?
The yield for staker primarily comes from:
- Block rewards: Validators get rewards for staking their tokens as collateral and participating in the consensus process. Staking reward yields are distributed proportionally to the amount of tokens they have staked.
- Transaction fees: Validators gain transaction fees as part of their block rewards.
- MEV rewards: Validators involved in the practice of MEV (the value of adding and reordering transactions in a block to improve the quality of the proposed blocks) can earn extra rewards.
By ordering transactions in a certain order that is profitable to a third party, they often get their portion of the reward.
Why Staking?
Defi staking (anchor #1) helps users invest their crypto smartly and gain passive income, but what other perks do you get?
Supporting Network
By staking tokens, a user takes part in the governance and security of a blockchain network. They can help maintain network integrity, process transactions, and secure the blockchain. This contribution can be rewarding both financially and ideologically.
Higher Returns
Staking often has quite high returns. Annual staking rewards range from a few percent to double-digit percentages, depending on the network, and market conditions.
Multiplied Rewards
By staking your tokens, you accrue rewards and your overall stake grows. the point is that you earn rewards not only on your initial stake but also on the additional tokens you receive as rewards. Over time, this can substantially boost your overall holdings.
Control and Liquidity
Staking allows many to manage control over one’s assets. When your tokens are staked, they are not locked away entirely, and you can usually un-stake them with a waiting period. So, you can use your assets, in case of emergencies or when you decide to to exit the staking program.
Staking Opportunities on Notum
Notum App aggregates hundreds of various defi investment (anchor #2) strategies for users to grow their crypto capital. This was made with the main idea in mind — help people to use their crypto, not just hodl or spend, but multiply their funds. Staking is one of the most popular ways how to do that, but that’s not the only option, as DeFi is ever ever-evolving field.
Notum wants to stay in the avant-garde of DeFi space that’s why it provides its users with various staking options. Let us quickly introduce you to some of them.
Swap & Restake
EigenLayer launched a restaking narrative to the crypto space and it lets users take ETH they’ve staked with Ethereum and then restake it with “Actively Validated Services,” or AVSs.
Such platforms as Puffer, Ether.Fi, Renzo, and others presented on the Notum App take your assets and deposit them into liquid staking platforms, and issue “liquid restaking tokens” (LRTs). These tokens accrue interest and can be traded in DeFi to earn even larger yields.
Using Notum’s Swap feature, you can get any restaking tokens you’d like. For example, swap your ETH to ezETH. There are 17+ chains (Optimism, Ethereum, Tron, Arbitrum, etc.) to choose from, as well.
Staking Pools
A staking pool gathers several stakeholders to combine their computational resources to increase their chances of getting rewards. They merge their staking power in the validating new blocks process, so they get a higher probability of earning the block rewards.
Notum’s users can deposit the tokens used for trading on Aerodrome and receive $AERO emissions as rewards. They can also use Curve, Balancer, Across, and other popular platforms.
Liquid Staking
Liquid staking introduces a mechanism where users can stake their crypto without compromising liquidity. Users earn staking rewards being able to use their staked assets in other dApps.
Users can get liquid staking tokens (LSTs) in exchange for their staked assets. So, if they stake ETH on a platform like Lido, they will receive stETH tokens in return.
Notum has a whole bunch of liquid staking protocols such as Mantle, Frax, Stakewise, etc. to delve into.
Final Thoughts
Cryptocurrency staking yields are an interesting option for long-term holders. The staking yield depends on factors such as the network’s consensus mechanism, block reward structure, transaction fees, and the number of tokens staked by a staker.
That’s important to remember that yields are not guaranteed and may vary over time based on different factors affecting the network’s performance and token economics. There are also risks, such as the illiquidity of assets during the staking period and the possibility of slashing in the event of network violations.
| Disclaimer: The text above is an advertorial article that is not part of Coincu.com editorial content. |
Author
Analysis
Boost Your Returns with DeFi Staking on Notum
What Is Staking & How It Works?
Cryptocurrency staking is when a user holds and locks up a certain amount of cryptocurrency tokens to support a proof-of-stake network’s operations. Those staked tokens validate transactions and create new blocks in the blockchain. Stakers gain staking reward, or “yield.”
Staking mechanics
Crypto staking refers to a user’s participation in validating nodes and potentially staking pools. The staking flow goes like this:
- Getting tokens: First, stakers get tokens native to the proof-of-stake (PoS) blockchain. A staker can buy ETH from an exchange using fiat currency to start staking on the Ethereum blockchain.
- Locking up tokens: Stakers lock up or “stake” their tokens by sending them into a wallet or smart contract. These tokens are temporarily held as collateral and cannot be spent or sent while they are staked.
- Taking part in consensus: Stakers engage in the consensus process by running their validator nodes or providing their tokens to other validators.
- Gaining rewards: In return, stakers receive rewards or a “yield” of additional cryptocurrency tokens.
Where does yield come from?
The yield for staker primarily comes from:
- Block rewards: Validators get rewards for staking their tokens as collateral and participating in the consensus process. Staking reward yields are distributed proportionally to the amount of tokens they have staked.
- Transaction fees: Validators gain transaction fees as part of their block rewards.
- MEV rewards: Validators involved in the practice of MEV (the value of adding and reordering transactions in a block to improve the quality of the proposed blocks) can earn extra rewards.
By ordering transactions in a certain order that is profitable to a third party, they often get their portion of the reward.
Why Staking?
Defi staking (anchor #1) helps users invest their crypto smartly and gain passive income, but what other perks do you get?
Supporting Network
By staking tokens, a user takes part in the governance and security of a blockchain network. They can help maintain network integrity, process transactions, and secure the blockchain. This contribution can be rewarding both financially and ideologically.
Higher Returns
Staking often has quite high returns. Annual staking rewards range from a few percent to double-digit percentages, depending on the network, and market conditions.
Multiplied Rewards
By staking your tokens, you accrue rewards and your overall stake grows. the point is that you earn rewards not only on your initial stake but also on the additional tokens you receive as rewards. Over time, this can substantially boost your overall holdings.
Control and Liquidity
Staking allows many to manage control over one’s assets. When your tokens are staked, they are not locked away entirely, and you can usually un-stake them with a waiting period. So, you can use your assets, in case of emergencies or when you decide to to exit the staking program.
Staking Opportunities on Notum
Notum App aggregates hundreds of various defi investment (anchor #2) strategies for users to grow their crypto capital. This was made with the main idea in mind — help people to use their crypto, not just hodl or spend, but multiply their funds. Staking is one of the most popular ways how to do that, but that’s not the only option, as DeFi is ever ever-evolving field.
Notum wants to stay in the avant-garde of DeFi space that’s why it provides its users with various staking options. Let us quickly introduce you to some of them.
Swap & Restake
EigenLayer launched a restaking narrative to the crypto space and it lets users take ETH they’ve staked with Ethereum and then restake it with “Actively Validated Services,” or AVSs.
Such platforms as Puffer, Ether.Fi, Renzo, and others presented on the Notum App take your assets and deposit them into liquid staking platforms, and issue “liquid restaking tokens” (LRTs). These tokens accrue interest and can be traded in DeFi to earn even larger yields.
Using Notum’s Swap feature, you can get any restaking tokens you’d like. For example, swap your ETH to ezETH. There are 17+ chains (Optimism, Ethereum, Tron, Arbitrum, etc.) to choose from, as well.
Staking Pools
A staking pool gathers several stakeholders to combine their computational resources to increase their chances of getting rewards. They merge their staking power in the validating new blocks process, so they get a higher probability of earning the block rewards.
Notum’s users can deposit the tokens used for trading on Aerodrome and receive $AERO emissions as rewards. They can also use Curve, Balancer, Across, and other popular platforms.
Liquid Staking
Liquid staking introduces a mechanism where users can stake their crypto without compromising liquidity. Users earn staking rewards being able to use their staked assets in other dApps.
Users can get liquid staking tokens (LSTs) in exchange for their staked assets. So, if they stake ETH on a platform like Lido, they will receive stETH tokens in return.
Notum has a whole bunch of liquid staking protocols such as Mantle, Frax, Stakewise, etc. to delve into.
Final Thoughts
Cryptocurrency staking yields are an interesting option for long-term holders. The staking yield depends on factors such as the network’s consensus mechanism, block reward structure, transaction fees, and the number of tokens staked by a staker.
That’s important to remember that yields are not guaranteed and may vary over time based on different factors affecting the network’s performance and token economics. There are also risks, such as the illiquidity of assets during the staking period and the possibility of slashing in the event of network violations.
| Disclaimer: The text above is an advertorial article that is not part of Coincu.com editorial content. |
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