Crypto Staking for Dummies: Meaning and Benefits
Staking is one of the surest ways to earn on the blockchain. It involves depositing your tokens in a staking pool, and in return, you earn what is known as an Annual Percentage Yield. It is a very good means of earning passive income on your tokens.
TL;DR
- All token holders on a blockchain can stake their tokens to earn passive income
- Staking takes place over a chosen duration when the percentage yield is calculated over the set period
- Staking yields are generally more rewarding than the percentage yield in the traditional financial system
A Guaranteed Means of Passive Income
Crypto trading is one of the most lucrative aspects of cryptocurrency, however, it can be regarded as a sphere for experts as funds can be easily lost with a single bad market move. A much safer alternative is cryptocurrency staking.
Staking guarantees a reliable source of passive income. Once you stake your tokens in a staking pool, you are guaranteed a set percentage at the end of your chosen duration. Stakers are usually entitled to an Annual Percentage Yield which is the calculated returns that accrue over the staking period.
Staking ensures that you take no further risk other than the volatility that the crypto market is already known for. It is a guaranteed source of passive income for token holders who do not wish to risk their assets.
Staking has a Defined Timestamp
Just like putting your funds in a high-yield fixed deposit account in the traditional financial system, you will have to set a staking duration for your asset. This means that you will decide how long you wish for the blockchain network to use your tokens to service the system.
Staked tokens are generally used to provide DeFi loans to those who wish to obtain them on the network. Returns from these loans are part of what is paid at APY for stakers. Depending on the timeframe you choose, your APY will vary accordingly and the payment will be released along with your tokens at the end of the staking period.
Better than Traditional Finance
One of the positives about staking your digital asset is that the rewards that accrue are usually more than what is obtainable in the traditional financial system. The benefits are two folds;
First, the percentage reward (APY) from DeFi staking is usually higher than what banks and other centralized financial institutions offer. By default, you are primed to gain more by staking cryptocurrency
The second benefit is that, based on trajectory, you stand the chance of growing the value of your tokens at withdrawal. Volatility is a given in cryptocurrency, however, you stand to benefit if the market goes on a bullish run at the time of your withdrawal.
The traditional financial system is inflation-ridden already and the tendency to have your funds appreciate is non-existent. Even if inflation subsides, your funds do not appreciate and you are only entitled to the interest payable on the exact fund.
So which is your choice, crypto staking or TradFi?
Conclusion
Cryptocurrency staking is a good way to passively grow your income. At the same time, its benefits far outweigh those offered by the traditional financial service industry.
To learn more about IvoryPay, feel free to use the links below:
