Staking

What is Proof-of-Stake?

Cryptocurrencies are created when networks of computers run a shared software with common rules that govern the data (coins) they exchange.

So, Proof-of-Stake is an algorithm that determines how computers running the software will come to an agreement on the history of exchanges of these coins.

In particular, proof-of-stake algorithms allow users to "lock" coins in special contracts, so they may be selected to perform roles necessary for maintaining the ledger history.

As a result, these users are rewarded new cryptocurrency generated by the protocol.

What Are Staking Rewards?

In most cryptocurrencies, new coins are automatically generated whenever the ledger is updated.

You gain the opportunity to be selected for this function by staking your crypto, allowing you to receive newly minted cryptocurrency directly from the software.

Do All Staking Coins Work the Same Way?

No, there are several forms of proof-of-stake.

Depending on how long users are required to lock their coins for staking and the specific rewards that are paid, they may vary.

Are Staking Rewards Similar to Interest Payments?

Not necessarily. Banks offer interest rates to depositors as an incentive to hold their money. Although interest rates can fluctuate over time, they are usually consistent month-to-month and paid on the same day every month.

Interest payments and stake rewards differ in two major ways.

Staking rewards are a form of compensation paid by the network for helping to grow and secure the network

There is no set order that determines who receives rewards when it comes to staking, so there is usually no guarantee