What is Defi staking about?
Nowadays, you can hear about this brand-new financial term in every crypto-related environment, but “what is DeFi and DeFi staking really about?” Although it is popular these days, it remains a vague concept. Of course, there is a reason that all of the attention is drawn to this very subject since it is overgrowing and changing many basic rules radically, such as types of investments, loans, and paybacks.
So, before going through staking crypto, it is better first to clarify what is Defi; then how staking works Defi-wise. It was back to the birth of the Bitcoin blockchain. As we all know, BTC has come to life to decentralize transactions, so this issue is based on blockchain. The first goal of its foundation is to omit intermediaries, which leads to a desirable result: you do not need to go through the KYC procedure through this new but basic idea of crypto-currency. By reading this article, we will give you a bright and clear image of its nature and function in your mind.
Defi Staking and Its Features
Now that the meaning of Defi is clarified, it is time to see how staking crypto works. When it comes to earning money from the crypto-currency world, three main ways cross everyone’s mind: Mining, holding, and staking. Although staking crypto is about generating money, it is different from mining, while it is similar to holding on some levels. To understand the meaning of this term deeply, it can be a good idea to compare it with the holding way. To hold means to buy a coin and wait for the coin to increase its value. Staking crypto is to commit the crypto assets to support a blockchain network and confirm transactions. It can take place with those crypto-currencies which use the proof-of-stake model to process payments. In this way, one can take the profit out of investing their money in specific cryptos and earn staking rewards.
It is a passive way of generating income. In staking crypto, you should buy those crypto-currencies which use the proof-of-stake model and then transfer and lock them into your blockchain wallet. After investing specific tokens, you should join a liquidity pool, a tool in which stakeholders combine their tokens. They get rewards with tokens of the same block. The next step is the best one; earning the mentioned passive income. When stakeholders invest their money in a liquidity pool, they get rewards with tokens from the pool in their wallets. So, isn’t it a good idea to consider staking crypto easy money right in your pocket?
How does staking crypto work?
As aforementioned, one can be rewarded tokens as they lock their cryptos into a blockchain wallet. Staking crypto can be the decentralized version of the traditional deposit and earning profit system. The same as the traditional system, Defi staking provides opportunities like borrowing, lending, and earning interest. That’s why it is a revolution in financial systems.
To see how Defi staking functions, stakeholders need to acknowledge some conditions and tools, like the smart contract, platform, and liquidity pool. As mentioned before, transactions take place through a smart contract in which conditions of contract such as the period of locking crypto in blockchain wallet and the leverage of profit-taking are determined.
Also, DeFi staking is available on platforms that provide a liquidity pool in which tokens are combined for stakeholders. The greater the pool, the lower risk of volatility.
Benefits of Staking crypto
Since intermediaries are eliminated through decentralization, and smart contracts are provided in platforms, from this point of view, DeFi staking has benefits for stakeholders like:
• Minimal need for attention compared to holding
• Low risk of crypto value decrease
• Safety and security of staked crypto via smart contract
• Lower risk rather than trading since no specialized skill is needed
• Almost no charging fees for transactions
Risks of Staking crypto
Like all other financial systems staking crypto might come across with some risks. However, compared to other crypto-based activities, the risks are so low. They can be considered the system with the lowest risk. The risks are:
• Earning relatively lower profit than expected in trading
• The value volatility of cryptos
• Inflation rate of crypto-currencies
Is Staking crypto the same as Liquidity Pool?
To answer this question, it is better first to review both terms. A liquidity pool is a store where tokens are reserved for decentralized exchanges. However, staking crypto is a way of investing in the crypto world. To be more clarified, check out this example. Imagine you want to try out DeFi. One way is to stake, which now we all know about it. Staking tokens are available through liquidity pools. So, both terms are related but not the same.
CrowdSwap DeFi Staking platform
As noted above, to stake you need a DeFi staking platform. Every crypto-currency trader, whether advanced or not, is looking for an easy and handy way to earn passive income. The good news is that the solution is right away. CrowdSwap provides a user-friendly and good staking platform for stakeholders to stake their CROWD tokens in liquidity pools. You will receive 25% APY CROWD as interest. Then earned CROWD tokens and all the staked initially CROWDs will be transferred in the opposite direction; from the liquidity pool into their wallets. Stakeholders can invest and then sit back and watch. CrowdSwap will save you time and do the rest for you.
Read more: How to work with Crowswap staking platform
On the whole, DeFi staking is an exciting present-day concept that has been proven very popular among crypto-currency environments. Since it can end the traditional financial system and low-risk function with blockchain in the future, it might be a good idea to consider staking crypto in a safe and provident manner to invest and think. Although it is a simple way of earning interest, it is less known in detail among traders and holders; so it will develop soon.