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What is staking ?

As an emblematic figure of a maturing financial product, staking imitates the passive income strategies of traditional finance. Recently put in the spotlight thanks to Ethereum 2.0 with the switch from its proof-of-work (PoW) protocol to proof-of-stake (PoS), staking is the new crypto investment that is attracting investors.

Definition


Le staking est le processus de détention de coins dans un portefeuille de cryptoactifs pour soutenir les opérations d'un réseau de blockchain. Les stakers sont rémunérés en échange de cette action.

History


Originally, the Peercoin

Proof-of-stake (PoS) is an alternative consensus protocol that was invented by Sunny King and Scott Nadal and first implemented by Peercoin in 2012. True to the Satoshi tradition, they have a feathered identity and advance in disguise.

Peercoin allows a different validation process for new transactions and blocks than PoW. Block producers are referred to as minters rather than miners. Initially used in a hybrid version, half PoW half PoS, the founders of Peercoin quickly realized that the PoS model was more scalable and that, in the event of very high transaction volumes, this model would be more likely to withstand the shock.

Peercoin was thus the father of proof-of-stake (PoS), NTX then developed the concept and then there were deliveries of other consensus protocols (Delegated Proof-of-Stake (DPoS), Leased Proof-of-Stake (LPoS) mechanisms and many other derivatives).

General Operation


As mentioned previously, the term staking refers to the process of holding and locking up funds to receive rewards while contributing to the operations of a blockchain.

Unlike proof-of-work (PoW) blockchains that depend on mining to verify and validate new blocks, proof-of-stake (PoS) chains produce and validate new blocks by minting, i.e. proving ownership of a certain amount of coin holding. This allows blocks to be produced without the use of mining-specific hardware (ASICs). So, instead of competing for the next block with a hash power job, proof-of-stake validators (PoS) are usually selected based on the number of coins they commit to play. This process contributes to the operations of the blockchain and thus distributes a reward. More simply, you are paid to block your funds without buying hardware.

Since each proof-of-stake (PoS) blockchain has its own specific currency with a myriad of underlying protocols and technologies. (Smart contract, self-regulated governance protocol etc) An informed reading of the white paper is good enough to determine the frequency and rate of inflation of your reward.

The reward system


Depending on the project, the reward systems can be significantly different.

Some systems have a maximum number of rewards, require periodic claims (e.g. Synthetix, SNX), blocking periods (e.g. ICON, ICX), or a frequency of compounded rewards. For others, staking rewards are determined through a pre-determined fixed inflation rate. This encourages individuals to use their coins rather than holding them (keeping them in a portfolio).

The Financial Dynamics of Staking


Savings 2.0


In its operation, staking presents similarities to traditional savings accounts: immobilization of an initial capital (in cryptocurrency for staking), remuneration thanks to interests, rate of return, ... In reality, staking is a similar investment solution but this time on the side of decentralized finance.

Staking rewards are theoretically incentive mechanisms to encourage users to participate in the network, but in practice rational users are looking for profit. The value of the reward is usually fixed with a controlled rate of inflation. However, there are additional project-based promotions. Just-Mining offers several pre-selected staking projects with annual ROI's between 5% and 50%, enough to make the classic savings pale in comparison. Of course, generally speaking, the higher the ROI, the higher the risks. Depending on your investment objectives, some projects are more suitable than others, our teams are there to answer your questions.

The limits


Naturally, there is no investment that offers a risk-free double-digit annual ROI. Generally speaking, the higher the ROI, the riskier or younger the project we are dealing with. ROI, while important in the choice of investment, should not be the only factor to consider.

The main risk associated with staking, as with investing in cryptosystems in general, is market volatility. The cryptocurrency market is unregulated and is regularly subject to large fluctuations, both upwards and downwards. It is necessary to have confidence in it before taking the decision to invest.

Just Mining's staking service


The rewards without the technical complexity


Like our masternode service, our staking solution is totally plug&play. No technical skills are required to use our staking service.

I don't have any tokens yet.


For those who do not have the tokens, this is not a problem, by selecting the option "I wish to buy and stake tokens", your purchase will include the purchase of the tokens necessary to set up the staking. Of course, the investor is the owner of the purchased tokens and can retrieve them at any time by a simple withdrawal request.



I already have my tokens.


For more experienced investors, who already own stakable tokens, you can simply outsource the staking to Just Mining. This way, you must select the option "I want to stake tokens I already own". Then simply select the token of your choice and you will be guided through the staking process. Please note that even though you have delegated your tokens, you still own them and can retrieve them at any time.



Conlusion


Staking is the process of holding coins in a portfolio of cryptoactives to support the operations of a blockchain network in exchange for rewards for proof of stake.

Peercoin is the spiritual father of Proof of Stake (PoS) and has proposed as early as 2012 an improvement to the mining protocol using minting, a related technique based on the possession of cryptocurrencies. This research has mechanically led to lower energy consumption and the possibility of opening up the technology to a wider public.

Since 2019, staking has experienced a major boom in the blockchain community. The announcement of the transition of the Ethereum network to POS has also necessarily contributed to the democratisation of this consensus.
Published by Just Mining on 08/06/2020
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