Crypto Academy / Season 3 / Week 1 - Homework Post for @imagen

What Is Staking?

Staking is a strategy undertaken by a user, where he/she traps their funds in a cryptocurrency wallet. To participate in preserving the operations of a proof of stake based blockchain system. It is identical to mining used in crypto currency, in the sense that it helps a network achieve consensus while rewarding users who participate.

In staking, the right to validate transactions is based on how many coins are trapped inside a wallet. However, just mining on a pow platform, a person who stakes are incentivized to fund a new block or add transaction on the block chain.

Apart from incentives which are inducements, “POS” block chain platforms are scalable and have high transaction speeds. In most cases, you would be able to perform staking, staking your coins directly from your crypto wallet, such as trust wallet or through another ways by which many exchanges offer staking services to their users.

Staking using Binance allows you to get rewards in an utterly easy way, all you have to do is hold your coins on the exchange platform.

Taking into account consideration;

• How many coins the validator will and is staking

• How long the validator has been even wholeheartedly staking

• How many crypto currency coins are staked on the network in total

• The rate by which the values of every crypto currency wallets and platforms are inflated
• lastly, are the other factors.

Everyone of the above mentioned are factors every new or former investors involved in staking must consider and follow it calculate rewards on staking.

Most people get involved in staking reasons why, may not be valid. That is why this content has been written today. Every information in the crypto world is as important as any business news. Why get involved in the crypto world when you don’t like scurrying for information on charts and other platforms. To improve your chances of getting more and more rewards on staking below would direct you.

Platforms for staking

Choosing a staking platform is as important as the rewards as a wrong choice may see you lose your rewards and staked coins all together. The rewards are gotten from staking in such a way so that it looks as if you are mining.

Mining? Most people wherever you are may have heard of mining in one way or the other, either your sibling, someone you know, or even your roommate is mining. A roommate of mine mined almost everyday in a row in a week last semester between 12 midnight and 6am.

Wow! Just so he could get more rewards from mining. Mining involves a lot of time and investments into it to get rewards. So, is staking like it? If it is like it why is it not called mining rather than being called “staking”? Wouldn’t that make it easier for people to not get confused?

Coinbase

Coinbase is a perfect platform for new crypto investors who may not have other investment knowledge. It offers more than 25 cryptocurrencies for investment trading and also staking, with extremely simple user interface it is perhaps one of the easiest ways to investing cryptocurrencies. With ease in signing up and buying cryptocurrencies within a matter of minutes.

Coinbase also has quite the learning program that pays users of cryptocurrencies so that they learn more about how cryptocurrencies work, with high liquidity pool coinbase is rather ranked among highly liquid exchanges, this protects investors from serious price slippage in an already evaporating market. Offering more cryptocurrencies such as BSV, cosmos, bitcoin, ethereum and others to trade in, coinbase is a leading website for staking.

Private wallets

Private wallets is another platform for staking where the people involved have to keep staked coins in the same address because mining differently breaks the lockup period which may lead to loss of rewards.

Like their name, private wallets have private keys. These keys help you get control over all of your assets mainly crypto assets. The private keys ensure security and are strictly block chain related. Private wallets ensure you alone has access to your private keys restricting the producers from getting control over your assets which shows your dominance over assets you own.

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Comparison between coinbase and private wallets

Coinbase and private wallets are similar in ways they also show differences. How? One, transfers between coinbase and private wallets are block chained. Two, both perform staking. And three, stores your cryptocurrencies. And should I say they both give rewards, yes they give rewards which you like. Though coinbase is more of a ‘.com’ than a wallet and private wallets, look at the name it’s more of wallets than a ‘.com’ which means a website they are both as important as the other.

Which is more profitable between both?

One, two, three. And the count goes to coinbase. Why is this? To me, the number of currencies to invest in is offered more than on any private wallets. Yes, private wallets provide private keys and control over your assets but if you are not a security expert then it just put you on the losing side of things.

Which no investor would be invested in no matter the cost. The features of coinbase have shown it considerably one of the best platforms for staking. That is of course apart from binance which ranked number one on the staking platform.

What is impermanent loss?

Impermanent loss (impermanent may be not lasting) happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger the changes are the more you are exposed to impermanent loss. In this case, the loss means less value of involved dollars at the time of withdrawal than at deposit.

Impermanent loss is one of the crucial concepts that anyone who wants to provide liquidity to AMMs should understand. In short, if the price of the deposited assets changes deposit the liquidity pool responds by being exposed to permanent loss.

It is an interim loss of related funds experienced sometimes by liquidity farmers because of volatility in a trading farm. This also illustrates how much more money someone would have gotten if they had put all their time into their assets rather than giving liquidity. Impermanent loss and liquidity pool works hand in hand to show how it works and how the other affects the other.

As the name implies it is temporary and not long lasting but the effect is still felt. No investor putting an initial high price of ETH and getting a limited return values of ETH would be satisfied. But you know how the market works. One low return may be the edge of rise for another leading to optimum inflation. So, to get the highest benefits from impermanent loss it is alright to go for platforms with weighty loads of either the ETH you want to invest in or others.

(liquidity pools are one of the important parts of the DeFi ecosystem that is a essential part of automated market makers (AMM), game changing in invention in decentralized finance (DeFi) that facilitates trading on decentralized exchanges and provide liquidity through a collection of finds, liquidity pools often feature 2 assets and while one may be a stable kind of coin such as DAI, the other is not, such as ETH.

Placed in a scenario where a provider needs to offer an equal number of DAI and ETH, but the price of ETH goes up, this leads to “arbitrage” after which a provider may settle for a greater number of the former than the latter).

Delegated proof of stake (DPoS)

Delegated proof of stake (DPOS) is an alternative and secondary means of stake developed mainly to allow users who love staking to signal their influence and reach through other participants of the network. It is just like operating in the shadows where people only know those who work for you but not really you as the leader.

It is a break from proof of stake which depends on delegated bodies to make validate all blocks on the same platform. Witnesses appointed are by one share per person. The delegated proof of stake works in such a way that the witnesses have a right to put new transactions into a blockchain with those having much more high tokens having a higher say in how the transactions are added to the block chain.

DPoS allows the delegates to organize their transactions making it more organized than any other proof of stake.

conclusively

In conclusion as stated…“staking is just as similar to mining, getting the right staking platform is important to any new investor as rewards is as important as staking itself. To get involved in staking as a new investor, search online for more information, read articles and previews by people who have been involved in one staking platform or the other, don’t settle for less, get involved in the charts by the crypto market and get more news online.”

Impermanent losses occur which is one thing a new investor should get familiar with and counter.”

@imagen