Crypto staking is the practice of locking your digital tokens to a blockchain network in order to earn rewards and secure the network. Staking cryptocurrencies is also how token holders earn the right to participate in proof-of-stake blockchains.
Pros of staking crypto:
- You have the opportunity to earn passive income on crypto assets you plan on holding long term.
- You contribute to its network security and efficiency improvement.
- The potential of the token staked and its rewards to increase in price.
- It might allow you to actively participate in the project / token’s governance by voting on different proposals to help dictate the future of the crypto asset and the project behind it.
Crypto staking also has some risks that you need to be aware of:
- Normally, when you stake a crypto asset, there is a lock up period on where you can’t unstake or use the crypto you staked and normally there is some processing period after unstaking where you will not be able to use the asset. This processing time differs depending on the network of the crypto you are staking.
- When many users receive staking rewards, there is risk of cryptocurrency inflation.