Are you looking for rewarding staking yields?
Then proof of stake (POS) coins and tokens is probably what you are looking for. Cryptocurrencies are decentralized since no financial institution controls them. That means there is no server to manage the network and process transactions. So how then do they verify transactions? One way they do this is through proof of stake (POS). It is the validation of crypto transactions through a consensus mechanism. You can read more about how staking works here or get started with staking today with Binance.
Through a consensus, people agree on a system used to verify transactions. The system used in the verification system is through using servers called nodes. Besides processing transactions, nodes add blocks of transactions to the blockchain when you stake your coin or token. Staking is a way of earning rewards on your crypto by locking it in the blockchain network.
60 Best Alt Coins and Tokens
This is the toplist with alternatives to Bitcoin for people in United States. There may still be restrictions what people in the your geographic region are allowed to do when it comes to crypto currencies. So make sure that you read up on the regulatory restrictions as well as the terms and conditions for each crypto exchange and consider what is allowed or not allowed. Crypto is extremely volatile and not suitable for everyone to invest in. Never speculate with money that you cannot afford to loose.
POS Coins vs. POS Tokens
Now that we understand what proof of stake is, we need to distinguish between proof of stake coins and proof of stake tokens. A coin is a medium of exchange, whereas a token represents an asset. For instance, Ethereum is a platform that provides you with a coin called Ether. So, Ethereum is a token, and Ether is a coin.
When you stake your coin, you will likely receive loyalty points. As for staking tokens, your rewards go to your wallet.
How Does Proof of Stake Work?
The point of staking your crypto is to earn rewards on it. To earn rewards, nodes analyze your cryptocurrency before they can reward it. The people who analyze your crypto before rewarding it are called validators. So think of nodes as a team of validators.
When you begin transacting, a validator is asked to review your crypto. Once validators are satisfied it is genuine; they include your transaction in the blockchain. It is through including your crypto information that they receive rewards. They give you a portion of it in your wallet when they receive rewards.
It is up to the validator not to be driven by greed or incompetence. For instance, if they try to pass off fake crypto as real, they may lose their position. To the traders, they are likely to lose their rewards when the validator does not reward them justly.
Which cryptocurrencies can I stake?
If you are looking to stake a coin, here is a top list of some stakeable coins and tokens:
A point to consider is that not all cryptocurrencies allow for staking. That is because they rely on another system of verifying transactions called proof of work. In a nutshell, the system rewards traders based on how fast they can solve a certain puzzle. So, you will have to work for your rewards. It is commonly the case with Bitcoin and Ethereum 1.0.
Difference Between Proof of stake and Proof of Work
Besides proof of stake, proof of work is another way to earn rewards. POS and POW are similar since they rely on consensus mechanisms to verify transactions. The differences between them is in how you get rewarded.
In POS, validators mine crypto on your behalf. They then share a percentage of their rewards with you. All you have to do is keep your crypto staked to enjoy rewards. As for POW, you mine for rewards in the blockchain. Typically, you will mine through solving a mathematical problem. You then compete with others. The quicker and more accurate you are, the more the rewards.
Most traders prefer POS to POW. Admittedly, some are terrible in mathematics. Others are simply lazy and prefer to wait for their crypto to earn rewards. Lastly, traders resent POW since you would have to invest in expensive hardware to begin mining for your rewards.
Benefits of the Proof of Stake System
+It offers faster transactions.
+It allows for greater scalability.
+With a consensus system, it eliminates centralization by dominant traders.
+Its environmental impact is smaller compared to the proof of work system.
+It offers a financial incentive to approve valid blocks.
+It offers security as users have a disincentive to validate improper transactions.
+It is an effective system for facilitating your transactions, making faster transactions.
+It keeps blockchains secure by rewarding or punishing validators when necessary.
+It does not require one to invest in hardware to earn rewards.
Disadvantages of the Proof of Stake System
-It is still new and hasn’t been tested at scale.
-It tends towards centralization.
-It may not be as secure as the proof of work system.
-Access is limited as individuals need to own cryptocurrencies first.
-Switching to proof of stake can be difficult.
-Some coins have a stipulated staking period before you can sell them.
-Users with a lot of coins can influence the consensus mechanism.
-Compared to mining, you cannot get as much rewards from it.
-Possibility of bribery attacks if the validator acts irrationally.
-It is yet to be thoroughly tested for scalability.