Crypto Incentives – Staking
DeFi, General, Investing - August 25, 2020
Ethereum staking, Cardano staking, Tezos staking, what do these mean, are they the same, and why can’t Bitcoin stake? Staking is an important concept across crypto. In this video. we’ll discuss what staking is, what proof of stake is, and how it differs from proof of work.
One of the main problems in building a cryptocurrency is – security. Staking is a way to keep the cryptocurrency safe. A cryptocurrency’s safety is measured by how strong its network is. The network is the ability of a cryptocurrency to transfer currencies, validate transactions and prevent breaches.
In order to keep the network safe, no one party, can control it. This measn that no one party has full reigns over the cryptocurrency. Because if they would, they could transfer all the crypto to their own wallets.
For cryptocurrencies operating on a Proof-of-Stake or a PoS model, this is done through staking. It is a security feature by which a person on the network can validate a block based on how many cryptocurrencies they hold. A block is a bunch of transactions that need to be confirmed. This is done so that the more cryptocurrencies a person holds (the more stake they have) the more power they have to validate a block.
Now the question should be – won’t this incentivize people to buy more crypto, so that they have a larger stake and can valiadate easily. Yes, this does, but since the holders are incentivized not to sell the held crypto, the power remains decentralized.
This is how staking works in the cryptocurrency world.
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