Are you wondering how to make profits by just investing in cryptocurrencies without involving in online trading? You have landed on the right page.
The process of earning passive income with crypto is called staking. Staking crypto is the process of keeping your digital currency in a wallet and earning interest on your holdings. Read on to understand how staking cryptocurrency works in the digital world.
What is Proof-of-Stake (PoS) Protocol?
It is essential to check that the cryptocurrency uses the Proof-of-Stake (PoS) protocol. PoS works when you lock up your coins to secure their network, and then you receive new coins as a reward for securing their network. It can be done through master nodes or by staking crypto directly in your wallet.
Steps to Stake Cryptocurrencies
Here are the vital steps you must follow to earn money by storing electronic money.
- The first thing you need to do is set up a wallet. The wallet will contain your staking cryptocurrencies.
- The next thing that you need to do is purchase a master node or stake your coins in a wallet that supports staking.
- Now that you have either set up a master node or stored your coins in an official wallet with the capability of staking them for interest make sure that they are fully confirmed and unlocked for staking.
- Unlocking your wallet for staking is the process of decrypting it so that you can begin earning interest on your coins.
- Now that your coins are unlocked, and you have the official wallet running or the master node running, sit back and relax while your computer does all the work.
What Happens If You Need to Send Your Coins Out of Your Wallet?
The best option that a trader can do would be to stop their staking wallet and send the coins elsewhere. Then, start staking wallets again once they have been sent successfully to prevent any issues with missing stakes due to possible orphaned blocks.
Orphan blocks occur when a block is received but not added to the blockchain yet by a different node. In this scenario, the coins would still be locked and unable to generate interest even though they have been sent from your wallet.
What Happens If You Need to Send Your Masternode Coins Out of Your Wallet?
If you are running a master node, you have to withdraw them from the online exchange where the MN is hosted and restart it in your staking or official MN wallet.
The best way to ensure that this process is successful is by stopping the master node daemon before withdrawing from the exchange. Then once withdrawn, restart the daemon again after being sent successfully back to your local wallet as a security precaution, as explained above.
Ensure to Follow Good Staking Practices by Keeping Your Wallet Online as Much as You Can
The most critical part of staking is making sure that your coins are being kept in an online or synced state so that they have the possibility of generating interest in your holdings.
Keeping your wallet offline for extended periods may cause late fees to occur when you are scheduled to receive rewards, which means that you will forfeit those stakes.
Once you follow all the above steps, all there is left to do is sit back and watch how your earnings accumulate.
