These numbers speak a volume about the opportunity and value locked in this Defi ecosystem. Before we go ahead to define and understand more about what is crypto staking we must be aware Proof-Of-Stake,
Proof of stake is a type of consensus mechanism used by blockchain networks to achieve distributed consensus through staking. Here the validators, now need to be in the possession of the native token of the concerned blockchain (for example ETH in the case of Ethereum), which they are required to stake to validate any transaction and build a consensus among all the nodes in the network
I have covered the PoS in detail here in the article linked below:
Please do spend some time to understand the underlying technology and how it works, this will help you to be more informed before you learn more about Crypto staking going ahead in this article.
Now that you have understood what is proof-of-stake, its time to define,
Crypto staking is a financial tool that allows users to lock in their crypto tokens to help the concerned blockchain platforms achieve the required consensus in the network via proof-of-stake.
It is a more efficient and less resource-intensive alternative to crypto mining (which uses Proof-Of-Work). Staking involves validators who lock up their tokens, so that they can be randomly selected by the DefI protocol at specific intervals to create a block.
Does Every User Stake Gets Accepted As Validator ?
Not every one who has decided to stake their tokens gets the right to validate the blockahin transactions, as there are certain rules applicable which varies based on blockchain DeFi protocols. The decision of who will be able to participate and validate mostly depends upon the total count of crypto tokens at stake.
For Eaxmple :
In Ethereum 2.0 , users need to stake at least 32 ETH to become eligible for acting as a validator, rest any user can act as delegator of their token at stake and win rewards for the same.
But users can definitely stake their coins and act as a delegator to earn rewards for their locked in coins. Their staked coins in this case is lended to the selective validators and the user gets rewarded on their behalf .
Proof-of-stake blockchain Projects are highly scalable and have high transaction throughput.
In a nutshell:
Staking simply means locking funds in a suitable & secure wallet, enabling users to perform various network functions pertaining to the Defi platform & earn decent staking rewards for the same. User can also add funds to a staking pool,
What Is a Staking Pool?
A staking pool allows multiple stakeholders to combine their computational resources as a way to increase their chances of being rewarded.Simply put, it is mechanism to team up and have unified staking power to verify and validate new blocks, thus enhancing the chance to earn more block rewards
The return on your staked coins vary based on the type of Defi protocols and are majorly dependent on following key factors :
- Count of coins at stake
- Total locked in token count in the given DeFi network
- The market condition and rate of inflation
- The duration of the concerned validator and his longevity in term of active staking
Staking on Ethereum 2.0:
You’ll need 32 ETH to become a full validator or some ETH to join a staking pool.
- You will be rewarded for actions that help the network reach consensus. –
- Also you will get rewards for batching transactions into a new block or checking the work of other validators , as you enhance the security of the network by doing so
- If you act inappropriately or found to be malfunctioning you will risk yourself to lose all your staked 32 ETH .
- You can lose ETH for malicious actions, going offline, and failing to validate.
Staking on Tezos:
To become a staker/baker on Tezos,
User needs to hold 8,000 XTZ coins and run a full node.
Annual percentage yield (APY)on XTZ staking ranges anywhere from five to six percent.
If you act inappropriately or found to be malfunctioning you will risk yourself to loose all your staked XTZ
Staking on Binance:
Similarly you can execute crypto staking on Binance smart chain, which supports the token like USTD, BUSD, DAI, BTC etc.
- The only requirement is to hold your PoS coins on Binance exchange , and all the technical requirements will be taken care of for you
- The staking rewards are usually distributed at the start of each month.
Coinbase is also another top exchange like finance where you can earn rewards for your crypto tokens. Apart from ETH 2.0 staking it also supports other coins accommodated on Coinbase staking include ALGO and XTZ etc..
In a nutshell:
- You have multiple platforms like centralized crypto exchanges viz, Coinbase, Binance, which allows you to lock in your coin and earn a passive income for staking.
- Though returns are low as compared to Defi protocols , as they cover lot of pain points of setting up your wallet, securing it , and transacting. But if you are comfortable with the DeFi ecosystem you can earn a higher return .
- Exchange mostly offer returns in APY ranging from 5–12 percent which depends upon the coin type staked . You get most returns for staking stable coins like, USDT, USDC, BUSD, DAI etc.
- Defi platforms like AAVE, UniSwap, Maker, Synthetix, Compound, Yearn Finance , offer higher returns and can shoot up to 25–40 % and even higher . The rewards are highly fluctuating , to check the returns , please visit the below given link . Here you will get the calculator to make your life easy.
- Risks associated with DeFi protocols are extremely high and users are required to do their own research before staking. Don’t get too caught up in annualized rewards or APYs. There are many other crucial factors to consider such as the reputation and age of the platform.
Crypto staking, crypto lending, staking in pool, all these alternate instrument to put your crypto to work while you sleep definitely provides you the extra luxury to earn more , but understanding the underlying technology, project reputation , network stability is extremely important for you to understand as a crypto investor .
Compound platform set the trend in 2020, and now AAVE is shining ahead , and there are many more in the line, and I feel the future of DeFi is here to stay , as now technology and infrastructure is more congenial with the advent of multiple blockchain scaling platforms like Polygon, Solana, Ethereum 2.0, Cardano, Fantom, etc..
The network stability, security and scalability has been the largest concern associated with Defi protocols, but now these concerns are being mitigated fastly, but still as a user you need to be invested not only in terms of fund but also in terms of amount of research you put in, before choosing the right platform for crypto lending or staking .
“Be a responsible investor as there is lot at stake apart from funds ”
Next in the series of Crypto basics, we will cover
- What Is DeFi?
- How Defi Functions ?
- Different Defi platforms
- Pros & Cons Of Defi , as much more…
On this note, I would like to sign-off and would like to extend my heart-felt gratitude to all you awesome readers, you all are my true inspiration motivating to me to write and share as always.
Thanks a lot……
Extreme Fear In Crypto Market, Is It Time To Buy The Blood In Bitcoin?
The past week has been a brutal one for bitcoin and crypto in general. The market has taken hit after hit. So much so that it’s starting to seem like there is no end in sight. Coins have been falling at high percentages. It brings back a popular saying in the financial markets; “there’s blood in the streets.”
Investors have been reacting to this negatively. The Arcane Research Fear & Greed Index has moved back into extreme fear. Going down to the lowest it has ever been this year.
Fear & Greed Index down to 10 into extreme fear | Source: Fear & Greed Index on Arcane Research
The Index currently sits at 10 in extreme fear. This means that investors are scared to put their money in the market. With no more money going into the market, the prices will go down. And we will see even redder charts.
Time To Buy The Blood?
“Buy the dip” is a popular saying in the crypto space. People are encouraged to buy coins when there has been a massive downturn in the price. Quoting this as being the best time to get into the market. But what happens when a dip goes past just being a dip into full-blown bleeding?
With red charts and downward-facing arrows, the market looks like it is bleeding. With massive liquidations going on and not as much faith in the digital assets anymore, the crypto market valuation is down.
Related Reading | Will A Large Spike In Bullish Sentiment Translate To A Bitcoin Rally?
It is always best to buy assets when there is “blood in the streets.” People are wary of the market. Weak hands are pulling out, dragging the price down. And that is when the long-term hodlers come out to play.
There is never any definite way to tell where exactly the market will bottom out. But a good indication is when assets are down so much that people are scared to buy back in. A time where it seems like the coins will never recover and that is the best time to buy.
Is There A Market Recovery On The Horizon?
A trend in the market has usually been massive dips are followed by good recoveries. People buy assets that are down a significant amount in hopes that they will make a profit when it recovers.
Total market capitalization less than 50% ATH | Source: Total Market Cap on TradingView.com
With institutional investors still holding on to their bitcoins, it looks that they still have hope in the market.
MicroStrategy recently bought an additional $500 million worth of bitcoins to add to its growing portfolio. Goldman Sachs had ramped up its bitcoin trading activities by partnering up with Galaxy Capital. All good-faith moves in the market.
But with the hash rate hitting record lows and the number of bitcoin mined in a day dropping, it could be that the market is headed for a » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market.
In that case, investors might be headed for a long waiting period. As the crypto » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear markets are notorious for being painfully long. Lasting years at a time.
But there is just as much of a chance for recovery as there is for a total » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market.
It will not be the first time that the market has pulled ahead after massive downturns. A lot of investors see the falling prices as a chance to buy back in. And more money goes back into the market, so does more faith return. Increasing the valuation of the assets.
Bitcoin has fallen below $30k. Less than half its all-time high. A crucial hold point for the asset.
Ethereum has fallen below $2k.
The total market valuation now sits at $1.21 trillion. Less than 50% from its highest market valuation of $2.4 trillion.
Featured image from Cointelegraph, Fear & Greed Index from Arcane Research, crypto chart from TradingView.com
Bitcoin Price Analysis: Following Massive $4000 Rebound, Is BTC Still In Danger?
The Bitcoin rollercoaster continues after the price dropped by a precipitous 14% from today’s high of $33,250 to reach as low as $28,600. After hitting this level, the cryptocurrency quickly rebounded back above $32,000 liquidating a huge amount of long then short positions.
Yesterday, it seemed like the critical support of $31.7K was holding, however, earlier today Bitcoin broke the ascending trend line (started forming on May 19), losing the $30k support, but, as of now, the price bounced back above.
So far, the past 7 days have been a nightmare for Bitcoin, as the primary cryptocurrency touched $41.3K just last Tuesday. Keeping in mind today’s current low of $28.6K, the price dropped over 30%, before slightly recovering. $28,600 is a 5-month low for Bitcoin. The last time it was trading below $30K was during January 2021.
Moving forward, Bitcoin is still in danger, however, two things might light a bit of positiveness on the market:
– The fact that Bitcoin price quickly rebounded over $4k after plunging below $30k shows that there is very strong demand, especially below $30k.
– The consolidation zone between $30k and $42k, which lasted since May 19, is still intact.
Despite the above, the situation is very fragile, as volatility is expected to continue for the next few days at least.
In addition, the bounce allowed Bitcoin to remain inside the descending price channel as shown on the short-term chart below and buyers defended $31,185 support, and the candle did not close beneath it.
BTC Price Support and Resistance Levels to Watch
Key Support Levels: $31,700, $31K, $30,000, $28,600, $27,740.
Key Resistance Levels: $32,465, $33,520, $34,760, $36,440, $37,500.
Looking ahead, the first support now lies at $31,700 (yesterday’s low and the ascending trend-line). This is followed by ~$31k – $31,185 (downside 1.618 Fib Extension), $30,000, and $28,600 (today’s low). Additional support lies at $27,740 (Jan 2021 lows), $26,840 (downside 1.414 Fib Extension), and $25,000.
On the other side, the first resistance lies at $32,465. This is followed by $33,520, $34,760, $36,440 (20-day MA), $37,500, and $39,490 (early-June highs).
The daily RSI is well within the bearish territory and is still not yet oversold. It is starting to push higher, which indicates that the bearish momentum might be easing up a little. Aside from that, a bullish divergence signal has also appeared on the LTF charts, such as the 4-hour’s.
Bitstamp BTC/USD Daily Chart
Bitstamp BTC/USD 4-Hour Chart
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Cryptocurrency charts by TradingView.
Eswar Prasad: BTC Needs to Solve These Three Issues to Be Truly Effective
A professor at Cornell University believes that bitcoin can never accomplish all it has set out to do unless it manages to get past three big hindrances. According to Eswar Prasad, professor of economics at the educational institution, bitcoin still suffers from several flaws that are preventing it from being stronger than many of its altcoin cousins.
Eswar Prasad: BTC Still Has a Way to Go
In an interview, Prasad points to the idea that bitcoin mining is extremely expensive and hazardous to the environment. This is an argument we have heard time and time again over the past few months. Everyone from Kevin O’Leary of “Shark Tank” fame to Elon Musk – the South African entrepreneur behind billion-dollar companies such as SpaceX and Tesla – have said that bitcoin mining is simply too dangerous for Mother Earth to carry on.
As a means of making themselves more appealing than bitcoin, Prasad says that many cryptocurrencies which came after BTC have looked at the currency’s infrastructure and worked to ensure their mining operations are nowhere near as energy driven.
For example, Ethereum has already implemented a new method of mining it is calling “proof of stake,” which is allegedly built to limit the amount of computing power necessary to extract new units from the network. In fact, according to the Ethereum Foundation, the process requires approximately 99 percent less energy than before.
That is going to be much less energy intensive, and it could deliver a lot of the benefits that bitcoin was supposed to deliver. It could also make transactions much cheaper and quicker.
Another issue he says bitcoin needs to solve is its anonymity. Many believe that bitcoin is an anonymous currency, though according to Prasad, this is not entirely true. To prove this, he points to a recent incident in which the Federal Bureau of Investigation (FBI) was able to intercede and prevent a bitcoin-based ransomware attack on the Colonial Pipeline. He says they would not have been able to do this if bitcoin was as anonymous as people claim.
The main idea of bitcoin… was to provide pseudonymity, but it turns out that if you use bitcoin a lot, and especially if you use bitcoin to get any real goods and services, then it becomes possible eventually to link your address or your physical identity to your digital identity.
In the long run, he says that Monero and Zcash are far better alternatives as privacy coins.
Volatility Prevents Its Use as a Currency
Lastly, he claims that bitcoin does not work well as a currency given that it is so volatile. He comments:
So, you could take a bitcoin to a store and one day, get a cup of coffee and another day, with the same bitcoin, be able to treat yourself to a lavish meal. That does not work well for the medium of exchange.