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Understanding Staking Pools: The Positives and Negatives Of Staking Cryptocurrency

A staking pool is a tool that allows multiple crypto token holders to pool in their tokens. Thereby they are granting the staking pool operator a validator status and rewarding all stakeholders with tokens for their computational resources’ contributions.

For many crypto investors across the globe, the concept of a staking pool is unknown. It’s like investing in one elicits doubt rather than drawing hordes of investors to it. 

Yet, the overall concept of a staking pool is available on blockchains that employ a proof-of-stake (PoS) model. Further, it requires stakeholders to lock their crypto tokens. They can lock it in a specific blockchain address or wallet in return for an annual percentage yield (APY).

What Are The Staking Pool Returns? 

As a suitable option for long-term crypto token holders, staking pools offer the promise of earning yields. Not only this, but they offer added to the capital gains. These gains are earnable through token value appreciation.

Moreover, One can invest in this revolutionary tool with a fraction of the number of tokens. These tokens can become a validator on a PoS blockchain. However, this pool rewards users on a daily, weekly or quarterly basis.

For instance, investors can stake their ETH tokens in a pool on Coinbase. They need to stake to get daily rewards and with no minimum balance requirement.

Furthermore, another popular blockchain to stake tokens is Cosmos. Cosmos is the second largest ecosystem in the blockchain. Investors can also stake their tokens through various validators on many chains available in the Cosmos ecosystem.

Why do You need To Invest in the Staking Pool?

Staking pools earn rewards in proportion to the tokens invested. Even if the quantity staked is a fraction of what you need to achieve validator status on the blockchain.

Staking pools provide anyone to earn a passive income while still holding on to the crypto tokens for long-term price appreciation. Moreover, investors do not have to worry about how this tool works or the procedures required in setting up and running a validating node, which the staking pool operator instead does on behalf of all the stakeholders.

What You Should Know Before Your Staking Journey?

Despite the potential returns, the costs of operating a crypto staking pool should be USD.

It is important to choose a this tool wisely, as these tokens act as a guarantee for the blockchain. Also, it’s important that the pool operator, who is acting as a validator on the blockchain, does its job without any malicious intent.

Suppose a block is formed with invalid or fraudulent transactions; the blockchain network may burn a certain amount of the tokens staked and result in you losing money staking crypto along with other stakeholders who have invested their tokens in the staking pool.

Moreover, once an investor decides to join this pool, their crypto tokens are locked in a specific blockchain address or with a third party and this may result in stakeholders not having direct control over their staked tokens. It is wiser to choose staking pools that allow stakeholders to participate in the staking process while still having their holdings held on a hardware wallet for more security.

How Should One Begin Their Staking Journey?

It is necessary to conduct thorough research about all available crypto. It is for a particular crypto token, and choose those with a proven track record.

Unlike crypto mining, crypto staking doesn’t involve investing in mining equipment to generate returns. There are several crypto staking pools currently available for different cryptocurrencies that operate on a PoS blockchain. It is suggested that investors choose notable crypto exchanges. Those exchanges that operate public pools over private may offer a higher APY.

Related: Crypto Investments: Russia To Have Stricter Laws To Protect Crypto Investors


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