Staking is a process by which holders of cryptocurrency tokens can receive rewards for locking up their tokens in order to help secure the network. By staking, users are helping to support and maintain the integrity of a blockchain’s distributed ledger technology (DLT) while earning income as compensation for doing so.
Stakeholders act as validators on the blockchain, processing transactions and blocks on behalf of other participants. As compensation, they earn a share of transaction fees or block rewards that come with each new block added to the chain.
In order to stake coins or tokens, one must first hold them in an appropriate wallet or exchange platform where staking is supported. Then, depending on the particular protocol being used, users may be required to lock their funds into a smart contract for an agreed-upon period of time before receiving any rewards from staking activities. During this period – known as “staking” – users cannot access their funds until they reach maturity after fulfilling certain requirements set forth by the protocol such as verifying blocks or other tasks.
Once a user has completed all necessary steps in order to stake their coins/tokens, they will then begin earning rewards proportional to how much was staked and how long it was held in place (the longer it is held, generally speaking, more potential reward). The amount earned depends largely upon two factors: 1) The total number of coins/tokens being staked; 2) How much competition there is among stakeholders vying for block reward payouts at any given time – since only one person can win per round! Lastly once your chosen coin reaches its maturity you can either reinvest your earnings back into more stakes or withdraw them from your wallet/exchange platform according to its specific withdrawal policy guidelines .
