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Get to know what crypto staking is and how it works

Liputan6.com, Jakarta – In crypto investment, to gain profits is not only done by making transactions such as buying crypto assets at low prices and selling when prices are high. It turns out, there is another way that can provide profits when investing in crypto, namely by staking.

Reporting from Investopedia, Friday (7/6/2024), staking is a process when investors actively participate in validating transactions in the Proof of Stake (PoS) blockchain consensus algorithm.

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Meanwhile, Proof of Stake (PoS) itself is an algorithm whose role is to validate transactions based on distributed consensus. Validation is carried out based on the total amount of crypto assets owned.

By staking, investors can get passive income in the form of rewards or interest from locked assets. This makes it easier for investors to have diversified digital asset income.

In blockchain, anyone with a minimum balance can validate transactions and earn rewards. By locking certain crypto assets, investors have the power to make decisions within the network.

When successfully validating a transaction, the investor can generate additional income.

How Staking Works

The stored crypto will be locked into a blockchain that uses a Proof-of-Stake consensus algorithm for a certain period of time. The amount of profit that will be obtained depends on the price and number of crypto assets locked as well as the duration of locking the assets.

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Those who stake crypto assets in a PoS blockchain are usually referred to as validators. Validators earn rewards when they successfully validate transactions. Each PoS has various specific rules for its validators.

Some define validation rules based on the asset locking period or specify certain minimum limits.

Based on validator rules and algorithms, PoS works to perform actual validation and distribute rewards to validators. Rewards or interest are usually calculated based on the amount of assets locked.

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Get to know what crypto staking is and how it works

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