What is Staking?
Can it help me earn passive income with my cryptocurrency?
Is it risky?
And what do I need to know before I get started?

Well, stick around. In today's blog, we'll answer all your questions and more.

Today's topic is staking. But before we dive into staking, let's take a moment to understand the problem that staking is trying to solve.

Bitcoin and other decentralized cryptocurrencies promise to send money digitally without any central authority.

Initially, the solution to managing a blockchain, a fancy term for a ledger of balances that isn't controlled by any one entity, was done through mining.

What is mining?
Mining is a competition where powerful computers try to guess the solution to a mathematical question.

Whoever finds the solution first earns the right to write the next page of transactions, also known as a block, into the ledger. With mining, the more influential the computer you use, the more guesses it can make in a second, increasing your chances of winning this contest. Thanks to the laws of math and probability, it is highly unlikely that any single person or group will gain a monopoly over updating the ledger, and that's how decentralization is maintained.

Mining's technical term is "proof of work" - by displaying the right solution, miners prove that they've put in a lot of work, as there is no other way to get to the solution besides using computing power to constantly work at trying to guess it.

What is Proof of Work?
Proof of work is known as a consensus mechanism since its design is to create an agreement as to who gets to update the ledger amongst a group of people who don't really know each other or have any other basis for working together. While the Proof of work consensus mechanism may be a reliable and secure solution for managing a decentralized ledger, it's also very resource-intensive. Running all of these supercomputers just to guess a number takes up a lot of electricity, among other disadvantages.

Because of these disadvantages, other alternative consensus mechanisms have been suggested throughout the years.

Proof of Stake
One very popular alternative is Proof of stake. This means that people will stake actual coins instead of committing electricity to run computers and try to win a contest.

Proof of Stake is basically a consensus mechanism utilized to rectify new cryptocurrency transactions since Blockchain lacks any form of centralized governing authority or Proof of stake. Assures that data on the network is safe and secure.

How does Proof of stake work?
Proof of Stake selects participants to manage their lucrative tasks. We call them lucrative because the selected ones are rewarded with new crypto when they validate new transactions without manipulating the system.

"When blockchain participants verify that a transaction is legitimate and add it to the blockchain, we say that participants have achieved consensus," says Marius Smith, head of business development at digital asset custodian Finoa.

Participants are often termed as 'validators' with staked amounts of cryptocurrencies. In exchange for this, the validators get the opportunity to verify new transactions and grab a reward.

Cardano, Solana and Terra are some of the biggest cryptocurrencies that utilize Proof- - stake.

Benefits of using Proof of Stake
No need to buy expensive computing systems
Low electricity consumption
Individuals can earn a profit of 5%-14% or more by holding their stakes.
Potential for future

Goals
The main aim of proof of stake is to make Blockchain faster while reducing the environmental impact of running these systems. You'll be surprised to know that Proof of Stake can handle relatively more transactions per second even though they utilize less electricity.

However, the prototype takes a different path to solving the blockchain trilemma.

The blockchain trilemma is the speculation that blockchains can only offer 2 of 3 benefits associated with decentralization, security and scalability. Although PoS chains can scale to manage other mainstream use cases, such as hosting decentralized applications, they are typically considered more centralized than Bitcoin's PoW. Both methods also offer security designed to strengthen as adoption grows.

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