Staking is the process of holding onto or "staking" a certain amount of cryptocurrency in order to participate in transaction validation.
This occurs on a Proof-of-Stake (PoS) blockchain network, often considered a less resource-intensive alternative to mining in proof-of-work networks.
By staking, individuals can earn rewards in the form of newly minted coins in exchange for validating transactions and keeping the network secure. The key and simple takeaway for crypto investors is that staking is a means of earning rewards for holding onto cryptocurrencies.
Proof-of-stake has gained significant traction over the past several years, with some of the largest emerging projects operating under the newer, more efficient protocol. Some of the most popular proof-of-stake blockchains that enable staking include Ethereum, Cardano, and Solana.
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Proof-of-Stake (PoS) is a consensus algorithm used in some blockchain networks to validate transactions and secure the network. It replaces the traditional Proof-of-Work (PoW) algorithm used by most cryptocurrencies like Bitcoin, which relies on miners to solve complex mathematical problems to validate transactions.
In a PoS network, validators are selected to validate transactions and create new blocks based on the size of their stake or the amount of cryptocurrency they hold and lock in the network as collateral. These validators earn rewards for their work in the form of transaction fees and block rewards.
PoS is considered more energy-efficient than PoW, as it does not require intensive computational power to validate transactions. It is seen as a more environmentally-friendly solution for blockchain networks. PoS systems offer greater scalability and faster block creation times, making them a popular choice for new blockchain projects.