How does crypto staking work?
For most traders and investors, the process of staking crypto is a very easy one. Here’s how it works:
The initial stake
To begin with, you will stake your crypto. This simply means leaving the crypto accessible to the network during the transaction validation phase.
Selecting the node
When a new transaction needs to be validated, the network will use the staked amount as a factor while selecting the node that will validate the transaction. Generally, the selection process is weighted towards the node and user that has staked the most.
This stake is essentially a 'pledge of availability' — the node must be online when it is called upon. If it isn't, you could lose the amount you have staked.
Validating the transaction
A new transaction is validated, and a new block is added to the blockchain. This is now part of the immutable record that forms the DNA of the cryptocurrency network. A copy of this chain is shared across all active network nodes to ensure full consensus and decentralisation.
A crypto reward
In exchange for putting up their crypto holdings as a stake and validating the transaction, the node receives a crypto reward. Any holdings used in the validation process are returned, along with a further award, which means the node and its owner — the crypto user — have turned a profit.