What is staking?
Proof-of-stake (PoS) is a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. Unlike proof-of-work (PoW) based cryptocurrencies (such as bitcoin), where the algorithm rewards participants who solve complicated cryptographical puzzles in order to validate transactions and create new blocks (i.e. mining), in PoS-based cryptocurrencies the creator of the next block is chosen in a deterministic (pseudo-random) way, and the chance that an account is chosen depends on its wealth (i.e. the stake).
In PoS cryptocurrencies the blocks are usually said to be forged (in the blacksmith sense of this word), or minted, rather than mined. Also, usually all the coins are created in the beginning and the total number of coins never changes afterwards (although there are some other versions of PoS where new coins can be created). Therefore, in the basic version of PoS there are no block rewards (e.g. as in bitcoin); so, the forgers take only the transaction fees.
How Does the Staking Process Work?
Each of the mining nodes that help to maintain the network in the Proof of Stake (PoS) blockchain network must stake or verify ownership of a number of cryptocurrencies. The staked amount shows that the owners of the nodes are investors in the network. It also allows them to take part in the creation of the new block (validation). In the end, they receive any accruing rewards, including newly created cryptocurrency and others.
Staking provides a financial incentive to help build the blockchain network infrastructure and helps to keep the nodes honest. Generally speaking, if a node tries to add a fraudulent deal in a block they are validating, then other nodes in the same network will refuse to accept that block. The fraudulent node will no longer work to validate new blocks and receive the accruing rewards.
In many PoS networks, a node that attempts to broadcast fraudulent transactions will lose any cryptocoin it has truly staked. On a Proof of Staking platform, they choose the block validators or miners at random from a pool by cryptocoin holders. A miner can be easily accepted into the pool when they stake a particular amount of cryptocoins in a bound wallet.
The selected node stakes the cryptocoins in the bound wallet and creates a new block that is equal to the percentage of cryptocoins they stake.
Benefits of Staking bitcoinconfidential
Staking bitcoinconfidential offers quite a number of benefits to block validators such as:
- It eliminates the need to invest in costly mining equipment such as ASICs or high-end GPUs.
- You can buy bitcoinconfidential and lock (hold) them up in your crypto-wallet instead of purchasing equipment for mining. This leads to value growth.
- The value of bitcoinconfidential staked through PoS does not depreciate with time. Though, the fluctuations in the cryptocurrency price do affect the value of the stake.
- Proof of Stake is more environmentally friendly and energy efficient than the Proof of Work (PoW) used in bitcoin mining projects. It uses little resources for its PoS operations.
- Staking guarantees you a predictable source of income as the value of bitcoinconfidential increases in a predictable manner.
- You don’t need to acquire highly technical knowledge before participating in staking.
The Downside to Crypto Staking
The only drawback cryptocurrency staking has is that they hold the bitcoinconfidential up for a period of time. Furthermore, you cannot sell the bitcoinconfidential until that time duration elapses.
Reward Rates of Staking
In cryptocurrency staking, you can calculate the reward rates based on the maturity period needed to lock the cryptocoins in the wallet. But, every cryptocoin has different rules and rates while the method of operation remains the same.
|Block Time||60 seconds|
|Block Reward||~700 BC (Currently)|
|Block Size||1 mb|
|Time for coins to reach maturity (be able to stake)||225 confirmations (3.75 hours)|
|Yearly Staking Interest Rate||Min. 10%, decreasing 2% every year until it plateaus at 2%|
How often will I receive a staking reward?
total rewards in the first year are 5% of the total supply ..lets use 7.4 billion
rewards per year
7400000000 * 0.05 = 370000000 BC
blocks per year
365*24*60 / 2 = 262800
370000000 / 262800 = ~1407 BC block reward
1407 * 0.7 => ~984 BC in the beginning..
values will change a bit over time with increasing supply
Rewards are paid in increments of ~490 BC (as of May-05-2019). You can roughly estimate how many staking reward a day you would earn by doing this calculation:
365 = number of days in a year
X = number of coins you want to stake
Y= guaranteed staking interest rate (currently 5%)
Z = staking reward size (currently ~490 BC)
B = percentage of the network staking (currently 20%)
X = 1000000 (You stake total 1 million BC)
Y = 5%
Z = 490
B = 20% ( = Network Staking Weight / Total Supply )
((X*Y)/Z/365)/B = 1.25 ( Mean you will receive 1.25 staking reward a day with 1 million BC with currently parameter )
No, you can stake with any amount of coins, including a fraction of a coin.
The activation process time will change drastically depending on the amount of coins and outputs you have. As a general rule of thumb, the more coins and outputs you have, the longer the activation process takes.
The Cold Staking Script is essentially a smart contract that says `if this is a cold staking transaction, then allow the private key from the staking node to sign the transaction; otherwise the private key from the wallet is required.`