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Cryptocurrency staking is a popular way to increase digital assets. It is similar to depositing money in a bank, which uses customer deposits to form loans for others and incentivizes them with interest payments.
More specifically, crypto staking is the transfer of a portion of coins to the blockchain to keep the network functioning and secure.
For this contribution, coin owners are rewarded in the form of a percentage of the money deposited. The process is a way to earn passive income, so it is quite convenient.
Strike has not always been talked about and is not used as often as it is now. To understand how this phenomenon became so popular, it is worth studying its history.
Why did strike appear?
For a more complete understanding of the topic, it is necessary to consider concepts such as PoW (proof-of-work) and PoS (proof-of-stake) mechanisms, as these had a direct impact on the rise of staking.
Looking ahead, strike seemed to be the result of PoW issues.
Challenges of the PoW mechanism
PoW involves verifying transactions and creating new blocks in the blockchain. The verifiers here are called “miners,” who compete to solve mathematical tasks whoever solves it first adds the next block and is rewarded.
This concept worked fine until the popularity of cryptocurrencies started to grow intensively and the networks became overloaded.
PoW could no longer handle a large number of TPS (transactions per second), which began to limit network bandwidth.
Moreover, this mechanism is very energy intensive and requires a lot of computing power. This became especially noticeable in the context of increasing networking activity and only reinforced the need for change.
Introduction of the PoS mechanism
The answer to the problems of the PoW mechanism was a new answer: PoS. The idea was proposed on the BitcoinTalk forum in 2011 by a user nicknamed QuantumMechanic.
He said the PoS mechanism would select network validators to add new blocks to the blockchain based on the number of coins they have and are willing to stake as collateral.
Such a measure was supposed to reduce the speed of transaction processing, as validators did not have to spend time on tasks.
For the same reason, there was no need for powerful computing equipment, which would reduce energy consumption.
This scheme worked Back in 2012, the PoS mechanism was first introduced by the Peercoin cryptocurrency.
Stages of strike evolution
The idea of the PoS mechanism seemed very attractive to the crypto community.
Therefore, from the beginning of its emergence until today, strike has actively developed and passed through several stages.
Phase one introduction of PoS systems 2014-2017
A large number of crypto projects began to adopt PoS or hybrid PoW-PoS mechanisms. Blackcoin and Nxt were the first to do this.
During this period, staking was seen as more energy efficient than mining and also safer in terms of environmental impact.
Phase two
The BitShares blockchain platform proposed the concept of DPoS delegated proof-of-stake), where token holders could vote for a limited number of validators to secure the network.
Having a small group of validators increased the efficiency of the network and made staking distribution more scalable.
Phase three 2018
Some crypto platforms offered SaaS take as a service), where users could post their assets without running an authentication node themselves. This simplification expanded the user base.
Phase four Ethereum upgrade 2020
In 2020, the Ethereum blockchain began its transition to Ethereum 2.0, powered by the PoS mechanism.
It was a significant event in the history of staking as Ethereum is one of the largest blockchain networks. As a result, this period began to see a strong growth in striking, creating a so-called ‘striking boom’.
Phase five innovation
Staking continues to evolve due to the rise of available cryptocurrencies and liquidity protocols.
For example, the APR for staking TRX on KuCoin starts at two point two percent, on Binance it reaches five percent, and on Cryptomus it is the full 20%.
Each platform offers its own conditions, so users have the opportunity to choose the most optimal for themselves.
The first crypto platforms to start offering staking
It is possible to engage in betting on crypto exchanges, among which you can choose the most suitable for yourself. And who was the first to start offering the option to strike? These five.
- Binance The exchange implemented the staking feature in its interface in September 2019. Initially, it only supported coins such as NEO, VET, and ONT, but over time it expanded this list.
- Cracking A little later, Kraken launched a strike (December 2019). The platform’s service allowed users to stake coins without having to run the node themselves.
- OKEx Around the same period, in late 2019, the OKEx platform offered multiple token staking. It tried to simplify the process by offering rewards directly through the platform.
- KuCoin Also in 2019, KuCoin introduced staking via its dedicated Pool-X platform, which provided users with fixed and flexible stake amounts. It introduced a liquidity distribution system where users could save liquidity by placing derivatives.
- Coin base The crypto exchange Coinbase has overtaken other platforms in 2020, starting with Tezos’ (XTZ) offering. It allowed users to store their assets in the platform’s wallet while participating in staking.
These cryptocurrency exchanges which were the first to introduce staking into their functionality have been essential in making the process accessible to all users.
It is because they have been actively working to simplify the process of earning rewards that do not require specialized technical knowledge from the staker.
Conclusion
Such an innovative development as simplifying striking and working within the same platform has also influenced the future of the phenomenon because today the number of stakers is millions of users.
And every aspiring crypto investor has at least heard of this concept and may already want to multiply digital assets using this tool.
As blockchain technology has evolved, staking has also become an important part of DeFi protocols, where it protects networks and develops new projects.
The most important thing is that staking is a guarantee of the sustainability and security of the network, so it is chosen to work on it more and more every day.
Marta Abzal is a crypto investor and has been active in the cryptocurrency industry for 10 years. She has seen the rise of Ethereum, USDT, TRX and many other coins on the market especially those that can be deployed.
Credit : dailyhodl.com
