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Arnaud Deblander
Sep 19, 2022 10:00 PM

Last week we talked about web 3.0. It is indeed a hot topic in the DeFi ecosystem, which is destined one day or another to revolutionize the sector and the way of surfing on the internet.

Today we are going to focus on another very important part of the crypto ecosystem and more specifically DeFi. It is also a way to generate passive income quite simply, you will have understood today we will talk about staking!

What is staking?

Staking is the locking of digital money to protect a blockchain. The investor obtains benefits in the form of tokens as well as influence over community governance in return. This is comparable to making a return-generating investment in a company. The shareholder is paid dividends and has a voice in major choices. But from a technical standpoint, it is entirely different.

The Proof of Stake (PoS) consensus and its several variations are intimately tied to the idea of staking. This consensus mechanism's major objective is to drastically cut energy costs associated with running a blockchain while ensuring sufficient security and better scalability. 

How does it work?

If a cryptocurrency you hold is stakable, which is the case on DeFi ecosystems, you can stake a portion of your holdings and earn a percentage rate of reward over time. This usually involves a "staking pool," which you can more or less think of as being similar to an interest-bearing savings account. 

The blockchain is what makes cryptocurrencies operate, so when you stake it, you get paid. Staking-enabled cryptocurrencies use a "consensus technique" called Proof of Stake to guarantee that all transactions are secure and confirmed without the aid of a middle bank or payment processor. Your cryptocurrency is a part of this procedure if you decide to lock it.

Pros and Cons of staking

The advantages of staking

The blockchain is what makes cryptocurrencies operate, so when you stake it, you get paid. Staking-enabled cryptocurrencies use a "consensus technique" called Proof of Stake to guarantee that all transactions are secure and confirmed without the aid of a middle bank or payment processor. Your cryptocurrency is a part of this procedure if you decide to lock it.

The disadvantages of such a system

In a PoS system where you run a validator node, there aren't really any drawbacks (except for the knowledge required). Make sure to team up with a trustworthy validator node if you are distributing your tokens in a DPoS scheme, though. You will incur financial fines if you don't.

Two significant disadvantages exist when staking using a savings system. Your digital assets must first be locked in for a long length of time. You most likely won't earn any incentive if you remove your cryptocurrency before this time period.

Secondly, there are a lot of platforms that offer these products. However, many are exotic platforms where your money is not really safe. Finally, even if you get a good return on a little-known crypto-currency, it may still plummet because too many people will also come to stake it.

How to stake on SuperBots

It is also possible to stake on SuperBots and it remains the best way to earn a passive income on our platform. The best strategy is to use vaults and also staking, which allows you to receive part of the performance fees paid by other users.

Feel free to check out our gitbook to learn more about how staking works on SuperBots and how to use staking pools.

Conclusion

Staking is the savings account of the DeFi ecosystem and can be an excellent source of diversification for your portfolio. Be careful though, just as you probably wouldn't choose to deposit your funds in a bank with questionable practices, always do your own research before depositing funds in a staking protocol.

Don't be fooled by the promise of a great return. Remember, if something sounds too good to be true, it most probably is!

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