Crypto 101: Staking
Hello Citadel fans, and welcome to another article! In this crypto 101 episode, we will discuss Staking.
Staking is the process of participating in transaction validation on a proof-of-stake (PoS) blockchain. The process of staking increases the security of the network, and in return rewards the users for delegating their tokens. This way, staking can be a way to passively earn tokens by helping out the network.
In the following paragraphs, we will discuss in detail what staking entails and all the important things to note about staking.
Who created Proof of Stake?
It is quite uncertain who exactly created Proof of Stake, but the advent of proof of stake can be traced back to Peercoin in 2012, who in their whitepaper described their blockchain network as “a hybrid PoW/PoS system, where Proof of Work was used to mint the coins initially, and majority of the platform’s security came from Proof of Stake.
Why Proof of Stake?
Proof of stake is an improvement over Proof of Work, the version of consensus used by the Bitcoin Blockchain. Proof of Work requires transactions to be placed into blocks, and these blocks are then lined up into chains of blocks, which is where the name “blockchain” was derived. Miners (which represent validators in Proof of Stake) then solve complex mathematical problems to be the first to validate the transactions in the block. The miners with superior hardware are able to solve these problems quicker and are rewarded with the native token of the blockchain for solving these problems.
Proof of Stake on the other hand takes up another form of validation where it requires participants to lock up their tokens rather than solve complex mathematical problems. The protocol then randomly assigns the process of validation to any stack of locked-up tokens. The higher the amount of locked up tokens, the more likely the stack is to be chosen to validate the transaction.
Proof of Stake is therefore more efficient than Proof of Work as the barrier to entry isn’t having extremely powerful hardware, but having a lot of the native blockchain tokens.
How does Staking Work?
As we mentioned earlier, staking (or Proof of Stake) works by delegating tokens to the network to be selected for validation. The protocol randomly selects token holders to act as validators for transactions, with the largest holders of the tokens being more likely to be chosen for validation.
Just as in Proof of Work, there is a reward for being chosen as a validator for a transaction. Rewards are given as a portion of the cost of the transaction validated. Let us see how these rewards are calculated.
How are Staking Rewards Calculated?
As mentioned earlier, Staking yields rewards. But how are those rewards calculated?
In Proof of Work, the rewards are given on a “first come, first served” basis. In other words, the protocol is set to mine a certain amount of the token everyday, which decreases as the number of participants increases. So this fixed amount is distributed on a per-block basis, in a first come, first served manner.
Proof of Stake on the other hand isn’t as straightforward as that. The reward type depends on the network itself and numerous other factors, such as:
- Number of stakers in the pool
- How many tokens are being staked by an individual
- How long the tokens have been staked by that individual
These factors make it more difficult to determine a specific reward rate formula that works for all Proof of Stake blockchains, but many Staking services show an APY, which is representative of the projected rewards a staker can receive if the current conditions remain constant.
Getting Started with Staking
Before you can get started staking, you need a Proof of Stake blockchain. Proof of Stake is defined by Wikipedia as “a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency.”
In simpler terms, Proof of Stake consensus allows for the validation of transactions by the highest holders of the blockchain’s tokens.
There are numerous coins with Proof of Stake functionality. Some of the more popular ones are:
- ETH (coming soon)
- XTZ
- KAVA
- DOT
- ATOM
- RUNE
- ONT
The ones supported by Citadel.One are:
- BAND
- ATOM
- ICON
- IOST
- SCRT
- XTZ
- Polkadot and KAVA are coming in the next updates!
You can get some of these coins from Citadel.One through the fiat on ramp. We have a detailed article on how to use the fiat on-ramp here.
The coins can also be gotten from any major centralized exchange like Binance (link withdrawals from exchanges).
Once you have purchased these coins, you can head over to Citadel.One to stake them and start getting rewards.
Before you can use Citadel.One however, you need to create an account or use an existing one. The process of creating an account is easy. You need to follow these steps:
Step 1: Log on to Citadel.One
Step 2: Click on Platform in the top right.
Step 3: Enter your email address or use any of our other options to sign up.
And just like that, you have created your Citadel.One account!
You can also stake from our powerful mobile app, available for Android and iOS.
Now that you’ve created your Citadel.One account, you’re ready to start staking! Watch this video to see how to stake IOST.
About Citadel.one
Citadel.one is a non-custodial Proof-of-Stake platform for the management and storage of crypto assets. Users can create public addresses for all supported networks with one seed phrase, connect their Ledger or Trezor device, or import an address generated by another wallet.
The analytical dashboard provides relevant information on wallets’ balances and networks’ main metrics. In Citadel.one, we standardize the semantics, making interactions with the platform as easy as possible. The same goes for network metrics. By using universal terms, we are making it easier for users to understand and compare networks.
One of the main functions of the Citadel.one platform is participation in the PoS consensus — users can stake and delegate their assets, claim rewards, and follow the latest network proposals in the voting tab.
Citadel.one offers its users instant cryptocurrency exchange services that allow fast and secure crypto assets swap. It is also possible to buy and sell crypto with a credit or debit card. Citadel.one users can track rewards, withdrawals, transfers, and deposits across all supported networks and add comments to these transactions.
Among PoS platforms, Citadel.one supports BAND network($BAND) Secret Network ($SCRT), Cosmos ($ATOM), ICON ($ICX), IOST, Orbs, and Tezos ($XTZ). We also support Ethereum, Bitcoin, and Tether ($USDT) for our users’ convenience. Mobile and desktop versions, new networks, including Polkadot and Ontology, are scheduled for the upcoming updates. Furthermore, delving into the idea of true decentralization, we envision Citadel.one a decentralized autonomous organization and a genuinely community-owned platform in the near future.
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