First of all you maybe asking, What is cryptocurrency staking?
Do you stake on exchanges or not? When you hold cryptocurrency that supports staking, you will help verify transactions to support the network and reduce Sybil attacks.
In return for staking you’re cryptocurrency and strengthening the network you will receive a reward. It is kind of interest, like if you were saving your money in a bank. This enables a form of passive income for all that is involved, in addition to the potential rise of the coin.
How does staking work?
There are two types of consensus mechanisms Proof of work (POW) and Proof of stake (POS). With POW new blocks need to be mined to verify transactions on the network using powerful computers (think Bitcoin). POS is a slightly different protocol as new blocks are produced and verified by staking. The advantage with staking is that you get rewarded the more coins you have.
Why stake on an exchange?
- Its Easy
- Introduction to Newbies
- Get rewards minus exchange fees
- Helps mass adoption
- Communities to discuss on Exchange Forums
- You do not hold your Private Keys
- Reduction in reward fees as exchange will charge you
- Loss of Decentralised mindset
- Do not have custody of your assets
- A minimum amount may be required to be eligible for staking
- Coins in Wallet will not be transferable to external wallets
- Exchanges can take up a huge percentage of network stake, voting rights with many stake pools in their portfolio
- Waver responsibility of coin protocol and ethos
- You cannot delegate to another stake pool of your choice
- May be locked in for a certain period of time
- Centralised Exchanges are a Honeypot for Hackers
- Reduced control of your assets
Exchanges are needed for buying cryptocurrencies so they are essential to accumulate your favourite cryptocurrency. Once you have your coins its wise to send them to your own wallet. To have complete custody over them enables you to be responsible for storing, sending, and staking you’re coins. You do not require a centralised exchange service for this.
To be part of something that is decentralised and where you are in total control of your wealth is very full-filling. Not only do you reduce centralisation but you have a choice in how you wish to secure the network by choosing a stake pool of your choice.
Do not trust centralized services if you do not need to. You can be part of a decentralised future to help reshape the world by holding coins in your own wallet.