By staking, individuals enhance the strength of the blockchain and make it more resistant to attacks. Lower energy consumption by the PoS blockchain consensus mechanism is achieved through the selection of validators. Staking also contributes to the security and efficiency of blockchains. Staking rewards are similar to dividends in a stock market account in that they are passively earned through the ownership of the asset (stock or cryptocurrency). Many long-term digital asset holders view staking as a way of increasing ROI on their digital assets through reward generation rather than having the digital assets simply sit in their portfolios. Generally, participants with more assets staked have a higher likelihood of being chosen as validators and rewarded with crypto in exchange for their efforts. The staked crypto assets earn rewards while held because the blockchain puts the assets to work. The selection of validators by the network is based on the amount of native digital assets the validator has staked in the asset pool, and the length of time they have been staking. In return, validators have the opportunity to validate new transactions, update the blockchain, and earn rewards. When a new block needs to be added to a PoS blockchain, individuals known as “validators” contribute - or “stake”- their digital assets. While mining powers Proof of Work (PoW) blockchains, participants contributing to a PoS network are selected to add new data blocks to a blockchain based on the assets they have staked. Staking is central to Proof of Stake (PoS), the newer consensus mechanism that powers Ethereum and other blockchains. ![]() By holding digital assets, a buyer becomes an important part of a blockchain network’s security infrastructure and receives rewards. In simpler terms, staking is a way to earn rewards for holding crypto assets. Staking is the act of buying and setting aside a certain amount of digital asset tokens to become an active validating node for a blockchain network.
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