An Introductory Guide to Staking Cryptocurrencies

Similar to traditional financial ecosystem where strict guidelines govern the way new fiat currencies are minted by central banks, the decentralized world of blockchain-based cryptocurrencies have several consensus algorithms (proof-of-work (PoW), proof-of-stake (PoS), delegated-proof-of-stake (DPoS), and others which leverage different principles to mint new coins, secure a distributed ledger and partake in governance.

In the following guide, BTCManager will take a deep dive into the proof-of-stake (PoS) consensus mechanism and the promising feature known as coin staking.

The Genesis

The article would be incomplete if it failed to tackle the subject matter from the very genesis of what has now evolved into a multi-billion dollar industry and brought financial freedom to many.

In 2008, anonymous Japanese programmer and cryptographer, Satoshi Nakamoto created the proof of work protocol for achieving consensus between a vast array of devices on a distributed network.

Satoshi Nakamoto’s groundbreaking achievement has served as a solid foundation that paved the way for the creation of the world’s flagship cryptocurrency, bitcoin (BTC).

The proof of work algorithm which powers bitcoin and numerous altcoins reaches consensus by enabling “miners” (nodes on the network) to confirm transactions on the Bitcoin network and mint new coins by solving complex cryptographic puzzles.

As of November 2018, the mining reward for adding a block of transactions to the Bitcoin ledger was 12.5 BTC (less than $50K at the time). Back in the day, it was even possible for miners to carry out mining activities right from their bedrooms with their personal computers.

However, the mining difficulty has surged significantly ever since, making the Bitcoin mining business profitable for only big whales like Bitmain and others who can afford to set up mining rigs loaded with expensive Application Specific Integrated (ASICs) machines.  

Besides the fact that ASICs are…

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