Staking is a term commonly used in the cryptocurrency world and is part of a consensus algorithm called Proof of Stake (Proof of Stake, PoS for short). Proof-of-Stake is an alternative to Proof-of-Work (Proof of Work, or PoW for short) and is a way to maintain security and consistency in a blockchain network.
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In staking, users deposit their cryptocurrency as “stake” in the network. This authorizes them to generate new blocks and validate transactions. Staking participants are rewarded for the process of block generation and transaction verification, depending on the amount of cryptocurrency they have and the duration of the staking period.
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Staking serves to provide a more efficient and environmentally friendly consensus algorithm for PoS-based cryptocurrency networks and to enhance network security. In addition, by participating in staking, cryptocurrency holders can earn passive income.
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The problem of PoW eating up huge amounts of power needed to be solved.
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Staking creates an incentive to “not want that asset to be damaged” by depositing the asset.
- Therefore, if we lock asset Y in a way that it is aligned with a being X, we can consider the size of asset Y to be an indication of our intention not to destroy X. (2) The size of asset Y is an indication of our intention not to destroy X.
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