TL;DR

• Staking cryptocurrency means locking up coins to maintain the security of a blockchain network and earning rewards in return.
• Staking has become a popular way for crypto investors to grow their holdings without selling their digital assets.
• Crypto staking involves a unique set of risks that can result in a loss of funds. Staking typically involves less risk and loss than other crypto investment strategies, such as DeFi farming and or active trading.

Video - What is Staking in 60 Seconds

https://lenstube.xyz/watch/0xf5b2-0x014a

What Is Staking?

Staking is a process by which individuals lock their cryptocurrency (their “stake”) to support the security and operation of a blockchain network. When someone stakes their coins, they are essentially helping to secure the chain and validate transactions on the blockchain.

Staking is only possible on blockchains such as Ethereum and Cardano based on a proof-of-stake (PoS) consensus mechanism. PoS differs from the proof-of-work (PoW) used in cryptocurrencies such as Bitcoin, where miners use computing power to validate transactions.

Staking coins makes users' holdings less liquid because the coins are tied up in the staking process. Individuals can usually still access their staked coins but may only be able to use them for other purposes once they are no longer staked.

What are the advantages of staking?

Many long-term crypto holders look at staking as a way of making their assets work for them by generating rewards, rather than collecting dust in their crypto wallets.

Staking is also a way to contribute to the security and efficiency of the blockchain projects you support. By staking some of your funds, you make the blockchain more resistant to attacks and strengthen its ability to process transactions.

Why do only some cryptocurrencies have staking?

This is where it starts to get more technical. Bitcoin, for instance, doesn’t allow staking. To understand why, you need a little bit of background.

• Cryptocurrencies are typically decentralized, meaning there is no central authority running the show. So how do all the computers in a decentralized network arrive at the correct answer without having it fed to them by a central authority like a bank or a credit-card company? They use a “consensus mechanism.”
• Many cryptocurrencies — including Bitcoin and Ethereum 1.0 — use a consensus mechanism called Proof of Work. Via Proof of Work, the network throws a huge amount of processing power at solving problems like validating transactions between strangers on opposite sides of the planet and making sure nobody is trying to spend the same money twice. Part of the process involves “miners” all over the world competing to be the first to solve a cryptographic puzzle. The winner earns the right to add the latest “block” of verified transactions onto the blockchain — and receives some crypto in return.

For a relatively simple blockchain like Bitcoin’s (which functions a lot like a bank’s ledger, tracking incoming and outgoing transactions) Proof of Work is a scalable solution. But for something more complex like Ethereum — which has a huge variety of applications including the whole world of [DeFi](https://www.coinbase.com/learn/crypto-basics/what-is-defi#:~:text=DeFi (or “decentralized finance”,on public blockchains%2C primarily Ethereum.&text=As with crypto generally%2C DeFi,pseudonymous%2C and open to all.) running on top of the blockchain — Proof of Work can cause bottlenecks when there’s too much activity. As a result transaction times can be longer and fees can be higher.

Proof of Stake Consensus - Environmentally Friendly & Scalable

A newer blockchain consensus mechanism called Proof of Stake emerged — with the idea of  increasing speed and efficiency while lowering fees. A major way Proof of Stake reduces costs is by not requiring all those miners to churn through math problems, which is an energy-intensive process. Instead, transactions are validated by people who stake their tokens.