3 Risks You Must Understand Before Staking Cryptocurrency
One of the exciting aspects of the cryptocurrency market is its ability to generate passive income for users. Just like other computing networks, the blockchain technology that powers cryptos requires work to be done. But unlike a traditional network, blockchain is a decentralized computing network, which gives individual users the ability to participate and earn rewards based on work completed (in this case, processing transactions and executing instructions written into the blockchain).
The ability to earn rewards is thanks to a concept called proof-of-stake, which is used by cryptos like Solana (CRYPTO: SOL) and Cardano (CRYPTO: ADA), and is the same method that Ethereum (CRYPTO: ETH) is merging toward. It's an alternative to Bitcoin's (CRYPTO: BTC) proof-of-work method of validating transactions. As transactions are verified on a proof-of-stake network, you (and the other participants if you are pooling your crypto tokens as part of a validator node) earn new crypto tokens as rewards for the work performed -- a process known as "staking."
Participating in the daily operation of a blockchain network can be a great way to boost your returns on your investment, but it isn't risk-free. Here's what you need to know.
Source Fool.com
