Staking is the storage of funds in a cryptocurrency wallet to support all transactions on the blockchain. Staking is one way to make your cryptocurrency work and generate income. This is a process that involves temporarily locking cryptocurrency with a future reward for it.
Why staking is needed: its pros and cons
Advantages of staking:
• a way to earn interest for cryptocurrency;
• assistance in blockchain support;
• an ecological process that does not require a large amount of energy.
Disadvantages of staking:
• price volatility (you can lose more than you can gain if the value of the coin falls);
• blocking of coins with the impossibility of removing them from staking.
Staking can be a great way to use cryptocurrency to generate passive income. If you own a staking cryptocurrency, you can “bet” some of your holdings and get rewarded. This is usually through a “bet pool”. Your cryptocurrency is rewarded for helping to keep the blockchain running.
It is available for cryptocurrencies that use a Proof-of-Stake (PoS) model to process payments. It is a more energy-efficient alternative to the Proof-of-Work (PoW) model, which requires mining devices that use computing power to solve mathematical equations.
What is Ethereum 2.0
Soon, the second most popular cryptocurrency — Ethereum — will switch to Proof-of-Stake. The update integrates several fundamental changes — both technical and economic — into Ethereum’s structure.
Ethereum 2.0 is an update released to support the previous Ethereum network. It took place in three stages: stage 0, stage 1/1.5 and stage 2. The main advantage of Ethereum 2.0 is scalability: if the current network supported only 30 transactions per second, then with the transition to the updated version, the number increases up to 100,000 transfers.
In addition, Ethereum, like other cryptocurrencies, currently uses a Proof-of-Work consensus mechanism. In this system, miners use the machine’s computing power to solve complex mathematical puzzles and verify new transactions. The first miner to solve the puzzle adds a new transaction to the record of all transactions that make up the blockchain. They are then rewarded with the network’s native cryptocurrency. However, this process can be very energy intensive.
Proof of Stake (PoS) means that instead of relying on miners, individual users can stake the network’s native cryptocurrency and become validators.
Validators are similar to miners in that they verify transactions and ensure that the network does not process fraudulent transfers. These validators are chosen based on how many cryptocurrencies they staked and how long it took.
Other validators can confirm that they have seen the block. When there are enough attestations, a block can be added to the blockchain. Validators are then rewarded for a successful block proposal. This process is known as “minting”.
The main advantage of PoS is that it is much more energy efficient than PoW because it separates the energy-intensive computer processing from the consensus algorithm. It also means you don’t need a lot of computing power to secure the blockchain.
How to get involved in staking and what Binance offers
On the occasion of the merger, that is, the transition of the network to a new mechanism, the crypto exchange launched the ETH 2.0 Staking service, which allows you to engage in Ethereum 2.0 staking.
Benefits of staking ETH 2.0 on Binance
— You can start with 0.0001 ETH.
— Binance exchange fully assumes possible risks, that is, you will be returned an unchanged number of tokens even in the event of a reduction.
— A simple and straightforward process to obtain a BETH tokenized asset that can be used just like ETH.
Additionally, the merger brings the ETH bid closer to unlocking. Binance tokens BETH as the only proof of your ETH staking on a 1:1 basis. So when the ETH 2.0 mainnet launches, you will receive an amount of ETH equal to your current BETH holdings.
Staking on a crypto exchange is easier and more profitable than running an ETH validator node on your own, which requires powerful hardware and involves blocking 32,000 ETH.
How to use staking on Binance: a simple step-by-step guide
1. Register or login to your Binance account. Go to Binance Earn platform page https://www.binance.com/uk-UA/earn/eth and select ETH 2.0 staking.
2. Enter the desired staking amount and make sure everything is entered correctly.
3. Read the detailed terms and conditions and click the confirmation button again.