14 Dec 2021, by Bittrex Team
What do you do with your crypto once you own it? This is a common question for crypto holders, new and old, and many users consider staking.
Staking, despite its connotation in the space, does not necessarily entail earning rewards. Instead, the function refers to users depositing their eligible coins into a smart contract to take a number of actions:
- Secure a network (i.e. Proof of Stake)
- Earn yields with yield farming / liquidity pools
- Vote on governance matters
Proof of Stake (PoS)
With certain Layer 1’s including (but not limited to) Cardano, Tezos, Polygon, and Ethereum 2.0, the networks are secured by PoS. This is in contrast to Proof of Work (PoW), the energy-intensive security mechanism that currently powers the Bitcoin and Ethereum 1.0 chains.
With PoS, users stake their applicable coins to play the same role as PoW miners. They validate transactions, and if they are found by other validators to be a bad actor, their staked position is taken away. With Ethereum 2.0, for instance, users can operate a full validator node with a minimum stake of 32 ETH. Users with less can still stake their ETH in mining pools and earn rewards relative to their stake, making PoS a more accessible way for users to participate in network security and earn rewards. It is also worth noting that with PoS, users stake their assets on a simple computer (instead of the energy-intensive computing machines required for PoW), so PoS is considered an environmentally-friendly alternative to PoW.
Staking in yield farming and liquidity pools
Yield farming and liquidity pools, which are on-chain activities popular on smart contract / EVM platforms like Ethereum and Polygon, give users the opportunities to stake coins or pairs of coins into smart contracts and earn rewards denominated in crypto in exchange.
In this case, staking references “locking up” of your coins in the smart contract (e.g., Compound or Aave vaults). These rewards are earned by stakers to encourage holding and to reduce token velocity on the market.
Staking in governance
On different decentralized protocols like Tezos and some DeFi protocols like Yearn, token holders have voting rights in what is known as on-chain governance.
Users can stake their coins and vote on proposals in the community. Depending on the network or protocol, proposals are often made by community members or project team members, and the most popular and significant ones rise to the top and can create network effects around not only the vote, but the issue at hand.
In the case of protocols like Ethereum-based Augur, users stake their REP tokens to have on-chain consensus. Where there’s a disputed prediction market event, these users stake their REP tokens to the outcome they think is correct, allowing the Augur community to come to a consensus at the protocol level.
Start Providing PoS for Cardano on Bittrex
Stake with Cardano (ADA) directly from your Bittrex account! Eligible users can opt in to help secure the Cardano network and earn staking rewards on the ADA tokens in their Bittrex wallets. Bittrex has contracted with a third-party staking service to provide you with the convenient option of staking your ADA tokens, without having to leave the Bittrex platform.
Bittrex users will enjoy:
- Consistent payouts. Rewards are earned daily and distributed monthly.
- Flexible trading and staking. Opt in or out anytime. Add or withdraw anytime. Trade while you stake.
- Starting with 1 ADA. You don’t need a large number of coins to stake ADA on Bittrex. Start with just 1!