Cryptocurrencies are assets that can be bought, sold, and staked on different platforms. In this article, we’ll discuss staking crypto on Kraken: a popular crypto exchange platform.
What is Crypto Staking?
Crypto staking is a process in which certain crypto holders stake their assets on certain blockchain networks, contributing to securing the platform and receiving crypto tokens as return rewards.
Staking allows individuals to earn passive income without the need to sell their rewards. Crypto staking is carried out using different protocols including Proof of Stake (PoS) and Delegated Proof of Stake (DPoS).
Benefits of Staking Cryptocurrency
Cryptocurrency staking offers numerous benefits to both holders and operators.
- Earn Passive Income
Staking cryptocurrency provides users with an additional income without the need to sell their assets. The higher the crypto tokens staked the higher the rewards earned.
- Development of Blockchain Network
The cryptocurrencies staked are utilized for the effective management and growth of the blockchain technology, thus staking helps in the development of the network.
- SecureThe Blockchain
The staked cryptocurrency is subjected to rewards, and the rewards earned are then utilized to secure the network.
- Integrity and Accuracy of Information Stored
Staking ensures the integrity of past information stored and also assures the accuracy of new blocks added.
- Environment Friendly
Cryptocurrency is staked using the proof of staking consensus mechanism, it reduces the consumption of energy for validating the transactions and creates less harm to the environment.
How Crypto Staking Works?
Crypto staking is carried out using the Proof of Stake (POS) consensus mechanism. This consensus mechanism allows users to earn rewards and also ensures the integrity of the network. The validators are selected to add new blocks based on several characteristics; the coin age and the number of tokens staked, and involves some randomness to ensure chances for every participant to earn rewards.
In return for the coins staked, the token holders are rewarded with a certain number of tokens. The rewards are automatically distributed by utilizing smart contracts and blockchain technology. The person taking the highest number of tokens is rewarded the highest.
Limitations of Crypto Staking
- Uncertain Rewards
Rewards for staking are provided by considering numerous characteristics including the number of tokens staked, network performance, slashing penalties, participation rate, etc. Thus the rewards can’t be guaranteed.
- Market Volatility
Cryptocurrencies are highly volatile, they are affected by social, economic, and regulatory factors. The decline in the price of a token reduces the rewards earned by the holders.
- Security Vulnerabilities
Staking in a platform is done when a person has trust in the platform. The increasing hacks and scams happening in the platform can reduce the number of people staking in the platform.
Staking Cryptocurrency in Kraken
Kraken is a popular crypto exchange platform where crypto traders can buy or sell crypto coins with fiat currencies. The platform supports spot trading, margin trading, futures trading, over-the-counter trading, staking, etc.
The staking mechanism in Kraken allows holders to stake different cryptocurrencies and earn rewards in return. However, due to the existing regulatory guidelines of the US staking is not available in Kraken for US citizens.
How to Stake Crypto in Kraken?
Staking crypto in Kraken is easy and involves only a few simple steps.
Step 1: Create a Kraken account
By filling in the required information username, email, password, and country of residence. A person can create an account in Kraken. Verify the identity by submitting any identity proof.
Step 2: Navigate to ‘Earn’
Once the account is logged in, navigate to ‘earn’ seen at the top of the home page.
Step 3: Choose The Asset to Stake
From the list of available assets, choose an asset that you intend to stake, or else use the search option to find the asset you want to stake.
Step 4: Enter The Amount Of Asset to Stake
After choosing the asset, enter the amount of assets you wish to stake. Some stakes have bonded terms and flexible terms, choose them accordingly. Bonded terms require more time for unstaking than flexible terms.
Step 5: Confirm Stake
Once choosing the amount and associated terms, press ‘stake’ to confirm staking. Your tokens are now initiated for staking.
Step 6: Earn Rewards
After completing a certain period, a holder can earn a reward from the stake, which will be credited to the person’s wallet account.
Advantages of Staking in Kraken
- Staking Rewards in Kraken
Kraken offers staking rewards for different cryptocurrencies. The staking reward for Cardano with an annual percentage yield is 4% to 6% and 4% to 7% for Ethereum 2.0.
- Simplified Staking Experience
The staking program in Kraken allows holders to participate in network validation and earn rewards without the need to operate their nodes or manage complex technical aspects.
Disadvantages of Staking in Kraken
- Limited To Some Countries
Due to the regulatory compliance staking in Kraken is restricted in some countries. The staking facility is restricted to US users due to the strong regulatory guidelines of the government.
- Inefficient Customer Support
Kraken platform offers customer support to needy users, however, the customer support is not effective and useful to many users.
Final Thoughts
Kraken is one of the oldest and largest crypto exchange platforms in the United States. It allows participants to stake their assets in the platform and earn rewards in return. The platform offers a seamless experience for staking, eliminating the need for complex technical processes. Rewards earned from staking can be held, staked further, or sold.
