Let us provide you with some information about staking and how it works.
As you know, in all blockchains, transactions need to get validated. In most cases, it’s done in a process called mining (also referred to as Proof of Work or PoW). With PoW, the miners use their computing resources and consume vast amounts of electricity.
Unlike Proof of Work, Proof of Stake makes the consensus mechanism fully virtual. Even though the principle is the same as in PoW, the way to reach the end goal is completely different. In PoS, instead of miners, there are validators. They lock up some of the crypto they own as a stake (and that’s exactly where the term “staking” comes from) in the system. Then, validators bet on the blocks they think are likely to be added next to the chain. When the block gets added, the respective validator gets a staking reward in proportion to their stake. Obviously, in order to earn such rewards, a user needs to hold the minimum balance of a digital asset eligible for staking. The more you hold, the more the platform you use can stake on your behalf, and the more potential rewards you receive. Note that rewards are also impacted by the frequency of blocks produced by the cryptocurrency’s network.
At Coinbox.org, staking is currently available for ALGO cryptocurrency.
Algorand (ALGO) is a cryptocurrency network that focuses on payment systems. Blockchain technologies developed by the Algorand team allow the users to reduce the cost of blockchain storage while being sure of the maximum security and decentralization.
The fundamental purpose of Algorand’s existence is: improving the foundations of the current blockchain paradigm. And it does this with the Proof of Stake algorithm.
Algorand Technology is reliable because:
- Those who hold the majority of funds on the platform are the only ones who can stop other users from making transactions. The owners of the majority of funds are discouraged to engage in dishonest actions as this would only devalue their assets significantly. This guarantees their honesty.
- There is no communication between users. Should there be any malicious users, they would be unaware of who is relevant to the next block generation.
Annual Percentage Yield (APY) means a percentage rate reflecting the amount of the staking rewards projected to be earned over a 365-day period. To date, it’s 6.12% for ALGO in Coinbox.org.