What is Staking?
Staking, in the world of Web3, refers to the process of actively participating in transaction validation on a proof-of-stake (PoS) blockchain. On these blockchains, anyone with the minimum required balance of a particular cryptocurrency can validate transactions and earn staking rewards.
In this guide, we’ll dive deeper into what staking is and how you can earn rewards using Trust Wallet.
What does staking mean?
When you stake your crypto, you're essentially locking up your funds in your wallet to support the operations of a blockchain network. These operations can include validating transactions and securing the network. In return for staking your crypto, you typically receive rewards, often in the form of additional cryptocurrency.
How do staking rewards work?
Staking rewards are the incentives earned by participants who lock up their crypto to support blockchain networks. The reward can be a fixed amount of the cryptocurrency or a percentage calculated based on the amount of crypto staked and the staking duration.
It’s important to note that the specifics of staking rewards may differ between various blockchain networks.
Here's a bit more detail on the process and roles involved in staking:
Choosing a network: The first step in staking is choosing a network that you want to support by staking your crypto.
Acquiring the necessary crypto: Once you've chosen a network, you'll need to acquire the specific cryptocurrency that the network uses for staking.
Staking your crypto: After acquiring the necessary cryptocurrency, you'll need to lock up or "stake" your coins in a wallet that supports staking. The process will vary depending on the network and wallet you're using.
Earning rewards: After your crypto is staked, you'll begin to earn rewards over time. These rewards are usually paid out in the same type of crypto that you staked.
Within the staking process, there are two key roles
Validators: These are network participants who run nodes, validate transactions, create new blocks in the blockchain, and earn staking rewards for their work. Validators must be technically proficient and willing to invest in hardware and energy costs. The process and requirements to become a validator differ for each blockchain.
Delegators: If you don't have the resources or technical knowledge to become a validator, you can still participate in staking as a delegator. Delegators "delegate" their staking power to a validator by staking their coins with the validator. The validator then does the technical work, and the delegator earns a portion of the staking rewards in return. The specifics of delegation, including how rewards are shared between delegators and validators, vary by blockchain.
Remember, as with all crypto activities, it's essential to do your research before you begin staking. Consider the risks, understand the process, and ensure you use a secure and reliable wallet.
Can I do staking on Trust Wallet?
Absolutely! Trust Wallet supports staking for a variety of cryptocurrencies. To start staking, you simply need to hold the crypto in your wallet and follow the steps to stake it. The staking process can differ slightly depending on the crypto you're staking. Let’s have a look at an example.
How staking works in Trust Wallet
Please note that these steps might slightly differ depending on the crypto you want to stake. In this example we’ll have a look at what it’s like to earn BNB on the beacon chain using your Trust Wallet:
Before we dive into how staking is done using Trust Wallet, you’ll need to create a wallet if you don’t already have one. Trust Wallet is available as a mobile app or you can get the Trust Wallet Extension for your desktop web browser. In this example, we’ll set up a new wallet using the Trust Wallet Mobile App.
Step 1: Download the latest version of the Trust Wallet App.
Step 2: Set up your wallet
- Open the Trust Wallet app, and choose “Create a new wallet.”
- Select an option to back up your wallet.
- Once your wallet is set up, tap on “Start using Trust Wallet.”
Tip: If you already have a wallet that’s not Trust Wallet, you can choose to import that wallet. In this case, you’d choose the “I already have a wallet” option.
Step 3: Ensure you have the crypto you want to stake in your wallet
You’ll need BNB in your Trust Wallet before you stake it and earn BNB, so use the appropriate instructions below to get some BNB into your wallet.
- Use these instructions to buy crypto directly in your Trust Wallet.
- Use these instructions to deposit crypto into your wallet.
Step 4: Stake your crypto to earn rewards
We’re using BNB for this example, but you can stake any of the assets available. To see other staking options, go to: “Discover” -> “Staking”.
- Start by navigating to the BNB asset via the main wallet page, or if you cannot find it there, you can select the toggle icon in the top right-hand corner, then search for it.
- Select “BNB Beacon Chain BNB”.
- Select the “More” button and then choose “Stake”.
- On the Staking page, select “Stake”.
- Choose the amount you want to stake, select Next, and then follow the remaining instructions to stake your BNB.
Once you’ve completed the steps, it’s just a matter of waiting until your rewards appear. This will be dependent on the protocol and asset you choose to stake.
What are the risks of staking?
Staking, like other investment-related activities, comes with its own set of risks. These include:
Slashing: Some PoS networks employ a mechanism known as "slashing", where a portion of the staker's holdings can be taken away if they act maliciously or fail to stay online and uphold network responsibilities.
Liquidity: While your crypto assets are staked, they are locked up and cannot be sold or traded until the staking period is over or until you decide to unstake them, which could take some time depending on the network.
Market Volatility: The value of your staked assets can fluctuate with the market. If the price of the cryptocurrency drops significantly, so will the value of your staked assets.
As always, be sure to do your own research before staking any asset.
Are staking rewards taxable?
In many jurisdictions, staking rewards are considered income and therefore taxable. However, at Trust Wallet, we do not offer financial or legal advice. It's important to keep track of your own records and consult with a tax advisor to ensure you're in compliance with your local tax laws. Remember, tax laws can vary widely depending on your location and individual circumstances.
We hope this guide helps you understand more about staking and how it works, especially in relation to the Trust Wallet. Always remember to do your own research and reach out to our support team if you have any questions.
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