What is Staking?

Staking is to lock the holding token in the cryptocurrency wallet to support the operation of the blockchain network. Essentially, it involves locking up cryptocurrency to get rewards. The pledge of rights and interests also contributes to the operation of the blockchain. Therefore, equity pledges are widely used in the blockchain network of the Proof of Stake (PoS) consensus mechanism or its variants.

Unlike the proof-of-work (PoW) model that verifies and confirms new blocks through mining, the PoS model can generate and verify new blocks through equity pledges. In this way, blocks can be generated without relying on dedicated mining hardware (ASIC). Therefore, miners do not need to compete for the next block through a lot of computational work, but only need to elect PoS verification nodes based on the number of tokens they hold.

Generally, users who pledge a large number of tokens are more likely to be selected as the next block validator. ASIC-specific mining equipment requires a large amount of investment in hardware, while equity pledge requires the use of cryptocurrency for direct investment (and commitment). Each PoS blockchain has its specific token. Generating blocks through equity pledge can make the network more scalable. This is also one of the main reasons why the BEP network decided to change the consensus protocol from PoW to PoS in the upgrade of the BEP Casper stage. When token holders increase their chances of verifying blocks and obtaining rewards by integrating their resources, a stake pool is formed. They combine equity shares and share the final block rewards they receive in proportion. Fund pools are most effective in networks with relatively high barriers to entry (including technical and financial levels).

Usually, the fund pool requires a lot of setup, development, and maintenance. Therefore, many fund pool operators charge a certain percentage of commissions based on the pledge rewards obtained by participants.