According to Bloomberg’s report on February 1, some cryptocurrency investors have found a way to safely invest their virtual currencies in order to curb losses. Using a method called staking or forging, funds are stored in digital wallets where they are used to validate transactions that create a block on blockchain networks. Investors, on the other hand, are rewarded based on their staked funds.
Crypto Investors are Now Staking to Withstand Bear Market
Per the report, cryptocurrency investors are now staking their digital coins in order to withstand the bear market. In this case, digital assets such as Decred, Tezos, EOS, Cosmos, and Livepeer are held in such wallets. Each of these is then used to verify the transactions that create a block on the blockchain.
Furthermore, an investor can get between 5 to 150 percent as their interest. The profit earned depends on how many coins and the amount that was held in these wallets. In the same vein, this differs from the operation of miners where they compete to be the first to solve mathematical puzzles and then be rewarded.
More Companies Join the Staking Business
In addition, more companies have joined this line of business in order to serve these investors. According to reports, some of the companies in this industry are Staked, EON Staking Inc. and Figment. The same has been said about platforms that manage their clients’ cryptocurrency such as Anchorage. The latter is reportedly offering staking services as well.
Kyle Samani, managing partner at Multicoin Capital Management who spoke with Bloomberg said:
Regardless of market conditions, staking provides returns denominated in the asset being staked.. If you’re going to be long, you might as well stake.
Risks Involved in Staking
While forging may sound like a better option for the long term investor, it is not as rosy as it seems. The media also said staked coins are not usually released immediately as per when an investor demands it. It could take up to a few hours and even days before the network releases them.
The same is reported about the level of trust that is required given that people have to rely on companies to stake on their behalf. In the opinion of Aaron Brown, a writer for the media, a company’s negligence or the operation of an insider may be reported as a security breach by the startup. “So while I don’t specifically predict problems, no one should be surprised if they crop up”, he added.