The idea of staking is nothing new in the financial world. A good example of this concept comes in the form of Fixed Income Assets. These assets – they could be bonds, exchange-traded funds, or a number of other assets – function by being bought by investors with the understanding that they will be paid a fixed amount of interest and these funds will be “locked” until they reach maturity at which point the initial investment will be returned. Not a revolutionary concept by any stretch of the imagination.
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What is Crypto Staking?
Staking in the cryptosphere has a similar function. The term was originally coined (pun intended) for the Proof-of-Stake mining protocol, a process that deserves a bit of attention. Developed as an alternative of Proof-of-Work – with its huge energy consumption and other prohibitive characteristics – PoS functions instead of on the coins that a validator stakes in order to mint new tokens. A validator locks up a number of tokens in the system that acts as his collateral, which provides them an opportunity to mint new coins and in turn investors receive rewards. The more collateral, the higher the chance of being selected to mint a coin which means more rewards.
There are several staking services out there these days that use this protocol to provide dividends to investors. They create staking pools in which groups of investors drop their tokens into the system that then pays back a percentage to investors that comes from the new coins that are minted: your share depends on how much collateral you have put up as well as the functions of the specific coins they are minting.
Seems like a good deal, right? Well, it can be. You earn interest on your coins just by letting them sit there with little risk day today. It is even possible to make some extra money from doing just that. But what happens if the market dumps? Or there is an opportunity to trade that would bump your holdings up and get you some gains? Tough luck. The downside to staking is that your tokens are locked up, and given the inherently volatile nature of the crypto market this could end in disaster.
The Soft Staking Solution
KuCoin’s new Soft Staking program turns the idea of staking on its head. One of the defining aspects of traditional staking is the idea of the investment being locked. KuCoin’s Soft Staking allows users access to their coins at any time, creating a way to use your tokens to earn while still being able to adapt to fluctuations in the market. With no minimum staking period, users have the opportunity to receive rewards while maintaining the freedom and independence that is so revered in the crypto-world.
The two most important aspects of PoS are security and technological capacity. Since the mechanisms of staking work based on contributions to the network, to compete they must maintain a constant, 24/7 connection. This can prove to be too high a strain on individual user’s devices, not to mention the heightened security risk posed by a constant connection. Single users are unlikely to find it profitable to operate as a single node.
A Different Way To Stake Crypto
This is why we have seen the rise in different staking pools and projects offering to provide these services: lumping groups of users’ tokens together and then divvying out the rewards in order to generate income in a bearish market. This makes sense. However, the concerns of tech capacity and security remain at the core of the issue and must be addressed for each individual staking project.
These same tenets that are so important to the function of staking are exactly the standard requirements for an exchange. This is why KuCoin has decided to embrace this new way to take advantage of PoS protocols. KuCoin is able to take advantage of the infrastructure already in place and use it to function as a secure network to enable Soft Staking, providing returns on staked tokens while maintaining a fluid system to allow users to remain in control of their assets.
Projects Currently Supported By The Program
KuCoin currently supports Soft Staking for these tokens:
The program is promoted as a new way to stake, one that on the surface seems to provide the best of both worlds: the low-risk, passive profit generation from staking, while maintaining full control of your tokens. KuCoin has stated that ROI for the Soft Staking projects will be an annualized return rate based on each project individually. Not the most impressive of returns in comparison with some of the other staking projects currently available, but in combination with the freedom provided it is an interesting prospect.
So, why trust KuCoin? Calling itself “The People’s Exchange”, since its inception in 2017, KuCoin has provided users a consolidated, easy to use, way to interact with the cryptosphere. Featuring almost 400 different currencies and pairs being traded daily, as well as a tiered fee structure for KCS holders, the exchange has become increasingly popular and continues to develop new programs and promotions to gain attention. Staking is simply the latest in a series of innovations developed by the KuCoin team.
The Convenient Way To Stake Cryptocurrency
Soft Staking seems to provide the best of both worlds. It really does appear to be a perfect solution to the issue of forfeiting control of your assets in order to reap low-risk rewards. However, as with most things in this world, if something seems too good to be true, it usually is. We will just have to wait and see what the future holds for KuCoin’s Soft Staking project, but one thing is for sure: it has piqued the interest of many in the cryptosphere and is worth a look for anyone interested in PoS and its growing popularity.
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Agrawal, H. (2019, June 18). KuCoin Review: Is It Safe To Use? (Everything You Should Know). Retrieved from: https://coinsutra.com/kucoin-review/
Chen, J. & Murphy, B. (2019, April 4). Fixed-Income Security. Retrieved from: https://www.investopedia.com/terms/f/fixed-incomesecurity.asp
Rosic, A. (2017). Proof Of Work vs. Proof Of Stake: Basic Mining Guide. Retrieved from: https://blockgeeks.com/guides/proof-of-work-vs-proof-of-stake/
Simpson, A. (2018, December 19). Staking As A Service. Retrieved from: https://www.tokendaily.co/blog/on-staking-as-a-service