DeFi staking is a way to earn passive income by staking your cryptocurrency on a blockchain network using DeFi protocols and technologies. It is a rapidly growing practice in the crypto industry due to the decentralized nature of finance (DeFi). #DEFİ Staking is attractive to many crypto enthusiasts, so it is important to be aware and understand the process in detail. $BTC
What is DeFi?
Decentralized finance (DeFi) is a financial ecosystem based on blockchain. All transactions are recorded in encrypted form and stored in a public ledger.
Compared to the classic financial system, where the transaction history is managed by a bank or other institutions, there are no intermediaries in the blockchain. Transactions are verified by users in the same blockchain network by solving mathematical problems and adding new blocks to the chain.
This decentralized approach provides users with anonymity while keeping their data safe. Additionally, payment verification and ownership records protect users from fraudulent activities. Therefore, DeFi is considered to make financial transactions safer and more transparent.$BNB
How does DeFi staking work?
DeFi staking means locking cryptocurrency in a smart contract to keep the blockchain network running. In return, stakers are rewarded with additional coins. To understand how DeFi staking works, you need to know the basics of the process.
Proof-of-Stake (PoS) mechanism. This means locking a certain amount of cryptocurrency as collateral, which allows transactions to be verified and new blocks to be created.
Validator nodes. These are nodes that store a full copy of the blockchain and allow consensus to be reached. Nodes are managed by validators.
Staking pools. If users don’t have enough cryptocurrency to stake, they use pools, where funds from several participants are combined to reach the required threshold. This increases the chances of a transaction being selected for verification. As for rewards, pool participants distribute them among themselves depending on their contribution.
Smart contracts. These are technologies that form the rules and conditions for staking and unstaking. They also automate the process of distributing staking rewards.
Penalties and fines. To maintain the integrity of the network, PoS mechanisms include restrictions. If validators fail to fulfill their obligations, part of their assets are confiscated. This measure prevents malicious actions and ensures the security of a particular network.$USDC