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The current bear market always seems to keep dragging on just a little bit longer whenever you think things are about to change. Contradicting reports and researches are always surfacing from prominent and credible sources regarding the market trends. The crypto market environment for ICOs is susceptible to change in a matter of months or even weeks. Such volatility is almost an accepted fact of the market at this point.
In such an environment, new norms are developing and dictating how investors play with the market to get a return on their investments. One of those norms is earning interest on their holdings through something called “staking.”
Staking is the practice where investors’ tokens are left sitting in their wallets as they are used to help validate transactions, create new blocks in the relative blockchain networks. As a reward for their help, they receive coins from the particular blockchain. The proof-of-stake process can generate returns ranging from 5 percent to 150 percent depending on the amount held in those wallets and the underlying coin.
This practice raises yet another argument regarding the proof-of-stake vs proof-of-work. Proof-of-work greatly supports staking. It is drastically different from how transactions are verified for Bitcoin, which follows a proof-of-work system. In a Proof-of-work system, miners are competing to solve complex mathematical riddles and win new coins.
With the seemingly never-ending bear market where token prices have plunged as much as 90 percent during the last year, proof-of-stake supported currencies have made is slightly easier for investors to earn something back from their investments. The examples include Tezos, Decred, Cosmos, EOS, and Livepeer.
Kyle Samani, who is a managing partner at Multicoin Capital Management based out of Austin, Texas, was quoted saying, “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.” A cottage industry has risen out of the practice of forging. Crypto custody services like Anchorage are also starting to offer staking. EON is launching a staking-as-a-service offering in February. They will be charging a 5 percent fee on the interest earned by its clients.
A company called Staken reported that $4.5 million was raised from Pantera Capital Management, Coinbase Inc., Digital Currency Group among other investors. As new companies are entering the market, new ideas are being introduced to the gloomy old timers. How the crypto market will fair one year from now is anyone’s guess. But in the meantime, investors need to find ways to thrive and be able to earn back on their investments. Similarly, crypto companies need to come up with ways to thrive in the same space.