Staking. Find out all about it. - Bitfinex blog
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30 Nov Staking. Find out all about it.

Posted at 12:32h in Education by

What is Proof-of-Stake (PoS)?

Proof-of-Stake is a cryptocurrency consensus mechanism for processing transactions and creating new blocks in a blockchain. A consensus mechanism is a method for validating entries into a distributed ledger and keeping this ledger secure. 

How does Staking Work?

To create and verify a new block, the coins’ owners offer their funds as collateral for the chance to validate blocks. When the coins are staked, their owners become validators. 

Validators are then selected randomly to mine or validate the block. The network randomly chooses who gets to mine rather than using a competition-based mechanism like proof-of-work. The network chooses validators based on the size of their stake and the length of time they’ve held it. So the most invested participants are rewarded. If transactions in a new block are discovered invalid, users can have a certain amount of their stake burned by the network in what is known as a slashing event. 

To become a validator, a coin holder must stake a specific amount of coins. For instance, Polygon will require only 1 MATIC to be staked before a user can become a validator, while to become one on Ethereum, users must invest 32 ETH.

Blocks are validated by more than one validator, and when a certain number of the validators verify that the block is accurate, it is finalised and closed.

The Bitfinex Soft-staking program allows users to easily generate rewards by simply holding digital tokens on Bitfinex. Staking rewards can be as high as 10%* per year for supported Digital Tokens. Please read the FAQs for details.

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