Crypto Academy Contest / S1W3 – Blockchain through the concepts by @mccoy02

Hi there steemitians it's been a while since I made a post on steemit crypto academy I guess am fully back to start with my weekly post on the platform thanks for always keeping users engaged with the weekly engagement activities.

Blockchain is a broad topic of discussion that can not be exhausted in a single post it needs collective idea from different expert to communicate terms involved in blockchain register here I will choose a term and discuss it with my readers I hope you will enjoy reading thanks for your time.

Tell us about your favorite concept or term related to blockchain, try to be explanatory and make sure to give your opinion. (For example Decentralized, Genesis Block, Hard Fork, Proof of Stake.)

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Staking has been considered a passive means of earning in the crypto space just like in the centralized system where a user deposits his fiat on a fixed account for a specific duration and gets fix reward for locking up such money this system is also applicable with cryptocurrency we have seen with the increasing rise of DeFi world how staking has become quite popular for investors to lockup their crypto for months or days and get rewarded.

Staking involves locking up a certain amount of crypto token in either a wallet or an exchange and in return get reward for staking such token.

For proof of stake, to validate and produce new blocks staking needs to be done through validators through the means of staking their coin in the protocol network here validators will be selected randomly at a specific interval to validate a new block on the network if a validator fails to validate new block at a required time his staked coin can be at risk unlike the proof of work that requires miners to solve complex computing work with simple staking mechanism using staking the network can be secure and maintain.

The image below shows a typical example of staking done with from my binance exchange account, here I staked binance BNB for 30 days with an APR of 70% which will be rewarded using a $GAL token Note GAL is a new token listed on binance interested participant need to stake their BNB to get $GAL as reward token.

Some blockchain can reward users with different token with other reward using the block native token.

1. Secure a network: staking is an alternative to proof of work activity in staking validators who are selected to approve the proof of stake transactions need to stake the required amount of staked token to take part in the validation of network transactions these validators help in maintaining the network security by making sure transactions are processed on time to avoid network congestion.

2. Encourage holding: when users lock up a certain amount of tokens in their wallet they help reduce sell of pressure in the market and this process increase token value as more users lock up more token the value of such token will increase which also reduces excessive circulating supply of token which increase total locked up the value of a token.

3. Passive earning: as stated in the introductory section staking is very rewarding when an investor locks up his token holding for a specific time they get rewarded.

4. Voting: staking allow users to have voting power with a user's locked up token they can be able to make decisions such as participating in the governance system voting of a blockchain network.

A particular shortcoming about staking is once tokens are been locked for either let's say 30days such user can not have access to the lock-up token until the 30 days is complete, in a market crash when such token begins to depreciate such holder have no choice but to watch his locked up token fall to zero in essence staked tokens can not be used for emergency purpose.

With the help of validators who are distributed across different regions proof of stake with the help of staking is use to help secure a blockchain network, with a maintained balance on how transaction activities are been processed with staking stakeholders who stake a high number of tokens are mostly selected as validators to help in fast processing and validation of transaction on the chain.

Sure blockchain activities would have been fully operational without the existence of staking activity.

Since the use of staking can not be emphasized without mentioning proof of stake the alternative term for staking is the proof of work where miners compete to solve complex puzzles using a sophisticated computational device, unlike the staking concept where validators are chosen randomly through a voting system to validate users transactions although the proof of stake through staking process seem less complicated when compared to the proof of work concept.

The only area in which I think staking needs to be worked on is the aspect where only large stakeholders can be able to participate in the validation of block transactions which does not give equal rights to small investors there is a need to allow both small investors who stake on the network to enjoy such rewarding system.

Conclusion

Staking in crypto is a low-risk means of generating passive income through the concept of locking up tokens in a wallet for a specific period, it helps secure the network by creating new blocks encourages holding of tokens, and also gives users the right to participate in network voting system by holding a high amount of a platform token a user can apply and be chosen at random to become a validator which is very rewarding validators helps in processing users transaction on the blockchain.