Can I earn money by staking coins?

In the cryptocurrency world, everybody knows about mining bitcoin. In the ”old days”, people could setup mining on a regular home computer with a powerful graphics card installed and actually make a dime from time to time. But as Bitcoin is getting harder and harder to mine, people let the big players mine bitcoin and look to other coins to try to make a profit.

Normally you mine with your computer and get coins as a reward. That’s how transactions are confirmed. That’s called Proof of Work (PoW) and is referred to as mining.

But there is also a System called Proof of Stake (PoS), where transaction confirmations are not done with hardware, but with already owned coins. An amount of your coins are ”on the stake”, while they are used for staking. That depends a little on the implementation, but basically you get a certain percentage of your coins as a reward.

Some people think, they can ”earn” coins this way, but that’s nonsense, because if the market cap stays stable, the single coins are worth less, if new coins are generated. So you just “keep” your value, if you are staking. And you ”lose”, if you are not. It’s like in a bank if you get 2% interest and the inflation is 2% as well. You only “earn”, if there are transaction fees and if those are also paid to the staker.

Huge thanks to Dwarrel Corner for originally posting on telegram.

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