Bitcoin staking is one of the different ways to earn from Bitcoin. Bitcoin is a digital currency underpinned by blockchain technology.
Most users on the network must validate every transaction on the Bitcoin blockchain network. And this is where Bitcoin staking comes in. In addition, you can visit bitcoinsup to trade Bitcoin more effectively.
Bitcoin staking is like earning interest or dividends on your assets. You still hold your staked Bitcoin and earn income from it, which differs from earning active income through trading Bitcoin.
This article identifies the major pros and cons of Bitcoin staking.
Pros
Bitcoin staking has various pros that motivate investors to try it.
Passive income earner
One of the main advantages of Bitcoin staking is that it provides a good way of earning passive income. You can increase your earnings by adding Bitcoin staking if you are already a Bitcoin investor.
Unlike active income earning through Bitcoin trading, where you need to spend more time and resources, staking Bitcoin is simple and easy, letting you earn income passively as you focus on other essential things.
High returns
Staking Bitcoin has a high potential for high returns. Generally, you can earn as much as 20% yearly from staking Bitcoin.
Overall, the average return in Bitcoin staking is approximately 5%, which is still higher than you would expect from your savings or dividends.
Low cost
Staking Bitcoin does not require investment in any equipment. You only commit part of your Bitcoin to validate transactions on the blockchain. And this makes Bitcoin staking cheaper.
The low investment cost also means the potential for higher returns is also high.
Satisfaction
While earning passive income is suitable for any investor, Bitcoin staking has the advantage of making one feel satisfied because of being part of the blockchain project.
Most people who opt to stake Bitcoin already have an interest in Bitcoin, and getting a chance to be part of the community that validates transactions and supports the network can be fulfilling.
Cons
Despite having advantages, Bitcoin staking also has some drawbacks.
Locked up Bitcoin
A significant drawback of Bitcoin staking is that you can have your Bitcoin held up for extended periods. When you stake part of your Bitcoin, it usually has a lock-up period.
You cannot sell, trade, or use the staked Bitcoin during this lock-up period. If the period is long and you need to sell or trade your Bitcoin urgently, you won’t be able to do so.
Security Risks
The easiest way to stake Bitcoin is by using crypto exchanges. When you use a crypto exchange, you let the crypto exchange do the work for you.
Essentially, you are entrusting your Bitcoin to the crypto exchange. And this creates a security risk. Criminals steal most Bitcoins from crypto exchanges.
Volatility
Bitcoin is highly volatile. While you can make good earnings from Bitcoin staking when the prices rise, you can also realize lower profits or even lose part of your Bitcoin when the price falls.
Therefore, staking can be a less profitable venture that could lead to losing your Bitcoins.
Take Away
Bitcoin staking is a good strategy for earning passive income. Yet, before venturing into it, it is essential to understand the pros and cons.
As discussed in the article, staking Bitcoin has various advantages and disadvantages. Depending on your assessment of these, you should make an informed decision whether to start staking Bitcoin or not.
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