What is staking?

Modified on Thu, 15 Sep 2022 at 01:09 PM


Staking can be seen as a less resource-intensive alternative to mining. Staking is the act of holding funds in a crypto wallet to secure the network operations of a blockchain. In other words, staking is the act of locking in cryptocurrencies to receive rewards.

On our platform, you can stake your 11UP tokens directly. elevenUp Staking makes it very easy for you to earn rewards - all you have to do is hold your tokens at specified times.

To better understand what staking is, you should first understand how Proof of Stake (PoS) works. PoS is a consensus mechanism that allows blockchains to operate in a more energy-efficient manner, while maintaining a good degree of decentralisation (at least in theory). Let's dive into PoS and see how it works.

What is Proof of Stake (PoS)?

If you know how Bitcoin works, you are familiar with the Proof of Work (PoW). This is the mechanism for gathering transactions into blocks. These blocks are then linked together to create the blockchain. Specifically, miners compete to solve a mathematical equation. The miner who finds the right answer wins the right to add the next block to the blockchain.

Proof of Work has proven to be a robust mechanism to facilitate consensus in a decentralised organisation. The problem is that it involves a lot of computation. The equation that miners try to solve first only serves to secure the network. Some would argue that this makes the many calculations justifiable.

At this point, you may be wondering if there are already other methods to ensure decentralised consensus without a lot of calculations?

 This is where the Proof of Stake comes in. The main idea is that participants must lock their currencies (their "stake") so that at regular intervals, the protocol randomly assigns them the right to validate the next block. Obviously, the probability of being selected often correlates with the number of tokens - the more tokens a participant locks, the greater their chances.

Staking selection process

Thus, what determines whether a participant can create a block is not related to their ability to solve hash challenges as in Proof of Work. Instead, it is determined by the number of staked tokens held.

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