Staking is an increasingly popular way to make income passive as a crypto investor. It represents a way for people to get involved with helping validate blockchains and creating new network links without the hassle and expense of mining.
But knowing where to start as a beginner can be quite daunting. There are lots of different cryptocurrencies out there, all with different values and levels of applicability. So, how can you know what tokens are worth staking?
In this article, we take a look at the Cosmos network and its native currency ATOM to determine whether or not it is worth staking. Read on to find out more about this relatively new network and to learn about Cosmos staking rewards.
What Is Staking?
In staking, crypto consumers hold some of their crypto coins rather than spending them. There are several ways this can be done, but most often investors bring together their unspent currency in something called a staking pool.
Staking is carried out as a means of validating the blockchain network the currency belongs to and creating new blocks in the chain. If you’ve ever heard of proof-of-work and proof-of-stake consensus mechanisms during your time researching crypto, this is the staking to which the latter refers.
In return for staking their cryptocurrency, stakeholders are rewarded with additional earnings. Exactly how much depends on a few factors, including the value of the coin, its applicability, how long you stake it for, and the method you choose to stake the token.
What Is the Cosmos Network?
Cosmos’ development team describes the network as “an Internet of blockchains.” That is to say, it is an expanding ecosystem of blockchains capable of communicating with one another. This is significant, as other types of blockchains are closed-circuit and require an intermediary to communicate with one another.
The network was only launched in 2019, but in that short time, it’s already gained a lot of interest. This is no doubt in large part due to its high levels of customizability and interoperability.
Cosmos is powered using its native ATOM cryptocurrency. The coin plays a central role in the interoperability between blockchains and therefore has the potential to become more valuable the more blockchains are incorporated within the network.
Is Cosmos Worth Staking?
Now that we’ve explained what the Cosmos network is, it’s time to answer the big question: is it worth staking?
As is the case when staking any kind of cryptocurrency, caution must be exercised when making a decision here. That being said, Cosmos’ revolutionary nature could make it a good staking opportunity for long-term investors. Its interoperability makes it a popular choice among many crypto stakers.
Additionally, the rewards you can earn are considerable. Those who stake Cosmos tokens can earn an annual passive income of up to 10%. This is understandably a very attractive prospect for people interested in investing in cryptocurrency.
On top of that, staking Cosmos in turn validates the network and boosts its growth. For those who are interested in what uses a network with such interoperability might have later down the line, the chance to support such technology may be appealing.
Is Staking ATOM Tokens Risky?
Staking any kind of cryptocurrency can be risky. When considering making an investment yourself, there are a few things you should first consider:
- You will lose control over the coins you’ve staked. Not only will you be unable to trade any staked cryptocurrency, but if the staking pool is attacked by hackers you could end up losing your assets. Staking pools do take measures to help prevent this sort of event, but there is still a chance you could lose funds when entrusting your coins to them.
- Staking pools and other staking platforms take a cut from your reward. The size of the cut is influenced by factors such as the size of the platform and the popularity and value of the crypto in question. Most places charge between 1% to 25%. When looking for a suitable staking pool, make sure that you do your research to ensure you’re not losing out.
- The amount of money you get for staking currency isn’t always a lot. Your rewards depend on a few factors, such as the coin’s value, its applicability, the number of tokens available, and more. But the truth is that relatively few coins pay stakeholders very much.
This article has explained what the Cosmos network is, why it may be considered for staking, and what risks to keep in mind if you do decide to invest in it.
The Cosmos network holds a lot of potential; in the future, who knows how influential its technology will become? Nonetheless, as much as it may be an attractive staking option, make sure you consider all angles of your investment properly before putting money into it.
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