Insights

Cryptocurrency is a virtual or digital currency that is based on blockchain network which can be used to buy goods and services. It is hard to define its legal standards as it is not backed my government, and its form of recognition differ from one country to another.

Crypto staking is an act of locking up one’s own cryptocurrency holdings. The tokens are staked to maintain the integrity of blockchain and helps to validate the transactions. In return, the staking rewards are issued by the network that are usually in the form of additional tokens. Crypto Staking is legal in India but with strict tax obligations. The Ministry of Finance requires all the Virtual Digital Asset Service Providers to register with Financial Intelligence Unit of India. 

Types of Crypto Staking:

1. Solo Staking: It is a method of participating in a blockchain network by running holder’s own validator node (Installing and configure specialized software that stays online 24/7). It denotes highest level of control and full share of rewards. 
2. Pooled Staking: Multiple crypto holders combine their assets. The investor delegates to a staking pool which collectively operates as a validator node. 
3. Protocol Staking (Staking-As-A-Service): The users delegate their crypto assets to a specialized platform that manages the technical operations of staking. The users will retain their ownership but entrust staking responsibility to third party. 
4. Centralized Exchange Staking (CEX): Rewards can be earned by depositing their crypto in a centralized trading platform. The exchange manages all technical operations.
5. Liquid Staking: Users can earn reward on staked crypto assets without locking them up. Instead of immobilizing tokens, users receive liquid staking tokens that are tradable derivates that will represent their stake. 

How it Works: 

1. Deposit the crypto assets into a staking wallet. These funds are like security deposit. 
2. The protocol of blockchain will randomly select the validators. The selection is influenced by stake size, performance history, and the time. 
3. The rewards that validators earn are shared proportionally with the stakers.  
4. Validators should follow the protocol rules, and avoid malicious behaviours. 

Benefits: 

1. A passive income can be earned without trading. By simply locking the cryptocurrency for certain years, the holders can earn additional tokens. 
2. By staking their crypto assets, individuals earn governance power within the network thus gaining the ability to vote on key decisions and contribute to the security. 
3. The profits can be compounded and it will boost the profits automatically.

Risks involved: 
One of the major risks involve in crypto staking is that, the crypto assets will be locked for certain period. During this time, the holder can’t sell or trade those assets. If in case the market drops and they want to avoid further losses, the holders will be stuck until the lock-up ends, which can take several days, depending on the market. 

Conclusion: 
Crypto staking plays a key role in supporting both individual investors and the wider blockchain ecosystem. It is surely an attractive way to earn passive income. Particularly, the concept of staking has proved to be an attractive way to earn passive income. Therefore, Crypto Staking has its both positive and negative, it is always essential for the those who intent to stake the crypto assets to research carefully and understand the risks involved before getting started.