Bitcoin undeniably has gained fame and laid the foundation of cryptocurrencies, being the first generation cryptocurrency. The first of it kind, Bitcoin has amassed interest, enthusiasm and investments from millions across the globe. However, the players in the crypto space being astute, quickly realized the major concerns and environmental impact that Proof of Work brought with it. An alternative was found to this energy inefficient method; the Proof of Stake consensus that verifies transactions and validates blocks without energy consumption.
With the development and growth of the cryptoverse, as more coins join the race, Proof of Stake is gaining momentum leaving the Proof of Work consensus behind. Although, Bitcoin still operates on PoW, Ethereum has plans to shift to the PoS consensus soon.
So why is everyone moving towards the PoS consensus? Read our previous blog to take a deep dive into the question.
Also, it’s becoming quite evident that people staking cryptocurrencies are reaping huge profits as compared to that with the PoW algorithm. And then, enter the Staking-as-a-Service platforms and staking pools. So let’s gain insights on what are staking pools and Staking-as-a-Service.
Staking as a Service
Earning passive income through staking is the new social signal. For investors who do not have the time or inclination to indulge into the staking process, but are interested in grabbing the opportunity staking has in store for them, staking-as-a-service platforms are the right destination. These platforms literally provide staking services to anyone interested in garnering the rewards and profits while having to not do anything. All that a person holding crypto assets needs to do is delegate the token to a validator and have the validator perform staking on his behalf.
One such platform is Livepeer, which provides an annual staking yield of about 158.14%. The token holders known as delegators bond with transcoders on the platform and stake their LPT to earn fees and rewards.
Read the Livepeer staking guide to learn about how Livepeer works.
Staking Pools: The new trend in the crypto space
Staking pools are built to accommodate small or medium investors as they face challenges to staking with a very low investment. Small investors often lose the opportunity to validate blocks as their stake is very less and so is the probability for them to be chosen as a validator. Enter Staking Pools.
Staking pools unite stakeholders by allowing them to pool their holdings to stake as frequently as a big investor would and maximize their returns. The bigger the staking pool, higher are the chances for the staking pool to be selected to verify a block. Staking pools are beneficial for small to medium investors as they are incapable of staking as much as a big investor.
Staking Solo vs Staking Pools
Staking pools focus on combined staking whereas staking solo is staking whatever you hold. When staking solo, a person has very slim chances to be chosen to validate the block as the stake is less than the value of a staking pool.
For example a person staking 1000 coins solo against a staking pool with 1 million coins, is no competition to the staking pool. Moreover, the person would have a higher profit through a staking pool than staking solo.
Why go for Staking Pools?
- Higher Earnings - With a slim chance for a small stake to be chosen as a validator, staking pools benefit investors with higher and predictable earnings. Large staking pools have a higher probability of getting picked to validate a block and as a result provide consistent and frequent rewards.
- Always connected - A server with high speed internet connectivity is essential to run a masternode. While solo players face difficulties to always stay connected due to complex server setup, maintenance and unreliable internet or electricity services, staking pools guarantee a continuous connection by running on a virtual private server or their own hardware.
Trust is the key factor demanded by a staking pool. Any person contributing to a staking pool has limited knowledge about the reliability and skills of a company staking on his behalf. Moreover, there still exists a threat of hacking attacks and scams due to lack of monitoring.There is lack of transparency and regulatory uncertainty involved in these third-party staking pools that are run by enthusiasts rather than professionals.
Two Types of Staking Pools
Staking Pools come in two varieties, one being embedded which are decentralized and support only the native token of the project. The other type is the multi-blockchain staking pool. Regulated by central authorities, they allow people to stake in small market cap PoS blockchain plans. As a result, people can either stake to a masternode or a Proof of Stake pool.
You can also read the guide containing the top 5 proof of stake (POS) coins for staking .