Secure Delegated Proof of Stake

Staking is an activity where a user locks or holds his funds in a cryptocurrency wallet to participate in maintaining the operations of a proof-of-stake (PoS)-based blockchain system. It is similar to crypto mining in the sense that it helps a network achieve consensus while rewarding users who participate. In staking, the right to validate transactions is baked into how many coins are “locked” inside a wallet. However, just like mining on a PoW platform, stakers are incentivized to find a new block or add a transaction on a blockchain. Apart from incentives, PoS blockchain platforms are scalable and have high transaction speeds.

So, what is Delegated Proof of Stake?

In 2014, a variation of the Proof of Stake (PoS) mechanism was created by Daniel Larimer called Delegated Proof of Stake (DPoS), this mechanism was first used by BitShares, and then other networks like EOS, Casper and Tron followed. By design, DPoS appears to be an implementation of on-chain democracy, where voting and electoral processes are conducted to maintain the network’s integrity and security.

It enables you to delegate your coins as votes. Your voting power is proportional to the amount of coins you hold, which are used to elect a certain number of delegates who run a blockchain system for all users. Typically, the staking rewards are distributed to these elected delegates, who then distribute part of the rewards to their electors proportionally to their individual contributions.

The DPoS model allows for consensus to be achieved with a lower number of validating nodes. As such, it tends to enhance network performance. On the other hand, it may also result in a lower degree of decentralization as the network relies on a small, select group of validating nodes. These validating nodes handle the operations and overall governance of the blockchain. They participate in the processes of reaching consensus and defining key governance parameters. Simply put, DPoS allows users to signal their influence through other participants of the network.

How to secure and choose a Staking Platform

Before hurrying to stake your coins, your choice of staking platform is as important as the rewards. Making the wrong choice may see you lose your rewards and staked coins all together. Here are some best practices when choosing a staking platform:

1. When it comes to new DeFi platforms, never take a founder’s or team’s word for whatever protocol they are trying to introduce, especially if you are a non-tech person.
2. Go over to Reddit and Twitter and see what others are saying about the protocol. Dev users can usually spot the possibility of a rug pull and will usually alert the community for any signs of foul play or code vulnerability they can find.
3. 2. Don’t get too caught up in annualized rewards or APYs. There are many other crucial factors to consider such as the reputation and age of the platform.
4. 3. As much as possible, stick with reputable platforms like Maker, Cool Wallet, etc., instead of risking your crypto wealth on fishy-looking platforms that promise extremely high staking yields.
5. 4. Before staking, read the terms and conditions or rules governing the staking process.
6. The rules take care of things like whether the wallet needs to be connected to the internet 24/7, staked crypto has to go through a cooling period before being unstaked and a minimum staking amount, among other factors.

Crypto staking is a new activity that has revolutionized the face of cryptocurrencies and provides an interesting new use case. As DPoS networks proliferate and grow in influence, so too will this powerful investment tool. If you have idle crypto investments growing dust somewhere, take the time to research and look into staking them. As always though, please do your own research and weigh up your risks.