3 Things about Crypto Staking You Need To Know

We’ve talked about cryptocurrencies in the previous article. Now, you might have heard about crypto staking. You might want to do it but not sure if it is halal or haram. Therefore, we will talk about crypto staking in today’s article so that you can decide whether you can do it or not.

1- What is crypto staking?

First and foremost, let’s start with its definition. Crypto staking is the process of storing your bitcoin in a wallet and locking it away for a set period of time. People utilize this money placement to receive a reward that is paid in cryptocurrency.

To make it clear, for example:

  1. You have 20 coins and you commit to doing crypto staking so you put them into the wallet.
  2. After 2 weeks you receive a reward of 2 coins because of staking.
  3. You have 22 coins in your wallet now.

Now you might be wondering, where are the 2 coins coming from? Will we get it from no one? Actually, the answer is yes. Software governs the use of cryptocurrencies. The software calculates when new coins are produced and awards are paid. There is no “profit” we will gain from someone’s loss.

Then, what is the benefit of your coins to the blockchain? The staked coins assist strengthen the authenticity and protection of the cryptocurrency’s blockchain, which is why cryptocurrency software is frequently built to promote staking with prizes.

2- Does it contain any unlawful things?

Firstly, let’s not talk about its technical details since it needs more explanation. The method produces a one-of-a-kind situation in which more coins are staked, implying that the network becomes more secure. As a result, the coins we put in generate a worthwhile activity. As you might have heard before that we are not allowed to do something with no value because it is similar to gharar.

Secondly, does it contain riba? Riba is made where there is a benefit from a loan that harmful to others. So, let’s look into crypto staking. Is there any loan? No. there is no one who borrows our money, and we do not lend any money to anyone. Essentially, the software handles the staking transaction. The software’s security increases as we put more coins into it. As simple as that. In conclusion, crypto staking does not contain gharar and riba.

When you earn your staking rewards and the new currency is created, no one else’s cryptocurrency balance is reduced. These rewards are generated by the algorithms for particular cryptocurrency software, not by someone else’s balance.

3- Risks and benefits of crypto staking

Crypto staking, like any other type of investment, comes with its own set of risks. Before you start crypto staking, you should be aware of its risks. The associated risks to crypto staking include:

  • Price volatility. As cryptocurrency is such a volatile investment, price swings are inevitable.
  • Locked up period. Staking may demand you to keep your coins locked up for a set period of time. You won’t be able to do anything with your staked assets during that time, including selling them.
  • Waiting period for unstaking your cryptocurrency. If you want to unstake your cryptocurrency, you may have to wait seven days or longer.
  • Fees. There are costs associated with staking, especially if it is done through an exchange. The fees are usually a proportion of a staker’s rewards.

Besides, there are also some advantages to crypto staking, which we have listed below:

  • You have the opportunity to earn more tokens.
  • Unlike crypto mining, crypto staking does not require any special equipment.
  • You’re contributing to the blockchain’s security and efficiency.
  • It is less harmful to the environment than crypto mining.

Staking is another way to show your support for a cryptocurrency’s blockchain. These cryptocurrencies use staking to verify transactions and keep things running smoothly.

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