Staking is now hugely popular across a wide array of cryptocurrency exchanges. It involves a user putting up something valuable to them, like a portion of crypto funds or their reputation, so that they can become validators on any given blockchain.
Although it's traditionally done online, you can stake offline using a method known as cold staking. So, what exactly is cold staking—and is it better than the online version?
What Is Cold Staking?
You can stake several cryptocurrencies, including Polkadot, in various places. Cold staking involves using an offline cryptocurrency wallet. In most cases, you'll use a hardware wallet for this; your coins will be stored in a blockchain when you use these, but you'll need to verify transactions offline.
Your rewards will differ depending on yur individual situation. If you remove your funds before the staking period ends, you won't earn any of these.
There are a number of companies that currently support cold staking, including Binance, Callisto, and Coinomi, both of which can be accessed either on a desktop or via their mobile apps. But is it wise to choose cold staking over online staking?
Is Cold Staking Better Than Online Staking?
At the moment, cold staking is a lot less common than online staking. Not as many exchanges offer cold staking, with the Proof of Stake mechanism being so popular across the board. Most exchanges offer online staking, whereas significantly less support cold staking. So, if you want to get into cold staking but already have a preferred exchange, it's important to keep in mind that said exchange may not be able to offer this feature.
Additionally, with online staking, you can join a staking pool. This is typically done when users don't have the minimum amount of crypto to stake independently. This often happens with Ethereum staking, as users need to put up tens of thousands of dollars worth of ETH (32 ETH, specifically). But staking pools don't exist with cold staking.
However, cold staking is significantly safer than online staking. This is because of the different storage methods used by the two different staking types. The use of software wallets in online staking isn't necessarily bad, as reputable software wallets still have high levels of security. They are, however, at risk of cyberattacks.
Cold staking involves the freezing of crypto funds in offline wallets. This makes it far more secure, as your funds will be entirely protected from cybercriminals. Additionally, cold staking is more environmentally friendly than online staking. This is, again, because of the storage methods used. It requires significantly less energy to store crypto funds in offline wallets than it does to store them online, so cold staking outshines online staking in an environmental aspect.
So, how do you cold stake? Well, this differs depending on the exchange or exchange app you're using. We recommend first confirming whether or not the exchange you have in mind even supports cold staking to begin with. Then, have a look on their website to see what you need to do or have to get started with cold staking.
Staking Cryptocurrencies Comes in Several Forms
Staking is now being considered by more and more crypto owners every day. It's an easy and reliable way to earn rewards on your frozen funds without doing very much at all. If you're a beginner to cryptocurrencies, you might find that it's an excellent way to get started with investing.
If you're not a fan of traditional online staking, why not give cold staking a try? Earning rewards while being kinder to the environment doesn't sound like a bad deal at all.