What is Staking? Can it cure me earn passive income with my cryptocurrency? It is risky? And what do I need to know before I get started? Well stick around: now on Crypto Whiteboard Tuesday, well answer these issues and more. Hi, Im Nate Martin from 99 Bitcoins.com and welcome to Crypto Whiteboard Tuesday where we make complex cryptocurrency topics, interrupt them down and translate them into plain English. Before we begin, don’t forget to subscribe to the channel and sounds the buzzer so youll immediately get notified when a brand-new video comes out. Todays topic is staking and how its done on Ethereum. But before we dive into venturing tells take a moment to understand the problem that staking tries to solve. Too, if youre brand-new to cryptocurrencies let me suggest that you start with our what is Bitcoin and what is Bitcoin mining videos before watching this one to gain a solid foundation for what well be covering here.Bitcoin and other decentralized cryptocurrencies accommodate the promise of casting coin digitally without any central dominion. First, the solution to managing a blockchain, which is a fancy term for a record of balances that isnt controlled by any one entity, was done through mining. Mining is sort of a competition where potent computers try to guess the solution to a numerical question. Whoever spots the mixture first, gives the right to write the next sheet of business, also known as a block, into the ledger. With mining, the more powerful computer you use, the more suspicions it is feasible build in a few seconds, increasing your chances of winning this race. Thanks to the laws of math and probability, it is highly unlikely that any single person or group will gain a monopoly over informing the ledger, and thats how decentralization is maintained. Minings technical term is proof of work – because by exposing the right solution, miners prove that theyve put in a lot of work, as there is no other style to get to the solution aside from expend computing ability to invariably work at trying to guess it.Proof of work is what is known as a consensus mechanism since its layout is to create an agreement as to who gets to update the ledger amongst a group of people who dont really know one another or have any other basis for working together. While the proof of work consensus mechanism may be a reliable and secure solution for managing a decentralized record, it’s also awfully resource intensive. Running all of these supercomputers just for the sake of suspecting a number makes up a lot of electricity, amongst other drawbacks. Because of these handicaps, other alternative consensus mechanisms have been suggested throughout the years. One very popular alternative is proof of stake. This means that instead of committing electricity to run computers and try to win a tournament, people will stake actual coins. But how does this all work? Well, you basically lock a certain amount of stores on an everyday computer that is connected to the network. Your computer is called a node in technical terms and your fastened funds are your stake.Once your stake is in place you take part in the contest of which node will get to forge the next block. You recognize stakers forge blocks, they dont mine them. The champion of this controversy is chosen by taking into consideration several factors such as how much money is being staked, how long the silvers ought to have staked for and randomization so that no single entity will gain a monopoly over forging. Generally speaking, whoever earns the contest gets to forge the next block of business and is reinforced in silvers for his contribution to the network. It is important to note that there are many coins that use proof of stake such as Tezos, Cosmos and Cardano, and each silver has different rules as to how it calculates and shares wages. In this video we will focus mainly on how Ethereums proof of stake model works. Up until 2020, Ethereums blockchain was based purely on proof of work; but in December of 2020 a brand-new blockchain named Beacon chain was set up that uses proof of stake: this is also known as Ethereum 2.0 and it runs alongside the original Ethereum blockchain, Ethereum 1.0. In order to join as a validator for Ethereum 2.0 you will need to lock up 32 Ether as collateral, which in turn will make you venturing remunerations. Theres no way to lock up more than 32 Ether on a single node, so if you want to increase your remuneration you can just set up multiple nodes with 32 Ether each. In a few years, Ethereum 2.0 will deploy in full and will mix with Ethereum 1.0. This event, known as the docking, will happen somewhere around 2022, after which Ethereum will become strictly a proof of stake network. Simply after the docking results will you be able to withdraw your ventured Ether and remunerations, which means that staking is mainly helpful for long term Ethereum holders. Now youre probably asking how much Ether is rewarded? In Ethereum 2.0 each validator that participates in the forging of a block gets a percentage of the recently minted Ether when its appointed. The more validators the network has, the smaller the proportion of the wage is likely to be. For example if 1 million ETH is ventured, the max annual compensation for each staker could reach 18.10%, however if 3 million Ether are ventured, that annual wage pace would descent to 10. 45%. You can think of these amounts of brand-new Ether awarded as a pie with a set length, and the more validators you have that want a piece of that pasty – well, the smaller each slice is likely to be. To streamline things there are dedicated venturing calculators you can use that will try and estimate how much Ether youll stir when staking a certain amount of ETH in any particular lane. So where do I sign up? Well, signing up is not that easy, as there are certain limitations you should be aware of. Each daylight, simply 900 new validators are allowed on board, so as you can imagine theres a fairly long waiting list.At the time of posting this video there are almost 20,000 pending validators waiting to join. Additionally, setting up your own validator involves technical knowledge, a dedicated computer and 32 Ether – all of which provide barriers that are likely remain a lot of beings from being able to take part. To build difficulties even more complicated, if you dont set up your validator correctly, or if it goes offline or it is harmful to the network in any way, you may be subject to penalties.These retributions may even include trouncing – a period referring to the destruction of a fraction of your stake and even removal from the network. All of the risks Ive just mentioned are why some added venture answers were created. These alternatives allow for the everyday person to stake ETH and pay venturing compensations – without the considerable effort or gamble of guiding your own node. The easiest course to stake for a non tech savvy person would be to use staking business provided for by exchanges. Certain exchanges allow you to stake your coppers through their validators even if you exclusively have a small amount for a fee.This completely eliminates the hassle of leading your own validator but requires you to forfeit control over your coins to the exchange. Some exchanges will also allow you to claim your jeopardize compensations immediately and not wait until Ethereum 2.0 reachings the docking phase. Another alternative is to join a venture reserve. Exactly like mining consortia, staking kitties are groups of parties joined together in order to get a better chance at forging the next block. Staking funds likewise allow you to deposit less than the minimum staking amount since all of the funds are pooled together. If you decide to go with a jeopardize pool its important to research certain aspects of the kitty; such as reliability of its validators, consortium costs, customer support, the dimensions of the the pool, customer reviews and whether or not you are required to give up your private keys to the pool. Finally, there is the validator as a service option. These are corporations that will allow you to run your own validator on their computers without the need to set it up or maintain it.Since this is your own personal validator, youll still be required to deposit 32 ETH and pay a certain fee for this service. The immense thing about this option is that its relatively easy to set up and you dont need to give control over your coins to another fellowship. Thats it for todays episode of Crypto Whiteboard Tuesday. Hopefully by now you understand what staking is – a lane of participating in the process of revising a ledger of deals by putting your stores at stake and earning payoffs for your contribution.You may still have some questions. If so, just leave them in the comment section. And if you want to learn about the different staking alternatives just take a look at the links weve are shown below. Also, if you want to discover more opportunities for generating interest on your cryptocurrency take a look at our What is Defi? video. Eventually, if youre watching this video on YouTube, and experience what youve seen, dont forgotten to made the like button, subscribe to the channel and click that buzzer so that youll be notified as soon as we post new escapades. It really helps us out a lot. Thanks for connecting me here at the Whiteboard. For 99 bitcoins.com, Im Nate Martin, and Ill see youin a little ..