I am asked questions about Proof of Stake (AKA PoS or Staking) often. What is Proof of Stake? How does Proof of Stake work? How difficult is it so start staking my digital currencies?
PoS is much easier to use in my opinion than PoW (Proof of Work). The effort required to set up a crypto wallet to start staking is minimal, and it can be done on any computer. Almost all staking wallets are simply copies of another digital currency wallet and work exactly the same. The parameters may be different and the graphics may have been changed, but the process to start staking is the same. Here I explain the basics of staking and give the basic steps involved in setting up a Windows or Mac staking wallet.
What is Proof of Stake?
Many coins are using Proof of Stake to contribute to and audit their blockchain. PoS is simply a mechanism where your wallet helps to run the network. In return, you are rewarded with coins for your contribution based on the number of coins you have.
Ethereum (ETH) is in the news right now for their future conversion from Proof of Work to Proof of Stake. Proof of Work requires expensive machines using a great deal of energy competing for the available rewards. Proof of Stake is much less expensive to use, hence it is open to a wider audience and friendlier to the environment.
What is the process involved to get it working?
Some coins, like NEO, stake using a different system where your wallet does not need to be active and you are awarded a different coin (GAS in NEO’s case). The instructions defined here to not cover all possibilities, so be sure to visit the Bitcointalk ANN or community chat channels to learn how the coin works before staking.
Here is the process to start staking almost every PoS digital currency available.
- Download (< 1 minute)
- Install (< 1 minute)
- Sync the Blockchain (variable)
- Password protect / encrypt (< 1 minute)
- Move coins into the wallet (variable)
- Unlock the wallet for staking (< 1 minute)
Step 1 & 2 are easy. You simply find the wallet of the coin you wish to start staking and download the current version. The latest wallet will be found on the Bitcointalk ANN or the project’s website. I do not know the Linux specifics, but Windows and Mac wallets typically are brought in as a zip file. From there it is just a matter of extracting the executable and running it.
For Windows, this usually creates a new folder for the wallet in the Roaming -> AppData directory. This may be hidden, if so a quick Google search for how to show hidden folders on your operating system will show you how to see the new folder. I typically move the executable from ‘downloads’ to this new folder to keep everything in one place.
Step 3 is just a matter of waiting. Every wallet needs to download the entire blockchain. If you are installing the wallet for a new coin, your blockchain is going to be short and may just take minutes. If your coin was created three years ago this might take all day. If it is a long blockchain, join the Slack/Discord channel for the digital currency and ask for the latest ‘bootstrap’ and how to apply it. This is a prepackaged copy of the blockchain that can be downloaded in a fraction of the time it takes the wallet to sync.
Step 4 is just common sense. Look in the menus for the option to Encrypt your wallet and choose a long password. You won’t need to use it much, so just make it something you can remember. Mine is typically the last sentence from one of my favorite books I have sitting on my computer desk.
Step 5 is variable based on how long it takes for you to get your coins into your wallet. There is sometimes a minimum number of coins needed to reliably benefit from staking. If you are planning to stake a small number of coins, be sure to ask in the Slack/Discord channel of the coin if there is a minimum required.
Step 6 is to find the option in the menu to unlock the wallet. When the screen comes up it will ask you for your password and typically has a box that says “Unlock your wallet for staking only.” Be sure the checkbox is selected.
That’s it. Leave your computer on and the wallet open. There is an initial length of time where your coins have to mature before you will actually receive a staking reward. During this time it will appear as if your coins are not staking. When they have matured an icon, usually at the bottom of the wallet screen, will indicate you are staking in some way.
What coins can I stake with?
There are more than I can list here. I have nine different coins currently staking on one computer including PIVX, NXS, TZC, OPC and MONK. In the past I have staked many other coins in my crypto journey. There are hundreds of Staking coins to choose from. You will have to research the coins you are interested in buying to see if you can stake them. One note though… you cannot typically stake a token. To be stakable a coin generally needs to have its own blockchain.
What are some tips and tricks you have learned?
It always helps to have the most connections possible while syncing the blockchain and staking your coins. In your wallet folder there may be a file with a .conf extension. This is your configuration file and you can generally ask the coin community for a list of ‘addnodes’ to put in your file. If there is not already a .conf file, you can create one, you just need to know what to name it. Choose to open this file with notepad or a similar text editing program to change it.
Some coins pay based on a fixed percentage of coins. For example, you may see a project advertising a 3% payout per year. DVRS and HOLD are examples of this type. As a general rule, it usually makes sense to send all of your coins at once to a single address for these coins (as opposed to the next type described below).
Other coins pay a fixed amount, and the more coins you have the more times you get paid. HYP and MAY are examples of this payout structure. You may want to ask the community what the optimal number of coins for staking is on these types of coins. Let’s say you have 50,000 of a particular coin for staking. Sometimes it makes sense to create 5 addresses in your wallet and send 10,000 coins to each address. These 5 addresses will all stake separately, so you will have a better chance to receive a reward.
What is a staking pool?
There are various services where you can send you coins to have them staked for you. There are advantages and disadvantages to using these pools. Please take a look at the page below for more information.
<– There are some more links to staking resources on the left hand side of the page. Check my other posts for more PoS information.