Staking is an important element of the current stage of blockchain development. The staked coins are delegated to a node, which takes part in the governance of a Proof of Stake (PoS) blockchain network. In exchange for offering their assets to be used in ensuring functionality of the blockchain network, the owners of staked coins are rewarded with additional coins that are issued by the blockchain in question.
But the average user doesn’t really care about such technicalities - for many people, the most attractive feature about staking is the ability to gain returns on their crypto by simply holding the coins. It is only logical that crypto exchanges, who act as custodians of coins for their clients, eventually began to provide such services.
Usually exchanges deal with the technical side of things themselves, thus significantly simplifying things for their customers. This way users do not need to care about the inner workings of the staking process and can earn money merely by keeping the coins in their accounts.
I feel that staking and other cryptocurrency instruments will very likely become much more mainstream once there’s enough regulation in the market to allow secure deposits with either full insurance policy or, ideally, government backing. For now, it is still mostly the realm of crypto enthusiasts who are willing to take some extra risks.
By comparison, when you choose to put your money into a traditional bank, you do so with the knowledge that your accounts are somewhat protected, seeing as how banks usually have the backing of a government. Even in the event of suffering losses or the bank collapsing, you won’t be left with nothing – there will be some form of compensation and a bailout scheme.
A bank collapsing is quite rare, as negative occurrences go, but we’ve seen it happen before - in 2008, in particular. And there’s no telling how the economy may change before 2021 is through. But with all that happened last year, many people started looking into alternative schemes to invest their money into, hoping to get better returns. Cryptocurrencies are one such avenue. What these people need to understand is that such investments come with their fair share of risk, compared to official government strategies.
The other thing to be aware of is that more and more countries around the world apply taxation to capital gains from cryptocurrency trading, savings and other crypto activities. The most recent example with India comes to mind – at the end of March 2021 the government there decided that local companies involved with cryptocurrencies would have to declare their crypto holdings for taxation purposes.
I believe that one of the things that will happen this year is that more and more companies will start offering equivalents of individual savings accounts for cryptocurrencies – some companies are already doing it. In the United Kingdom, each citizen gets tax-free allowance for investments into savings accounts, equities and bonds. And with the continuous growth of cryptocurrencies as an investment asset for both retail and institutional market players, one could argue that they should also be added to that list.