Bittime -How to stake Near? Listen until the end, okay?
NEAR is the native token of the Near Protocol network which plays an important role in carrying out various key functions of the platform.
First, NEAR functions as a utility token to pay network fees (gas) on each transaction processed. These fees are then burned, thereby acting as a negative inflation mechanism that maintains the stability of the NEAR value.
Second, NEAR is also utilized in the staking process. Users can temporarily lock their NEAR tokens to contribute to network security.
As a reward for their participation, both validators and stakers will receive epoch rewards, which are prizes that are given periodically.
With these two key functions, NEAR becomes a critical element in the Near Protocol ecosystem , driving user participation and the long-term stability of the network.
What is NEAR Protocol (NEAR) Staking?
Staking NEAR Protocol is the process of locking up your NEAR tokens in favor of validators running the NEAR network.
Validators play an important role in securing the network by validating transactions and generating new blocks. The reward for supporting validators is what is called a staking reward.
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How Does NEAR Consensus Work?
Near Protocol uses an innovative consensus algorithm called Nightshade. Nightshade is based on the Proof-of-Stake (PoS) mechanism , but comes with several key innovations to improve scalability and security. Some of Nightshade's key features include:
Shared transaction processing (sharded transaction processing)
The network is divided into small clusters or "shards", each processing a portion of the transactions on the network. This allows the network to achieve high transaction throughput by parallelizing transaction processing across multiple shards.
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Adaptive transaction batching
In this system, transactions are grouped into “batches” and processed together. NEAR Protocol uses a special algorithm to determine the optimal batch size for each shard, allowing the network to maximize throughput and minimize transaction costs.
Dynamic validator pool
Nightshade uses a dynamic validator pool to increase security and decentralization. In traditional PoS systems, the pool of validators is fixed, which can make the network vulnerable to attacks from large stakeholders.
In contrast, Nightshade uses a more flexible approach in which the validator pool is constantly changing, making it more difficult for attackers to coordinate attacks on the network.
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How to Stake NEAR?
There are several ways to earn income from your NEAR, including lending it to a custodian provider or through a decentralized lending protocol, running your own validator, or delegating your tokens to a validator of your choice.
For the best security and control over your funds, it is recommended to use Ledger Hardware Wallet. Meanwhile, if you want to delegate your tokens, follow these steps:
- Download NEAR Wallet and navigate to the staking tab in the top menu.
- Click the 'Stake my tokens' button and select a validator. If you're not sure who to delegate to, you can check out our FAQ for guidance on choosing a validator.
- Click 'Stake with validator' and enter the number of tokens you want to stake.
- Click 'Submit stake' and sign the transaction to complete the process.
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How to Earn Staking NEAR Rewards?
Staking rewards on NEAR come from:
Reward Blok (Block Rewards)
Each year, a fixed amount of NEAR, approximately 5% of the total supply, is issued. 90% of this (4.5%) is distributed to validators in exchange for computing, storage and security of transactions on the network.
In exchange for network services, validators are rewarded with a target amount of NEAR every epoch. If less than 100% of tokens in the network are staked, validators can earn higher annual rewards.
Transaction Fees
Every transaction processed by the network has a transaction fee. 70% of each transaction fee is burned, 30% is allocated to the contract used in this call (developer incentive). This means that issuance can be negative if Total Cost > Total Issue.
As a result, higher network utilization will increase the incentive to run validation nodes (as they receive higher real throughput).
Storage Staking
NEAR is required to store data on the protocol. For example, if you want to store a list of addresses on a protocol, 1 NEAR needs to be stored on that contract.
Storage costs can vary depending on the dApp being built, as storage costs around NEAR 1 per 100kb.
NEAR tokens are effectively held in a locked state until the associated data is deleted, a characteristic that is very similar to staking, as the tokens are taken out of circulation. However, these tokens do not generate staking rewards and remain static.
Keep in mind that the total annual reward is shared by all active stakers; therefore, when the number of staked tokens rises, the reward rate falls.
Risk Staking NEAR
While NEAR wants to ensure staking is as safe and transparent as possible, there are still things to consider regarding whether a particular staking option is right for you. Here are some risks:
Risk Slashing
Currently, there is no slashing on the NEAR network. However, there are still risks to staking during this early phase of the network. Validators who are offline will not receive rewards for missed blocks, and stakers who delegate to inactive validator pools will also not receive any rewards.
Risk Unbonding
The unbonding period for NEAR is 1 day. Crypto asset markets are highly volatile, and investors need to be aware that they cannot sell their tokens immediately after they have been staked. They have to wait 1 day for the tokens to be unbonded before they become liquid.
Please pay attention to this lockout before you decide to stake. Consider keeping funds liquid if you do not intend to hold NEAR long term.
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Exit Active Set
Validators can also leave the active set, meaning they no longer earn rewards. Make sure you check back frequently to ensure your validators are active and not increasing their commission fees unreasonably.
Protocol Security Risks
There is an inherent risk that the protocol may contain unknown bugs. This not only applies to staking but also your NEAR investments in general.
Conclusion
Staking NEAR Protocol offers an exciting way to earn passive income from your NEAR tokens.
By understanding how staking works, choosing the right validator, and considering the risks, you can maximize your potential profits while contributing to the security and decentralization of the NEAR network.
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DISCLAIMER: This article is informational in nature and is not an offer or solicitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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