What is offline staking?

Staking offers rewards for locking cryptocurrency. Typically this type of income involvesdelegating your coins to third-party validators or launching your own node.

How does offline staking work?

Offline staking – is a service that allows you to store cryptocurrency in a cold storage wallet – or hardware wallet – and receive a reward for it.

Offline Staking allows holders to choosenode operator, without transferring your money to him. These funds can be kept in your Trezor or Ledger hardware wallet. The only condition – The wallet must support the delegation function.

Benefits of offline staking

This type of earnings eliminates many of the risks associated with DeFi lending and farming. 

DeFi platforms like Compound or Aave continueGrow your user base and Total Value Locked (TVL) through attractive interest rates. However, the immaturity of the DeFi market creates huge risks for investors. 

Bugs in smart contracts of DeFi protocols of steelthe cause of several hacks in the past year. In the summer, unknown persons hacked bZx several times in a row due to an error in the contract. At the end of the year, hackers broke the Cover protocol and managed to mine 40 quintillion COVER tokens, which they then sold for $ 5 million. As a result, the price of the coin dropped by 70%.

Offline staking risks

Blocking funds offline is much less risky than online staking or DeFi protocols. 

And although cold storage of cryptocurrencies is consideredthe safest and most reliable method, you should never forget about basic precautions when working with offline storage. Users should keep hardware wallets and their passwords in a safe place. 

Crypto projects that use offline staking

Tezos (XTZ) – one of the most popularcryptocurrency that uses this operating model. Users can choose their own “baker” (validator), however, the “baker” must hold at least 10,000 XTZ in order to become a delegate (about $40,000).

Qtum – another project that presentedoffline staking solution. According to the developers, there are no minimum restrictions to participate in QTUM staking – You can start earning money even with a few dollars in QTUM.

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Based on materialscointelegraph.com