Introduction

Cryptocurrency has really changed the world finance and commerce industry, from the way we transact to the ways we make money. People are now preferring cryptocurrency to fiat currency and this as made the demand for cryptocurrency increased so more transactions needs to be completed faster so people can enjoy cryptocurrency but the validation process of transactions involves a lot of steps which usually leads to delay in validation of transactions so Blockchain networks uses different consensus to ensure quicker validation of transactions and one of this method is Staking.

What is Staking in cryptocurrency?

Staking in cryptocurrency is a process users who are referred to as nodes hold their assets in a cryptocurrency wallet to participate in the validation of transactions and maintaining operations on Blockchain system that uses the proof of stake consensus algorithm and the network award these nodes rewards.

For a person to become a node on a proof of stake Blockchain system, he or she must meet atleast the minimum amount of asset that can be deposited into the the network, this deposit is referred to as stake, the more the stake a user deposit the more the blocks the users is awarded to forge and the more the successfully completed blocks the more the reward.
Staking is almost similar to mining that is used in proof of work consensus Alogrithm just that staking uses less computational resources also blocks are assigned base on the proportion of the nodes deposit and staking is more scalable than mining. Some crypto enthusiast sees staking as a full time job and they are making money through it.

There are alot of cryptocurrencies exchange platforms where you can perform staking like finance, coinbase, kraken, poloniex, kucoin, etc. My writing will cover just two of the listed exchange which are KUCOIN and COINBASE.

Kucoin

When talking about top cryptocurrency staking exchange it's important to mention Kucoin because it was the first exchange platform to introduce soft staking.
Kucoin introduced soft staking to allow users to stake and receiving staking rewards without locking up their cryptocurrency on the network. The introduction of soft staking in 2019 increased the usage of kucoin network for staking. Also, there are alot cryptocurrency that can be staked on the kucoin platform, some that even other exchange doesn't offer. Some of the crypto that can be staked are : Aion, Cosmos, EOS, Tron, Neblio, DeepOnion, Energi, NULS, TomoChain, Loom Network.

Lastly the kucoin rewards users daily so there's no delay in payment of rewards and also the stake charges fee are relatively low compared to other reputable platforms. Kucoin charges 5% to 10%.

Coinbase

Every crypto trader would have heard or used coinbase, it is one the largest and best cryptocurrency exchange and wallets in the world, it also offers along of different services like educating users about latest cryptocurrencies and latest news that might affect price movements, staking,etc.
Coinbase allows users to perform staking on the network by locking their asset into their coinbase wallets. currently there are only three cryptocurrencies that can be staked on the exchange network which are : ethereum, Tezos and cosmos. Coinbase stake charge is 20% to 25%.

There are similarities between kucoin and coinbase, the first similarity is that both of these exchange platform allows users to earn their rewards quickly without any excess delay and lastly both of them allows users to stake top cryptocurrencies like cosmos , ethereum, etc.

There are also some differences between this two exchange platform, first is the charges, the charges incurred when using kucoin is low while that of coinbase is high, kucoin charges 5 to 10 percentage while coin base charges 20 to 25 percentage. Secondly kucoin offers more cryptocurrencies, you can stake different crypto available on the network but for coinbase you can just stake out of the three available cryptocurrency. Lastly kucoin has the soft staking features which allows you to stake without locking your assets into your wallet and coinbase doesn't have this amazing feature.

Base on the explanation above and my own opinion, KuCoin is the better and more profitable exchange platform to stake because it offers wide range of cryptocurrencies and the lower charges associated with the exchange makes it more better.

Impermanent Loss

The main motive for venturing into any business activity is to make profits, people invest their money into business so they can make more money but in some business activity where there is high profits, there are also some bad times where there is loss and some of this loss is hard to escape especially in crypto trading, One of the loss is impermanent loss.

Impermanent loss are the short term loss of funds frequently experienced by liquidity providers due to volatility in a trading pair. It is simply means reduction in monetary value at the time of withdrawal than at the time of deposit due to price fluctuations of the crypto pair.

Some traders who are known as the arbitrage uses this method to make profits, top automated market maker like uniswap, pancakeswap, etc, allows users to trade crypto pairs and this exchange are disconnected from external exchange platform like binace so a change in the price on binance network won't lead to change in price on the amm network
So arbitrage tries to buy from the cheaper place.

To have more understanding, let give an example:

Uniswap is one of the top amm to stake and to be able to stake you need a 50/50 of the asset pair. Using eth and trx .
Let assume you staked eth/trx pool in uniswap and the price of eth increased by 20%, the price of eth will remain the same on uniswap as there would be no intant reflection of the 20% increment so the arbitrage uses this opportunity to make profit by buying eth from uniswap at low price that's 20% cheaper than the current market price and they add more trx so the trade can reflect the current price thereby making the liquidity provider to suffer impermanent loss.

The ways to reduce the rate of impermanent loss is to use stable coins that is coins with low volatility and avoiding high volatile crypto also another way is using other automated market maker like pancakeswap, 1inch liquidity pool, etc that offers different ratio like 75%/25% unlike uniswap that only allow equal token weight. Lastly, another way to reduce the loss is by waiting till the exchange returns to the initial rate although this is not easy due to the volatility of the pair, more loss can be incurred through this also.

Source

Delegated proof of stake

Delegated proof of stake is another major type of consensus algorithm, this consensus is like a improvement of the proof of stake protocol so it offers some similarities to proof of stake.

Delegated proof of stake is a type of consensus protocol used in blockchain network whereby users elect and vote delegates who are referred to as witnesses and this witness will be responsible for the validation of transactions and making of some decision on the network. All users stake their assets but only few are delegated to validate transactions while the other users just participate in electing the delegates. Examples of Blockchain network using the delegated proof of stake are : cardano, tezos, nano, ark, stem, etc.

Advantages of using delegated proof of stake:

There's high scalability and quicker transactions, dpos can handle more transactions than the pow or pos and this transactions are completed faster.
It is democratic, users are responsible for voting in delegates to manage the network and the delegates and they can be voted out if there is any fraudulent activity.
Dpos is more eco friendly than the pow as it uses less power to function properly and it hardware is less expensive unlike pow.

Despite this advantages there are some shortcomings associated with the delegated proof of stake and some are:

The richer users who have more coin at stake have more voting power than those who have less stake than them, this can make the rich to be able to monopolize the voting process as their stake is enough to voting in or vote out a delegate.

Delegated proof of stake is more prone to attack due to the concentration of power in few hands. Delegated is not truly decentralized as few users are in major control of the blockchain network as the other users are just voters.

Conclusion

Staking is simply associated with proof of stake and delegated proof of stake which are part of consensus protocol used in Blockchain systems. Staking is simply a method whereby nodes lock up their assets to be able to participate in validation of transactions in return for rewards. There are alot of exchange platform to perform staking and we talked about two popular ones, coinbase and kucoin which we mentioned the similarity and differences and I picked kucoin as the best. Impermanent loss is the difference in funds between your automated market maker and your crypto wallets.

Thank you for reading my post.

Cc: @steemcurator02

@imagen