Cryptocurrency Staking Pools: Risks And Rewards

Source

INTRODUCTION

We have to a good extent heard of cryptocurrency staking pools, you don't really need to stay long in this space to know about them, they are just an opportunity for users to possibly increase their staking rewards and this is simply achieved by the whole lots of them bringing together their vast resources this thus will help their rewards to also increases exponentially, this is what staking pools generally entails.

Now as it is with everything in life and associated with cryptocurrency there are always potential for rewards as well as risk too, so I will like to talk about them in my post today so users and readers alike would be properly informed and make informed decisions.

So let's get on right into it, first on the rewards of cryptocurrency staking pools

ITS REWARDS

• INCREASED EARNINGS

Cryptocurrency staking pools like I mooted earlier increases users chances of earning rewards, because when we join our resources with a host of other users this makes us properly positioned to be selected as one of the validator of the network, and this will help to boost our staking rewards exponentially which is one of the great benefits of cryptocurrency staking pools.

So cryptocurrency staking pools generally offers users an opportunity to earn more simply put and here rewards are distributed more frequently than when an individual decides to stake alone, so cryptocurrency staking pools not only increase users chances of earning more but ensures that this payment or rewards keeps rolling in on a rather steady basis, so in other words we can say that cryptocurrency staking pools is a sure way of guaranteeing inflow of income on a much regular basis than we would have.

source

• LOWER ENTRY BARRIERS

Also cryptocurrency staking pools ensures there is really little or no restrictions as every one has equal opportunity to participate in this, every one, there is no particular amount that is the acceptable, nothing like from $5k and above is allowed in the staking pools, none of that here, cryptocurrency staking pools ensures that there is a lower entry barrier, how so?

Well that's by ensuring that users with less funds are able to participate, equal participation opportunity for all no matter how little your cryptocurrency is you are allowed to join in the staking pools and also earn rewards from this staking pools just like everyone else as you won't be staking alone, the strength in numbers would ensure that despite your little capital there is a chance of regular payout which is one of the rewards of staking or participating in cryptocurrency staking pools.

• REDUCED COMPLEXITY

For such a well established and organized mechanism one would reason that it would come with much complexity, granted you could make the case but really it's not so for the users who have to engage with it, why is that?

Well there is availability of good technical managers, the handle everything related to staking that's the technical aspect which would have otherwise been cumbersome for the ordinary user, the pool operators ensure it's not as they are solely responsible for running both the network nodes and it's maintainance and this makes it easier for ordinarily users as they are not required to deal with the technicalities so yes cryptocurrency staking pools reduces complexity for it's participants. This is a good reward.

ITS MAJOR RISKS

• CENTRALIZATION RISK

One of the risk that comes with cryptocurrency staking pools has to do with risk of centralization and this could result from having a considerably large pools of stakers.

When one participate in this staking pool they have a chance of being network validator which means they have some fraction of control over the network but when the staking pool becomes increasingly large then it could tip scale of control to them and this would be bad for the network as it could lead to network centralization defeating the whole purpose because this few entities will now have more validators, the larger the staking pools the higher the validators from that side and the more validators they have they likely they would control the network.

So in all centralization is really bad for cryptocurrency staking pools and this could make it lose its very decentralized nature, such is the risk that cryptocurrency staking pools have to contend with and have to combat.

SECURITY CONCERNS

There is possible risk or security concerns with this staking pool, that's in an event that it becomes centralized then the security system of the who system would greatly weakend and it would put other users at great risk.

Also another potential security risk is that the funds of all this users who are staking are in the hands of this pool operators, what happens if the pool operator have malicious intent or his own agenda or other nefarious purpose then our funds would be in great risk and we could potentially lose it because of this apart from that well meaning pool operators could also become target of hackers in which case we might eventually lose our funds.

So this are all some of the possible security risks that comes with cryptocurrency staking pools that we must be wary of and act accordingly.

source

CONCLUSION

It's really important that anyone wishing to participate in cryptocurrency staking pools are well informed on the possible risk and rewards and determine yourself if it's worth it, aside from that do your own research and do not rely on anyone for advice so as to put your money into something you are not sure of, at all times we must be cautions as a serpent when it comes to investment choices.