Coconut Water
Registered User
- Messages
- 11
With certain cryptocurrencies you can get income in various ways e.g. from providing liquidity or putting up your own capital to validate transactions.
I'm considering the latter, and wondering would this be classed as DIRT or income or what.
For some blockchains a transaction is submitted by a user (this is like you asking bank to transfer some of your money to another account), and someone else can process this transaction for a fee (to continue the analogy, this would be like what the bank does to make the transaction happen).
In a Proof of stake system, this processor processes the transaction and backs it up with some of their capital (in the form of the cryptocurrency-this is called staking). They will lose some/all their stake if the transaction is not processed correctly. This is the incentive for them to process the transaction correctly, otherwise processors would try to steal funds.
How much of a fee you can get from staking depends on how much transactions there are to process, how much the users are willing to pay to make those transactions happen and how many people are staking. There is also some randomness in getting chosen to process certain transactions- but over a longer period this would average out.
Staking is a pretty hands off procedure, you just download a program, and put up your collateral. To not process correctly and lose your stake you'd have to intentionally try to steal, or else be victim to a bug in the program. However, you do get punished for downtime i.e. when your computer would be offline and not contributing to the network.
It is possible to forgo the work of staking and send your stake to a pool- this would use your stake and other people's stake to have a larger stake and they would take care of making sure the staking program is working/updating/online.
I'm considering the latter, and wondering would this be classed as DIRT or income or what.
For some blockchains a transaction is submitted by a user (this is like you asking bank to transfer some of your money to another account), and someone else can process this transaction for a fee (to continue the analogy, this would be like what the bank does to make the transaction happen).
In a Proof of stake system, this processor processes the transaction and backs it up with some of their capital (in the form of the cryptocurrency-this is called staking). They will lose some/all their stake if the transaction is not processed correctly. This is the incentive for them to process the transaction correctly, otherwise processors would try to steal funds.
How much of a fee you can get from staking depends on how much transactions there are to process, how much the users are willing to pay to make those transactions happen and how many people are staking. There is also some randomness in getting chosen to process certain transactions- but over a longer period this would average out.
Staking is a pretty hands off procedure, you just download a program, and put up your collateral. To not process correctly and lose your stake you'd have to intentionally try to steal, or else be victim to a bug in the program. However, you do get punished for downtime i.e. when your computer would be offline and not contributing to the network.
It is possible to forgo the work of staking and send your stake to a pool- this would use your stake and other people's stake to have a larger stake and they would take care of making sure the staking program is working/updating/online.