Cryptocurrency platform Luno has launched ethereum staking, a way for its customers passively to earn ether, the token associated with the ethereum blockchain.
Luno country manager Christo de Wit said Luno’s staking feature will initially be launched in South Africa with support for ether. Customers open a staking wallet and can earn up to 4%/year in ether tokens by holding their coins.
“The reward rate can fluctuate depending on the demand on the network as well as the number of active validators. Rewards will be paid weekly, so you can automatically grow your stake and compound your rewards.”
While they are staked, customers cannot sell or send their coins elsewhere, but they can “unstake” at any time and remove their coins from their staking wallets. There are no minimum deposits.
What is staking?
Cryptocurrencies that allow staking use a “consensus mechanism” called proof-of-stake to securely verify transactions. “Your stake is used to ensure that transactions are not fraudulent – with penalties if you validate incorrect transactions and rewards when you validate correct transactions,” Luno said.
Staking removes the need for crypto miners to churn through mathematical problems for verification. Instead, transactions are validated by those who stake their tokens.
Staking is also a way to support the long-term health of the ethereum ecosystem, contributing to the security and efficiency of blockchain projects.
April’s eagerly anticipated Shanghai update concluded the ethereum blockchain’s migration to a full proof-of-stake consensus mechanism by allowing users to unstake their crypto and retrieve rewards for the first time.
Ethereum offers an annual percentage yield of up to 4%, though this may vary depending on network conditions.
There are no minimum deposit or withdrawal amounts. Luno doesn’t charge a fee to stake or unstake a user’s cryptocurrency, but there is a staking service fee that is deducted from the reward customers receive.
Luno said it is partnering with a specialist that operates validation nodes in all the main proof-of-stake networks to enable staking for its customers.
There are two main risks involved. Firstly, one of the specific requirements in staking is that validators (the people or companies responsible for operating the nodes that verify transactions) must have their computers constantly running for the network to run smoothly, so if there are connectivity issues this could attract penalties.
Secondly, while rewards are earned for validating good transactions, there is a penalty if bad transactions are approved. This is known as “slashing”.
“Our partners have stringent mechanisms in place that mean slashing is incredibly rare. In such an unlikely event, our staking provider will review and remediate slashing penalties where reasonable,” Luno said. – © 2023 NewsCentral Media