How to buy out cryptocurrencies and store them: A comprehensive practical guide

A Quick Introduction to Earning Profits from Your Idle Coins

If you own cryptocurrencies and leave them in your wallet without using them, you are missing out on a real opportunity to generate additional income. Staking gives you this opportunity - a mechanism that allows coin holders to participate in securing blockchain networks in exchange for attractive financial returns. This model has gained widespread popularity, especially among long-term investors looking for ways to increase their digital wealth without selling their assets.

What Makes Storage Possible? PoS Consensus Mechanism

You cannot store any cryptocurrency. Only currencies that operate on blockchain networks with a Proof of Stake mechanism (PoS) allow this. This mechanism, which was invented in 2011 as a more efficient alternative to the Proof of Work (PoW) used by Bitcoin, is fundamentally different from its predecessors.

Instead of consuming massive computational resources to solve complex equations, mining relies on validators chosen based on the amount of coins they hold. This means that the network selects larger stake holders to verify transactions and add new blocks, dramatically reducing energy consumption and making the process more environmentally sustainable.

How does the storage system on Earth work?

The process may seem complicated, but it follows a clear logical pattern:

Step 1 - Selecting Validators: The network examines participants and selects those who hold the largest stake or meet other specific criteria. Sometimes the selection is random. The chosen validator becomes responsible for upcoming transactions.

Step Two - Verification and Validation: The selected auditor reviews all submitted transactions and ensures their accuracy and compliance with network regulations. If a discrepancy is found, the transaction will be rejected.

Step Three - Creating the Block: Trusted transactions are grouped together into a single block, and this block is added to the chain - the distributed public ledger that keeps the entire history of the network.

Step Four - Earning Rewards: As a reward for hard work, the validator receives a portion of the transaction fees, and sometimes new coins issued by the network.

The Difference Between the Four Storage Methods

Not everyone has the technical knowledge or the desire to run a validator node on their own. For this, there are several options:

Individual Storage (Full Control): You run a validator node on your own device. This gives you complete control, but it requires a high level of technical expertise and constant attention. A simple mistake could lead to penalties (deductions) and loss of your funds.

Storage via Platforms (The Easiest Way): Cryptocurrency trading platforms provide integrated storage services where you don't deal with any technical complexities - just place your coins and receive rewards daily. This is the safest method for beginners.

Delegated Storage (The Compromise ): You choose a trusted auditor or specialized service and allow them to manage your currencies for a small fee. Some currencies support this directly from their native wallets.

Storage Pools (Social Option ): Pool your coins with others. Instead of needing a million coins to become a validator, you might only need, for example, 32 coins. Rewards are distributed based on each person's contribution size. Very useful for small investors, but choose a pool with a good reputation as security varies.

A New Revolution: Storage Without Freezing Your Funds ( Liquidity )

The traditional storage problem: Your funds are locked, and you cannot access them. You cannot sell, you cannot spend, you cannot lend. Until the storage period ends.

Today, a revolution called “Liquidity Staking” took place. The idea: you store your coins and receive a token representing your rights to them. This token can be traded or used in other applications while you continue to earn staking rewards from the original currency.

Practical example: Store Ethereum on a platform, and you receive WBETH - a token representing the staked ETH. You can now:

• Sell this token if you need liquidity
• Lending it out and earning additional interest
• Its use in DeFi platforms
• All this while you earn native Ethereum rewards.

Some networks go further - like Cardano - and allow for the storage of native liquidity, where there are no intermediary tokens at all. They are stored directly while maintaining full control of your funds.

Why might you choose storage?

Earning Additional Coins: This is clear and straightforward. Instead of letting the coins sit idle, you earn an annual interest that can range from 3% to 20% depending on the network and conditions.

Contributing to Security: You not only earn profits, but you also help stabilize and secure the network. The more trusted validators there are, the stronger the network becomes.

Impact on Decisions: Some networks grant voting rights to token holders, allowing you to participate in future decisions regarding the development of the protocol.

Green Option: Unlike traditional mining, which consumes huge amounts of electricity, storage requires significantly fewer resources, making it an environmentally friendly option.

The Dark Side: Risks You Need to Know

Storage is not without risks. Before you begin, understanding these threats is essential:

Price Fluctuations: If the value of the currency decreases by 50%, the storage rewards ( even if they are 10% annually ) will not compensate for the loss. You may find yourself in a net loss situation despite earning rewards.

Auditor Penalties: If you choose individual storage and a technical issue occurs or you make a mistake in running the node, you may be subject to a deduction - meaning a loss of part of your stored funds as a penalty.

Centralization Risk: If a few large validators control most of the shares, the network may become centralized and lose one of its core benefits.

Smart Contract Errors: Some storage services rely on complex software. A single programming error could mean losing your funds or having them frozen without recovery.

Third-party risks: If you store through a platform, you are trusting them. One security breach and your funds could disappear. Even centralized DeFi platforms that request permissions to your wallet can be dangerous.

Your Practical Guide: How to Start Staking Now

Step 1 - Choose your currency: Not all currencies support staking. Choose from established options such as Ethereum, Solana, Cardano, Avalanche, Polkadot, or Cosmos. Learn about the staking requirements and expected returns for each one.

Step 2 - Choose Your Wallet: Use a reliable and well-known wallet. Good options include advanced Web3 wallets, MetaMask, or TrustWallet. Make sure the wallet supports storage for the currency you have chosen.

Step 3 - Get Started Immediately: Follow the network instructions to start staking - whether it's running a node, delegating a validator, or joining a pool. Remember that web wallets are just interfaces and do not control the actual protocol behind them. Start with established and proven networks first.

How is what you earn calculated?

Rewards are not given randomly. Their calculation depends on:

• Your token amount: The more you store, the greater your rewards.
• Storage Duration: Some networks reward long-term participants more.
• Total Shares: The more other participants there are, the smaller your share of the rewards (the same cake is distributed among more people).
• Network Fees: High congestion periods mean higher fees and thus higher rewards.

Most networks define returns by APR ( annual percentage rate ) - which is a number that tells you: if you store 100 coins, how much will you earn annually?

Frequently Asked Questions and Quick Answers

Can you withdraw your funds whenever you want? Yes, usually. However, early withdrawals may mean losing some or all rewards depending on the network's rules. The Ethereum network, after its upgrade in 2023, now allows flexible withdrawals - you can withdraw and receive your rewards at any time without penalties.

Why does Bitcoin not support storage? Because Bitcoin uses proof of work (PoW), it is not proof of stake. These are two completely different models. PoW relies on mining and computational resources, and it does not have the concept of “staking” in the sense that we are talking about.

Is storage completely safe? No. There are multiple risks as we mentioned - price volatility, potential penalties, technical risks, and risks from external parties. Start with small amounts until you feel comfortable.

Summary

Storing cryptocurrencies opens up a new way to earn passive income from your assets. It is especially beneficial for investors who intend to hold their coins for a long time. But this does not mean it is without risks.

Success in storage requires a careful selection of the storage method that suits you, thorough research on the network and service you choose, and a clear understanding of the risks. When you combine all of this, you can turn your idle coins into a profit-generating machine, while contributing to securing the blockchain networks you believe in.