How Do You Stake a Bitcoin?

While Bitcoin is growing in popularity, most people still need to learn a few things about it. One of these is understanding the concept of staking and how it works with Bitcoin.

If you follow the definition of crypto staking exactly, then you can’t technically stake Bitcoin. However, you only need a slight variation on staking to get the same input and results. Take a closer look to understand better.

What Is Cryptocurrency Staking?

Staking cryptocurrency is part of a consensus mechanism called the Proof of Stake (PoS) to validate transactions. It is an alternative to the Proof of Work method used in Bitcoin, which is very energy-expensive.

In addition to reducing energy consumption, PoS delivers more predictable rewards. It also eliminates the need to buy expensive hardware.

With Proof of Staking, you hold or stake your crypto. You may have to place it in a specific wallet or lock it up using a smart contract. This allows you to participate in verifying transactions. As a reward, you receive some crypto in exchange. The more of the crypto in question you hold, the higher your earned income will be.

Why Can’t You Stake Bitcoin in the Traditional Sense?

You can’t stake Bitcoin using the method mentioned above. That is because this type of staking only works for cryptocurrencies with a Proof of Stake consensus mechanism. Bitcoin has a Proof of Work consensus mechanism.

So, What Is Bitcoin Staking?

Despite the fact that you can’t technically stake Bitcoin like a PoS token, many people still refer to certain actions as Bitcoin staking.

This typically means any method where you lock your Bitcoin up in exchange for the ability to earn profits. Most people refer to methods of earning interest that require no effort on your part when talking about Bitcoin staking. For example, if you had to put in the effort to trade, invest, or lend Bitcoin, you would call it that. That said, there are some variations.

Further information: Bitcoin Staking

What It Usually Means

If someone mentions Bitcoin staking, they typically mean depositing your Bitcoin into a designated wallet managed by a third party. That third party then takes various actions to profit from using your Bitcoin. They give you interest in exchange for letting them use your Bitcoin to make a profit.

Your only actions are depositing the Bitcoin or “staking” it and receiving interest or profits. These actions are identical to what you would do if you staked a cryptocurrency with a PoS mechanism.

The difference is what happens behind the scenes. Depending on the platform that you stake your Bitcoin with, they may use a range of actions to generate a profit. Trading is somewhat common, but that tends to have a slightly higher risk. Arbitrage or taking advantage of differences in prices across exchanges and lending tends to be more popular.

An Important Difference

It is important to note that unlike staking in PoS, staking Bitcoin means you are trusting an entity with your cryptocurrency. As such, you need to make sure you trust the platform you use and that they have a good track record. You can confirm this via simple research.

Haru Invest Offers an Alternative to Traditional Bitcoin Staking

If you want to stake Bitcoin, one of the best options is to do so with Haru Invest. The Haru Invest “Earn Like the Best” product lets you stake your Bitcoin into a designated account. When you invest, you are locking up your Bitcoin for at least three months. From there, the experts at Haru Invest use their vast experience in crypto and finance to make savvy decisions. In exchange, you earn interest.

The interest you earn is not guaranteed, but Haru has a strong track record and publishes its biweekly returns for transparency. Earn Like the Best’s biweekly return from March 16-31, 2021, was 0.9056%, which is 20.66% annualized.