What is Staking?

Simple Explanation of what Staking in crypto is and how it works

Crypto staking is the process of locking up crypto holdings in order to obtain rewards or earn interest. Cryptocurrencies are built with blockchain technology, in which crypto transactions are verified, and the resulting data is stored on the blockchain. Staking is another way to describe validating those transactions on a blockchain and to support a Dapp that is using it. That’s what staking is—investors who actively hold onto, or lock up their crypto holdings in their crypto wallet are participating in these networks’ consensus-taking processes. Staking On A DEX

When people use the word “staking” in reference to cryptocurrency, it can either mean validator staking or liquidity mining. For instance, a crypto trader can say ‘I have staked X tokens into Y platform for a Z yield’.

This means they have become a liquidity miner or a farmer that is farming its tokens by locking up their tokens for other traders to use in exchange for a small fee.

Although centralised exchanges such as Coinbase or Binance provide token swaps the same way banks provide currency swaps, the same can be done with decentralised exchanges. For that to be possible, liquidity has to be provided, so the swaps can run smoothly without delay.

It may be helpful to think of crypto staking as similar to depositing cash in a savings account. The depositor earns interest on their money while it’s in the bank, as a reward from the bank, which uses the money for other purposes (lending, etc.). Staking coins with the Paradox Dex (ParaSWAP) doesn't do anything like lending it out it simply charges the user a fee for you coming over to ParaSwap to swap your cryptocurrency for another on its exchange, so it isn't based on interest.

So stakers dont have to worry about being paid in interest as interest based staking is frowned upon.