As cryptocurrency staking is becoming more and more popular, one may wonder about the staking opportunities not only from cryptocurrency exchanges or software wallets, but also from hardware wallets.
By definition, staking allows investors to earn cryptocurrencies without selling their holdings, but by delegating cryptocurrencies to a staking validator to support a blockchain. Originating from the word “stake”, the staking process refers to earning profits and associated passive income from cryptocurrencies through a consensus mechanism known as proof-of-stake (PoS), as opposed to to the proof-of-work (PoW) mechanism based on Bitcoin (BTC) mining.
Amid the growing popularity of PoS, staking has become quite popular on online cryptocurrency exchanges and software wallets, with many trading platforms actively adopting this feature. Some hardware wallet providers have also integrated the staking feature into their physical handheld devices.
Ledger, a major hardware cryptocurrency wallet provider, has been actively working on its cryptocurrency staking features since staking debuted in 2019.
On Monday, Ledger introduced staking for Solana (SOL), allowing investors to earn SOL by pledging cryptocurrency to support the Solana network.
The new staking feature is enabled in the Ledger Live app in cooperation with the Figment blockchain service, which provides nodes for staking using the Ledger validator. The latest staking addition joins the six coins already available for staking on Ledger Live, including Ether (ETH), Tezos (XTZ), Polkadot (DOT), Cosmos (ATOM), Algorand (ALGO), and others.
Staking through hardware wallets vs. software wallets and exchanges
Staking coins through a hardware wallet has a number of quirks compared to staking through software wallets or cryptocurrency exchanges, Alex Zinder, head of Ledger Enterprise, told Cointelegraph.
“The main difference between staking with a software wallet versus a hardware wallet is security”Zinder said, noting that hardware wallets remain the “most secure way for users to maintain full control of their digital assets.”
“When staking with a software wallet, you own your coins as you own your private keys, but the security of your coins depends on an external source of security”Zinder declared. The security of coins put into software wallets depends on the security of the user’s computer or smartphone, the executive added.
Unlike staking on crypto exchanges, staking via hardware wallets allows investors to truly own and control their crypto holdings, as well as offering the freedom to choose a validator, the Ledger executive said. On the other hand, staking with an exchange is easier because this type of staking requires fewer steps, Zinder noted. “You don’t need the level of education to choose between different validators,” he added.
Cryptocurrencies always stay online, even in a hardware wallet
Since hardware cryptocurrency wallets are designed to provide a form of offline storage for cryptocurrencies, the process of staking coins through such wallets is sometimes referred to as “cold staking”, as opposed to “cold staking”. online staking” through exchanges.
At the same time, storing cryptocurrencies in a hardware wallet does not mean that the cryptocurrencies themselves are offline, Zinder noted, stating:
“It is critical that everyone understand that their cryptocurrency always stays online on the blockchain, even when using a hardware wallet. When we talk about hardware wallets, we mean private keys that are stored on a secure chip in the hardware wallet.”
“When you sign a transaction, such as delegating your coins to a validator, that message is passed through the secure element, signed on the Nano, and then sent to the blockchain,” the executive added.
A hardware wallet is a type of non-custodial cryptocurrency wallet designed to give the user full control of the cryptocurrency they own. Unlike custodial wallets, noncustodial wallets eliminate the need to rely on a third party that could recover, freeze or seize the user’s crypto assets. This makes the user solely responsible for storing the private keys to access the cryptocurrencies.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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