Unlike Bitcoin, which uses a proof-of-work (PoW) consensus algorithm to validate transactions and mine new tokens, Polkadot uses a nominated proof-of-stake (NPoS) system in which users deposit DOT tokens into d addresses in order to validate the chain and earn rewards. This is a process known as staking.<\/p>\n\n
This guide will explore the various ways that you can stake DOT tokens to earn rewards, whether by directly staking on chain or through some of the more novel methods, such as using an exchange or DeFi service.<\/p>\n\n
What is Polkadot staking?<\/h3>\n
To explain staking, let's look at a traditional savings account. Each month, you deposit cash into your account and your bank pays you interest on your savings. It pays you this interest because it's using your money to make money. This is one of the ways the banking system works.<\/p>\n\n
Staking works in a similar way. The funds that you lock in, or stake, are used to help validate transactions on the Polkadot network. You receive your \"interest\" from these tokens in the form of DOT rewards.<\/p>\n\n
You can stake Polkadot in two ways: as a validator or a nominator. Validators<\/a> are those who create the blocks, nominators are those who vote on who gets to be a validator. If the validator that you've voted for with one of your 16 votes wins a block, you get part of their bounty.<\/p>\n\n Similarly to Bitcoin mining, staking Polkadot as a validator requires a high level of technical know-how and investment in a masternode that runs 24\/7 before you can make a profit.<\/p>\n\n Alternatively, anyone can stake Polkadot as a nominator<\/a> without any technical expertise or significant investment in equipment. You can do this by depositing funds on a cryptocurrency exchange or by locking them in a wallet.<\/p>\n\n Lastly, while it isn't technically staking, another way to earn passive rewards from simply holding Polkadot is to transfer it to one of many lending platforms such as Celsius or Crypto.com<\/a>, where they use it to lend to other investors, earning you a variable amount over your deposit term.<\/p>\n\n\n The easiest way to get started with Polkadot staking is through a cryptocurrency exchange such as Binance or Kraken<\/a>. Using an exchange to stake is as easy as buying DOT tokens, picking your favourite exchange and depositing your tokens into your Polkadot wallet. Once you have tokens in your wallet, it's easy to start staking.<\/p>\n\n\n\n\n Here's how to stake Polkadot on Binance:<\/p>\nHow to stake Polkadot<\/h3>\n
1. Staking on an exchange<\/h4>\n
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Video: How to Stake on NDAX<\/h3>\n
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