In previous articles, we’ve discussed Staking when users deposit their assets into the pool to make a profit. In recent months, we have been observing that a new term has been added to the growing blockchain terminology book: the “Automatic Staking” So, let’s investigate what exactly AUTOSTAKING is?
Auto-Staking is a newly unveiled approach in the crypto world. Users who are newbies and don’t have enough knowledge or those who are busier than managing their assets can use the option. In this method, the system deposits their crypto funds to help them earn the agreed reward. All token purchases are automatically staked on the platform and automatically re-invest their earned funds to maximize their benefits during the staking period.
What is Auto-Staking?
To understand the concept of auto-staking, we need to learn what stacking is. Crypto staking refers to the activity in which a user locks cryptocurrency in a platform for a certain period to secure a blockchain‘s network and confirm transactions based on a Proof-of-Stake (PoS) consensus mechanism. Cryptocurrencies based on Proof-of-Stake consensus protocols allow earning additional coins by locking up assets in the network as a form of collateral. The network randomly assigns the right to one of them to validate the next block.
The more coins locked up, the higher profit.
Users who stake crypto funds in protocols earn rewards in return for maintaining the ecosystem, usually the combination of that network cryptocurrency included in the block they validated and the transaction fees associated with the transactions they processed for users.
What is the Auto-Staking Process?
Automatic Staking is one of the new applications that has recently entered the field of Blockchain and Decentralized Finance (DeFi). This new process helps busy people and new users who forget to re-stake their assets manually. In addition, auto-staking allows newcomers to the crypto world who do not know the requirements in this area. This mechanism works with tokens with flexible supply reserves (Elastic) and uses the Rebase algorithm.
The system generates new tokens every 15 – 30 minutes in this type of depositing, also known as Self-Minting. By this mechanism, users have the opportunity to increase their assets up to 100,000% APY in the form of compounded interest. It means users need to buy tokens and hold tokens on the wallet (e.g., Metamask, Trust wallet), and the number of tokens will automatically increase and have passive income.
The Advantages of Auto-Staking
- If someone uses this feature, they can get more profit from their deposited funds and will not need to check their stake amount manually. Using the automatic staking feature will never lose the staking period and the potential to make a profit.
- Simply if the protocol keeps its popularity among users and adds up new users, it will significantly increase the value of each token due to the supply and demand law in economics. If the token’s value rises, users will receive more revenue in the wallets in which they have staked tokens.
- Compound Interest – The system stakes held digital assets when users purchase the token. The system rewards the deposited assets, adds the revenue to the initially deposited amount, pays more to the users, and will repeat the process.
- Automatic Burning Process – The burning of a fixed rate of tokens, a distinguished percentage, automatically happens within each transaction, which causes the users to get the highest possible profit in the market.
Locking time – When users are staking their assets, keeping them in their wallets is necessary. During the period of Staking, users don’t have access to their (deposited) financial resources. This process will substantially impact profits if the asset price suddenly decreases and they cannot withdraw deposits.
To answer the question of what is auto-staking? With the rapid increase in the world of crypto, the Defi industry improves to meet most users’ needs. We can claim that the crypto auto-staking process is an instrument to avoid possible losses in case of a sudden fall in the prices of users’ cryptocurrencies.
Auto-staking reduces the risks of a significant fall in the value of crypto-assets or maximizes the holders’ benefits when the market situation is stable. Although there are tiny risks, it could be an acceptable solution. In addition, blockchain networks have complete control over supply reserves through the token-burning system.