Crypto assets staking is a means for holders of assets to earn rewards while contributing to the growth of their blockchain ecosystem at the same time.
Crypto staking can be defined as the practice of locking your digital tokens to a blockchain network to earn rewards. Rewards earned by stakers are usually a percentage of the tokens staked.
Staking cryptocurrency is pretty common in proof-of-stake blockchains as it is the only way participants can how token holders earn the right to participate in activities like governance within the blockchain.
Staking is a pretty common concept in cryptocurrency as it is the driving engine behind the proof of stake means of validating transactions.
However, it is not all crypto assets that can be staked. Some assets don’t have that feature and employ other means of earning rewards to their holders.
One of such asset is Ripple (XRP) and we will be discussing how to earn rewards on your XRP while highlighting why XRP cant be staked.
What is Ripple (XRP)?
Before we dive into the debate on whether you can stake XRP or not is important we define what it is first. There is a common confusion between the meaning of Ripple and XRP as both are usually misplaced for each other.
Ripple is a technology company that deals heavily in the payments sector of the financial industry. Ripple developed a payment network designed for fast and low-fee international transactions.
XRP on the other hand is a digital asset that operates within the Ripple network. XRP serves as a bridge currency between different Fiat currencies.
Ripple is the company and payment network while XRP is the digital asset that operates within it.
Can you stake Ripple (XRP)?
Now that we have defined Ripple and XRP, we get down to the question of the day. Can XRP be staked? The short answer to that is no! XRP cannot be staked because Ripple does not run on a Proof of Stake consensus mechanism.
The Ripple network uses a special system called the Federated Byzantine Agreement (FBA) consensus model to validate transactions.
This model relies on a pre-selected group of trusted nodes. These nodes, which are often financial institutions, operate as validators and agree on the order of transactions.
The FBA model has been touted to provide speed and security to a network.
How then can you earn rewards with your XRP token?
Ripple does not support XRP staking because of its consensus mechanism but XRP holders can earn rewards through a method known as XRP lending.
XRP lending involves lending your XRP to a specific platform. The platform in question in turn lends it to borrowers and you get interest on your deposited XRP. In simple terms, you let others borrow your XRP through a platform and pay you interest for using it.
As an XRP lender, you are not involved in validating transactions or providing security.
In this method, the lending platform being used often offers the interest rates and other terms about the transaction.
The major benefit of XRP lending is the passive income generated for the user. XRP holders can lend out their tokens and earn rewards instead of letting them sit idly.
XRP is the 7th largest crypto asset in terms of market cap and is currently exchanging hands for $0.5864.