Bitcoin, Ethereum, and Dogecoin are all popular digital currencies to invest in right now. While the technology underlying these tokens has been around for over a decade, the soaring trading values are relatively new phenomena.
Users of cryptocurrencies have a variety of options for making them profitable. Some people take the riskier route of crypto investment on trading platforms. There are both controlled and decentralized exchanges (DEX). The HODL and Staking are two significantly less problematic ways for achieving a very similar goal. This article will show the difference between HODL and Staking, which one is the better way of passive income in cryptocurrency.
What is HODL?
Among cryptocurrency users and investors, especially Bitcoin, HODL (from the English HOLD, but misspelled) is quite common. This term refers to a definite choice to purchase an asset and hold it for an extended period. This decision is viewed as an investing philosophy in Bitcoin, particularly by the most ardent supporters of Bitcoin or the cryptocurrency that is being preserved with luck, which will allow you to double your assets in the future exponentially.
One of the essential advantages of holding is that it provides a maximum profit for investment. For example, a short-term investor would have been tempted to trade his BTC at $19,800 after several tries to reach its 2017 high if two investors had acquired it at $13,500 at the start of November.
What is Staking?
Crypto staking is the technique of locking up cryptocurrency holdings in exchange for rewards or interest. Blockchain technology is used to build cryptocurrencies, in which crypto transactions are validated, and the resulting data is kept on the blockchain. Validating transactions on a blockchain is often referred to as staking.
Depending on the kind of cryptocurrency and its accompanying technology, these validation methods are called “proof-of-stake” or “proof-of-work,” depending on the kind of cryptocurrency and its accompanying technology. These procedures contribute to crypto network consensus or confirmation that all transaction data adds up to what it should.
Obtaining such consensus, however, demands the cooperation of others. That is what staking is—investors that actively retain or lock up their crypto assets in their crypto wallet are participating in the consensus-taking procedures of these networks. Stakers are essentially the people that approve and verify transactions on the blockchain.
One thing to keep in mind is that when the quantity of tokens nears its limit, the benefits offered by a projected decrease. Almost identical to the reduction in mining compensation on the bitcoin network.
As the crypto market is volatile and very fast-changing that’s why before you want to choose the best way to get a passive income from crypto, always check authentic news sites like Thetopcoins, Coindesk, Cointelegraph reports, latest information, and updated information to understand the market trends and predictions.
HODL vs Staking: Which One is Better Way to Earn Passive Income?
Ultimate Profit
The HODL does not accumulate coins, but the wager is that the coin will appreciate in value over time. Staking aims to add additional coins to the user’s account, resulting in increased value. This amount of coins is usually offered as an incentive for preserving coins safe in a program made for that purpose.
Retention Impact on Cryptocurrency Dynamism
Those that HODL keeps their coins mobilized, which can reduce the cryptocurrency’s economic vitality. Those who stake do so as well. Staking has a higher retention effect than HODL. This is because the more the staking, the greater the incentive amount collected and, as a result, the bigger the influence on the dynamics of the coin.
Long Term vs Short Term Strategy
HODL’s plan is relatively long-term. Indeed, there are Bitcoin HODLERS who have been immobilizing money for more than ten years, and the profits they have gained have been enormous. On the other hand, sticking is a more short-term approach, as the currencies that use these systems often have far more inflationary processes, reducing the potential gain in the value of their tokens.
Security Issues
Security is another distinction between HODL and staking. Those that HODL often do it using hardware wallets, full wallet purses, or other safe wallets in which they have complete authority over the funds. On the other hand, sticking is only conceivable with hot wallets, which the user may or may not have complete control over. If necessary precautions are not followed, this creates a security risk that might lead to money theft.
The Number of Coins vs High Value
HODLing will not increase the quantity of bitcoins in your possession. That is, you will only profit if the value of the coin rises. On the other side, in STAKE, the price of the currency may fall, but due to staking, there will be more coins, leading to greater valuation.
Possible Risks
When compared to staking, HODL is a simpler approach to implement. Indeed, there are so many possibilities for staking nowadays that it may be both a benefit and a drawback. Staking a funding broker, such as Uniswap, is one example. It may seem like a good idea, but the security risk of doing so is rather considerable, given the possibility that Uniswap might be hacked and your assets stolen. The second is not that unusual, especially given the field of decentralized finance’s recent security record (DeFi).
Digital Assets
The digital asset itself is maybe the most crucial element to consider when selecting an investing choice. An investor who chooses to hold an altcoin that is not directly related to Bitcoin or Ethereum should pay particular attention to the project’s long-term ambitions. It isn’t worth your money if it isn’t future-proof. While staking has a time limit established by the project, the length of time a digital asset is held is chosen by the hodler.
Final Words
Staking and hodling are two distinct methods of investing in cryptocurrency. One delivers incentives, while the other provides a more “steady” investment.
An investor may choose to forego stability in exchange for higher returns, while another may choose for the higher returns and trust DeFi to perform well in 2021. The project one chooses to support determines whether either option is successful.
Without a doubt, understanding the concepts of HODL and STAKING can assist you in determining the sort of approach you wish to employ with your bitcoins. Simply said, in order to get the most out of your assets, you must make good choices and maintain and enhance your position.
Useful Resources:
A Guide: How To Trade Cryptocurrency
