Things to know:
– Proof-of-stake is a consensus mechanism where validators can stake tokens to generate passive income.
– Despite market conditions, staking rates keep unlocking new revenue streams for many custodians.
Executing staking at an enterprise/institutional level requires specialized, secure and user-friendly infrastructure.
– Ledger Enterprise offers its clients an easy, secure, and cost-effective way to stake Polkadot and Ethereum 2.0.
Locking up existing assets to earn rewards and interest
Blockchain networks use various consensus mechanisms to process transactions and add new blocks. Bitcoin, for example, uses a Proof-of-work (PoW) mechanism, where participants in the network—also known as miners—are required to use physical equipment to solve complex cryptographic puzzles.
Proof-of-stake (PoS) is another consensus mechanism that was created as an alternative to PoW. With PoS, participants, also known as validators, process transactions and offer their assets as collateral to validate blocks and, in return, earn rewards.
Besides consuming less energy, Proof-of-stake also makes it possible to put assets to work and generate a return on those that would otherwise stagnantly sit in custody.
Most protocols today are already operating on the PoS mechanism, including Polkadot and—as of recently – Ethereum 2.0.
Making the most of assets in custody
Despite current market conditions, staking rates and staking yields remained largely unchanged from their record highs in Q1.
When done properly, staking gives businesses high rewards with relatively little effort. In addition, staking can function as a hedge against the coin inflation rate. Staking prevents the current value of the coin in custody to dilute and creates an additional hedge against inflation.
In other words, you can put assets in custody to work for you 24/7 on autopilot and maximize your earning power.
Learn more about staking with the Ledger Academy.
With opportunity comes responsibility
Although rewarding, executing staking at an enterprise/institutional level involves certain risks and requires adequate infrastructure that:
- Is designed for the enterprise level and caters to governance, control, and compliance requirements.
- Maximizes your rewards.
- Puts emphasis on security.
And this leads us to the topic of our next blog post. We’ll discuss the challenges of institutional/enterprise staking, why secure staking matters, and how Ledger Enterprise addresses key challenges to enable its clients to earn staking rewards without complex processes and stellar security.