Staking — What Is It?

Developed as an alternative of Proof of Work —due to its huge energy consumption — Proof of Stake is designed to function as a less energy intensive consensus mechanism. Instead of purchasing cryptocurrency mining hardware to acquire cryptocurrency coins and tokens, Proof of Stake consensus rewards cryptocurrency coins and token holders by simply holding those same coins and tokens in a cryptocurrency wallet.

Now, don’t get confused. Staking can refer to the Proof of Stake consensus, but it can also refer to the process of locking coins away within a masternode. An important distinction that can be made is with 100% Proof of Stake consensus models, staking is the process by which new blocks are propagated to the chain, whereas with masternodes, staking does not propagate new blocks to the chain.

Some Proof of Stake protocols reward users for locking away more collateral, but this can act as a barrier to entry for those with a lower amount funds. To counter this, some Proof of Stake projects have implemented a sequential ordering to determine staking rewards, whereby users wait in line to receive their reward.

Generally, staking services require you to lock away your coins for a predetermined period of time, which means your tokens will be left to deal with the market volatility — meaning you could miss out on a pump or dump due to your tokens being inaccessible.

In a direct response to available staking services and Proof of Stake projects offering Staking Pools, KuCoin has decided to offer their own staking solution.

KuCoin’s Soft-Staking Solution

KuCoin is attempting to redefine what it means to stake cryptocurrency coins and tokens. Instead of users locking their coins away in order to receive a reward or return on investment, KuCoin will remove the minimum lock up period and permit access to your coins at any time while still paying out rewards.

However, much like a cryptocurrency exchange, the concerns of technological capacity and security remain a core issue and must be addressed for each individual project. KuCoin will take advantage of its existing infrastructure to enable the Soft-Staking program with the goal of providing returns on staked tokens while maintaining user control of assets.

Pros & Cons of KuCoin’s Soft-Staking Program

Pros:

Staking service for non-technologically minded users.

Requires some funds to be stored in masternodes, and therefore not on the exchange itself — potentially offering an additional security layer.

Exchanges looking to innovate outside of Launchpad/IEO and utility token offerings.

Daily rewards and no lock up period.

Cons:

Opt-out only. Non-participation requires removal of tokens from exchange.

Not your keys, not your coins.

Centralized service controlling large numbers of masternodes.

Cryptocurrency exchanges are major targets for hackers.

Cryptocurrency Projects Currently Supported By KuCoin’s Soft-Staking Program

KuCoin currently supports Soft Staking for these tokens:

Each cryptocurrency project mentioned above (in bold) will link to a KuCoin explanation of the Terms of Service associated with KuCoin’s Soft-Staking service. Links contained within parenthesis will link to the website for each cryptocurrency listed.

Expectation of KuCoin’s Soft-Staking ROI can be found HERE.

Our Thoughts On Soft-Staking

The Soft-Staking program is promoted as a new way to stake cryptocurrency coins and tokens, one that KuCoin believes to provide the best of both worlds: low-risk and passive profit generation from staking, all while maintaining full access to your tokens.

Cryptocurrency exchanges have placed a lot of energy into innovation throughout the last 18–24 months. Development of Initial Exchange Offering launchpads and utility tokens are just a couple of the popular innovations implemented recently, and it seems Soft-Staking is simply the latest in a series of innovations, this time developed by the KuCoin team.