Basically, staking is a passive income method that has recently attracted more attention than mining. Although investors are looking for various platforms for staking, the most difficult issue for them is to find a reliable address. In such a case, alternative methods such as contingent staking come to the fore. We will examine both staking and contingent staking topics in detail for you.
What Is Staking?
In staking, users participate in the consensus mechanism. During this process, they lock their tokens as collateral to verify queries in the system. Naturally, staking platforms are rewarded with various tokens and products depending on the agreement.
The reward mechanism can often come in the form of additional tokens or fees. With this system, traditional staking has some limits in terms of flexibility and customization. The main reason for these limits is that the staking system carries more risks for the investor and its technology naturally takes a back seat.
Contingent staking, on the other hand, is a bit different. What is contingent staking, which emerged in the Cardano ecosystem and attracted attention as an innovative structure? How is it done? What are the differences? We will examine such question titles together.
What Is Contingent Staking?
In the staking mechanism, rewards are mostly distributed over a 24-hour period. Accordingly, staking users earn on the terms promised by the current ecosystem. In contingent staking, users are allowed to set conditions or triggers for the tokens they stake, such as a specific price, event, or timeframe.
Some exchanges, such as Yobit, have developed some coin and staking systems that pose trust issues. However, the emergence of this in a system such as Cardano is interpreted as it will make more noise in the future.
For example, a staker can set a trigger to sell their staked tokens if the price reaches a certain threshold, or to vote on a governance proposal if a certain issue is addressed. Contingent staking differs from traditional staking in that it gives stakers more options and flexibility to customize their participation in the network.
What Are Contingent Staking Options?
There are several options for contingent staking, including DeFi platforms, DAOs, and decentralized exchanges. Depending on your preference, these options have their own advantages and disadvantages, such as the degree of flexibility, governance, and the risk of smart contract failures or hacks.
For example, DeFi platforms such as Aave or Compound offer more flexibility in setting contract terms. It is also important to note that they carry higher risks due to their decentralized nature.
DAOs such as Maker or Yearn Finance offer more control for shareholders, but also require more commitment and knowledge about the project. Decentralized exchanges like Uniswap or Sushiswap allow stakeholders to participate in providing liquidity and earn fees. This can also expose them to temporary losses and price fluctuations.
How Can You Participate In Contingent Staking?
To participate in contingent staking, users need to deposit their tokens into a smart contract that supports certain conditions or triggers that they want to set. In fact, it is worth noting that this system is not much different from regular staking.
You then need to select the relevant staking option. If you wish, you can watch the performance of the staked tokens in different systems beforehand. For now, this system only works on Cardano. However, in the near future, it is possible to see the contingent staking system working on many different coin infrastructures.
Withdrawals can be made when conditions are met or when the distribution period expires. The technical aspects of contingent distributions include understanding the smart contract code, conditions, triggers and rewards. Users should also consider gas fees, tokenomics and the risks associated with each staking option.
What Are The Risks And Cautions?
For now, the contingent staking system promoted by Cardano has some risks. First of all, the biggest risk that users should be aware of in this system may be that the duration – price balance may not be achieved. In other words, a problem may arise such as your coin never reaching the lock you specified as a target.
For this reason, you should pay attention to the risks and act according to the complex infrastructure of smart contracts. Otherwise, you may encounter errors that can lead to financial loss. The same applies to security vulnerabilities.
There may also be disagreements or disputes between stakeholders or between stakeholders and the project team. Loss of access to private keys or passwords may result in permanent loss of funds. Users should conduct their own research, diversify their investments and regularly monitor performance before participating in conditional bets. Tools such as risk calculators, historical data and community feedback can help users make informed decisions.
Should I Invest In Contingent Staking?
Contingent staking is a promising concept that offers investors more options and customization. Cardano (ADA) has already implemented some features for conditional staking, such as time-locked wallets and on-chain governance.
In 2023, as the crypto market continues to evolve and mature, we can expect further developments and innovations in conditional distribution. It’s important to note that even when all of these options come together, there will still be some issues. You should consider these options and do in-depth research on contingent staking before investing.
