This article serves as a glossary of essential terms related to the coinpass Earn program. Understanding these concepts is crucial for anyone looking to participate in staking and grow their digital asset portfolio.
Key Terms:
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Earn Programme: The coinpass "Earn Programme" is a collection of products and services designed to help you passively grow your digital asset holdings.
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Staking: Staking is the process of locking up your cryptocurrency tokens in a smart contract for a specific period. This activity supports the operation and security of a Proof-of-Stake blockchain network. In return for contributing to the network, you earn rewards.
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Bonding: Bonding refers to the waiting period required after you initially commit (bond) your tokens to a staking smart contract before you start earning rewards.
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Unbonding: Unbonding is the waiting period after you initiate the unstaking process before your staked tokens are returned to your available balance. This delay is a security measure built into the blockchain.
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Rewards: Rewards are the additional cryptocurrency tokens you earn for participating in staking. They are typically paid out periodically (e.g., daily, weekly) and are often calculated based on a recent average of on-chain rewards. For example, staking Solana (SOL) will typically reward you with additional SOL tokens.
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APY (Annual Percentage Yield): APY represents the total return you can expect from staking over a year, expressed as a percentage. For example, a 5% APY means you can expect to earn rewards equivalent to 5% of your staked amount over a year.
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Proof of Stake (PoS): Proof of Stake is a consensus mechanism used by some blockchains to validate transactions and secure the network. Instead of using energy-intensive mining (like Bitcoin's Proof of Work), PoS networks rely on validators who "stake" their own cryptocurrency to participate in the network's operation.
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Epoch: An epoch is a specific time period or "cycle" on a Proof-of-Stake blockchain during which rewards are distributed. For example, on the Cardano (ADA) blockchain, an epoch is approximately 4-5 days long.
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Slashing Risk: Slashing risk is the possibility of losing a portion or all of your staked cryptocurrency due to penalties imposed by the network. This can happen if a validator (or, in some cases, a staker) behaves incorrectly, such as by being unavailable, performing slowly, or attempting malicious activity. While the risk of these events are low, they should always be considered when choosing a staking validator or platform for your token staking activities.
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Liquidity Risk: Liquidity risk refers to the fact that your staked crypto is often locked up for a certain period. This means you can't sell or trade it during that time. If you need access to your funds quickly, you may be unable to retrieve them until the unstaking period is complete.
- Token Price Volatility: The value of cryptocurrencies can change significantly and rapidly. This means that the value of your staked assets, including any rewards earned, can fluctuate along with the market price of the token. A price drop could offset any gains you make from staking rewards.
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