Make Money By Betting Crypto Tokens on Proof-of-Bet Blockchains: How It Works

With the crypto markets in a clear consolidation phase and the prices of leading cryptocurrencies correcting significantly from their all-time highs (ATH), many long-term crypto investors are looking to earn extra income from their cryptocurrencies.

Betting on cryptocurrencies offers such an opportunity to earn an extra income and is available on blockchains that use the Proof-of-stake (PoS) consensus model. Although there are a number of crypto tokens that can be wagered, platforms such as Binance, Kraken and Coinbase Global Inc COIN among other things, is a starting point for investors who look at efforts.

What is blockchain?

Simply put, a blockchain is a decentralized digital ledger system for recording transactions by involving multiple computers or nodes, thus establishing a peer-to-peer instead of a centralized network.

All transactions are maintained with full confidence as “blocks” of data, which can not be changed by any node in the network or the developers of the blockchain itself.

In this way, trust is maintained between all parties without dependence on a central authority or any other third party and the transaction ledger is distributed throughout the network of nodes.

For proof-of-work blockchains such as Bitcoin, nodes must use force to solve complex mathematical puzzles to extract cryptocurrencies and validate transactions.

For Proof-of-stake (PoS) blockchains, however, nodes act as validators based on the number of native tokens they have or lock with the blockchain.

Validators earn crypto tokens as a reward for their token contributions, and since they are often required to commit a large number of tokens to qualify, they resort to opening stakes pools and inviting retail investors to contribute.

What is staking?

As seen above, it is often not possible for retail crypto investors to become validators on a PoS blockchain due to the large number of tokens needed. A bet pool acts as a tool that allows multiple crypto token holders to contribute their tokens to the pool ‘operator’, which in turn is accredited with validator status on the underlying blockchain.

Available on a number of crypto platforms today, most crypto investors suffer from a lack of awareness of the benefits of investing and the potential to earn income through passive investing. Since the blockchain gives tokens to the pool operator instead of the total tokens lent, investors are eligible to earn rewards in proportion to their token contribution.

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How to make money through stakes and common mistakes to avoid?

According to Staking Rewards, the leading data provider for investment and crypto-growth tools, there are 205 return-bearing digital assets with 232 reliable suppliers operating today. Investors will be wise to choose notable crypto exchanges over private betting pools, even if the latter offers a higher APY.

Since the bet tokens act as a guarantee for the blockchain, blocks formed with invalid or fraudulent transactions may cause the blockchain to burn some or all of the bet tokens.

These risks were seen with the PancakeSwap (CAKE) token, which has lost more than 90% of its value from its ATH in May 2021.

By offering users the opportunity to bet CAKE on their platform, those who had invested their tokens in PancakeSwap’s stake or liquidity pools would have seen their total invested capital erode quite spectacularly during this period.

When you decide to join a bet pool, the bet crypto tokens are locked in a specific blockchain address belonging to the operator, resulting in loss of direct control over the bet tokens.

It is recommended to choose bet pools that allow investors to keep their holdings in a hardware wallet for more security.

Considering that validator rewards are distributed to investors after the platform fee has been deducted, it is important to take into account all such fees in order to arrive at the real return that can be generated from bet tokens.

Investors should choose betting pools that are ranked higher and that provide regular updates on performance, while maintaining transparency in operations.