The Growing Appeal of Crypto Staking to Online Gamblers

With the growing value of Bitcoin and other decentralised tokens, we have seen a surge in crypto casinos and a growing appetite from players to gamble using their favourite coins.

However, as the industry has begun to mature and cryptocurrencies are moving away from simply being the ‘hot new trend’ into a trusted financial instrument, how holders are using these digital assets is also evolving.

One of the use cases for this cutting-edge technology, which is gaining ground, is staking. Join us to learn more about this process and why it resonates with crypto gamblers.

Global Crypto Regulation Shift

In recent news, the Hong Kong Securities and Futures Commission (SFC) amended its cryptocurrency legislation to allow Virtual Asset Trading Platforms (VATP) and exchange-traded funds (ETF) to offer crypto staking to their users.

This move saw the financial powerhouse join the ranks of Singapore (excluding retail staking), Germany, Switzerland, and the United Arab Emirates. All of these regions have ensured that their crypto laws, local crypto tax codes, and investment frameworks allow investors to stake their digital assets in yield-bearing products.

Malta and Portugal do not have specific laws governing the practice, but neither is there anything that claims it is illegal. This grey area, combined with their lack of capital gains tax for private investments, has made staking a hot topic amongst investors but kept platforms from going too hard until there is more regulatory clarity.

While both the European Union and the United States are on record as considering the legalisation of crypto staking, it is the United Kingdom that will most likely be the next big player to enter the space.

Staking is not the Same as Betting

While crypto gamblers are used to funding their player accounts and using their assets to play slots or back a sports team, staking in this context is more like backing the house than wagering on the game.

Britannica Money defines cryptocurrency staking as:

“... practice of locking your digital tokens to a blockchain network in order to earn rewards—usually a percentage of the tokens staked. Staking cryptocurrency is also how token holders earn the right to participate in proof-of-stake blockchains.”

In short, this is similar to how a poker room operates. It allows players to compete head-to-head at their table; they manage the deposits, withdrawals, and the flow of the game. At the end of the game, they take a cut of the pot as a service fee.

Crypto staking allows investors to assign a portion of their holdings to a staking platform, based on the advertised rate of return, for example, 5% for 30 days. The investor receives interest on their stake at the end of the period.

Why Gamblers Are Turning to Staking

Punters who are holding large sums of crypto tend to have delegated gambling balances, and as this pot grows, they look for ways to keep it active without risking it all on crash games and live dealer bets.

Staking has become a fantastic way to ensure their portfolio remains active and gains value without being used for online gambling. The experience is akin to betting on low-volatility games; sure, the wins are not astronomical, but it's fun to see your balance ticking up over time.

Also, there is a particular pleasure in being the house for a change, rather than the one competing against it. Staking is essential for the viability of crypto platforms as it ensures that networks add accurate new information, and it is used to defend against network control attacks (also known as 51% attacks).

All of this and you earn passive income for investing your tokens into the network for short periods, making it the ideal intersection of risk versus reward for online gamblers.

It’s Not all Sunshine and Roses

With the mention of risk versus reward, we have to clarify that, much like any sports bet or casino wager, cryptocurrency staking is not a guaranteed win.

The Downside of Staking Your Tokens:

Anytime you place an asset under the control of a 3rd party, there are risks - here are some of the things to consider before staking:

1. You can’t access your crypto while it’s locked in staking.
2. Prices can drop, so your staked tokens and rewards might lose value.
3. Some or all of your crypto can be taken if the network rules are broken.
4. Too many rewards can cause inflation and reduce the value of your earnings.
5. If the blockchain is attacked, your staked crypto could be at risk.
6. Staking is not well-regulated in many countries.
7. Staking can be tricky and may need technical know-how.
8. Some platforms charge high fees that eat into your staking rewards.
9. Not all staking projects are legit—some could be scams.

Slashing Penalties Can Be Brutal:

Even with all precautions, slashing penalties can still occur, and they may cost you part or even all of your staked tokens..

This is because, in a Proof-of-Stake (PoS) network, validator activity is monitored by a smart contract that defines the rules of participation. If those rules are broken, whether intentionally or not, the contract can automatically trigger penalties, including the loss of staked tokens.

If a validator using your funds is deemed to be validating conflicting blocks (called double signing), or goes offline too often, resulting in missing blocks, they may be penalised by having a portion of their staked crypto permanently taken away or being removed as a validator.

In both instances, there will be a negative impact on your expected returns, or even lose a portion of the coins you set as the stake.

Take Matters Into Your Own Hands

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