Staking has become one of the most well-liked techniques to generate passive income in the realm of decentralised finance (DeFi), which has brought new ways to increase wealth. Staking equity tokens is a new technique that is gaining popularity, even though most people still identify staking with cryptocurrencies like Ethereum.
At the front of this movement is 0xEquity, a prominent tokenized equity platform that enables investors to stake their equity tokens and receive returns. However, how does it operate? Is it secure? Most importantly, is this a viable method of generating passive income?
1. What Is Equity Staking?
Traditional Staking vs. Equity Staking
Staking in cryptocurrency usually refers to locking up tokens in order to support a blockchain network (such as Ethereum 2.0) in return for rewards.
On the other hand, equity staking entails:
- Keeping tokenized shares of a business (equity tokens).
- Enclosing them in a smart contract so they can get governance awards, profit-sharing, or dividends.
Why Would Startups Offer Staking?
- Promote long-term holding (lessen pressure to sell).
- Give devoted investors more than simply price increases.
- Increase participation in governance (if stakeholders are granted the ability to vote).
2. How Does Staking Work on 0xEquity?
Startups can issue equity tokens with integrated staking mechanisms thanks to 0xEquity. This is how it operates:
First Step: Select a Staking Pool
On 0xEquity, startups can set up staking pools where investors can lock tokens for a predetermined amount of time.
For instance, Startup B provides profit-sharing rewards in place of fixed returns, while Startup A gives 10% APY for 12-month staking.
Step 2: Lock Tokens:
Investors contribute equity tokens to the staking contract, and smart contracts are used to automatically distribute rewards.
Step 3: Withdraw or Restake
Investors have the option to restake for compounding returns or withdraw tokens plus prizes following the lock-up period.
