Coinbase has today added support for staking rewards of the Cosmos cryptocurrency, according to a release today.
Cosmos is an ecosystem of proof-of-stake blockchains. Its goal is to create an “Internet of blockchains.” By using multiple blockchains, it hopes to provide a more scalable alternative to current popular blockchain platforms, such as Ethereum, which often struggle to support high numbers of transactions.
It’s very simple for Coinbase customers to earn these rewards. All they have to do is hold Cosmos (ATOM) tokens in their account and they will automatically receive these rewards—at a rate of five percent APY.
Coinbase has previously added support for rival proof-of-stake blockchain platform Tezos. By May the exchange had given out more than $2 million of rewards in its native currency Tezzies—and likely more since.
Proof-of-stake blockchains allow coin owners to “stake” their funds in order to participate in running the network. In return, they receive coins. But if they behave maliciously, they could lose their coins. The concept is designed to encourage a decentralized network of support—although having centralized exchanges act as a third party on everyone’s behalf undermines this to some degree.
Staking rewards have been likened to “interest.” However, there are a few differences. The new tokens come out of inflation—so no new value is necessarily being created. And while someone staking Tezzies could see an increase in the number of their Tezzies, the total value could decline due to the fluctuating cryptocurrency prices.
But that’s the risk that comes with crypto.