Staking is when you lockup your crypto assets for a certain period and get rewards in returns it can either be Annual Percentage Yield (APY) and you get compound interest in this or it can either be Annual Percentage Rate (APR), e.g you can stake NOW tokens and you get APR of 25%.
How Does it work?
You can either stake your altcoins on a Centralized Exchange like Binance or Kucoin or you can use you decentralized wallet e.g Atomic wallet or Trust wallet. You just buy your coins or tokens then you choose the period you want to lock them up e.g 1 year.
Why is Staking Done
Staking is done so as to provide security and to validate blocks on the Blockchain. Since we have Proof of Work and Proof of stake, here on Proof Of Stake we lock up altcoins and the investors who have a large amount have the higher chances of validating the block.
Staking does not have much risks, the only major risks i can say are there is when you are staking and get an APY LETS SAY 25% and the value of an asset you are staking starts losing value, there are higher chances of losing money.
Lets say you are staking your altcoins on a Centralized Exchange and it happens that the Exchange platform is hacked and funds are stolen then there are higher chances that you can lose you altcoins.
Staking is a good investment plan especially in times like this when the market is bearish, you should accumulate as much as you can at a low price and when the price rise you will make a fortune.
Staking has to be done using Decentralized wallets so that you avoid risks of losing you crypto assets but you also have to make sure you do not lose you wallet keys.