Your Guide to Navigating Staking & Insurance

date_range December 9, 2021
person Zoe Perl
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DeFi services have become increasingly useful in the crypto world. These services allow crypto users to increase their gains while minimizing risk. Many such services exist, so how do you know which solutions are reliable?

Magic Square is bringing a new level of usability and trust to the industry by integrating community-vetted, DeFi solutions into Magic Store apps. This way, crypto users access quality services that support native app currencies with the click of a button.  

Magic Square features all types of DeFi products and services. Here we will explore the benefits of a few of these, namely, insurance and staking.

smart contract

Staking

Staking, simply put, is locking a set of funds into a smart contract in order to gain. In a word: passive income.

When you stake coins, the coins enter into a smart contract which dictates the parameters for how and when the coins can move between parties. 

Here are some practical examples:
  • Many platforms are adopting Proof of Stake (PoS) over Proof of Work (PoW) to validate and confirm the truth of blocks in the blockchain. You have to stake coins in order to validate blocks, and you earn rewards for validation. 
  • You can stake coins in a liquidity pool to provide a network with security and earn interest. This acts kind of like a CD in conventional finance, but instead of earning 0.3% APY, stakers earn 5% APY.  
  • To earn much higher APY, sometimes above 100%, crypto users lend tokens to be traded in a liquidity pool and earn via yield farming. In this case, like in any situation, higher gains come with increased risk. 

So, if staking helps grow your crypto portfolio and create revenue, the next step is to make sure that your assets are secured. This is how insurance fits into the picture.

Insurance

Insurance, in the traditional sense, eliminates the risk of losing your assets. DeFi insurance achieves the same goal just with crypto funds, ensuring that you won’t lose everything in the event of a hack or exploit.

However, unlike in the traditional industry, DeFi insurance uses smart contracts to dictate the terms of the agreement and ensure they are carried out by both parties. These smart contracts replace lawyers and other middlemen-entities to make the transaction more cost-effective for the user and more lucrative for the provider.  

Blockchain is secure. Is insurance worth it?

Blockchain itself is secure, but most crypto platforms are still centralized to some degree. Also, exploits are fairly common in the crypto space. Magic Square has eliminated many of these risks via community validation and SSI. But, you can never eliminate the risk of hackers completely. DeFi insurance is a good way to make sure funds will never be completely lost. 

The question as to whether insurance is worth it is very case-specific. In-app DeFi integrations are just another way Magic Square is giving users more.

Magic Square does the hard work for you

Magic Square selects the best DeFi services for each app and integrates them within the apps for your convenience. These services are community-vetted for security and quality. Now you can make the most of your app experience with minimal research and worry.

Final Thoughts

DeFi integrations are just one way Magic Square is leveling up the crypto interaction for users across the board. Follow our blog and join the community to take part in the world of innovation Magic Square is bringing to the decentralized space.