Binance is powered by a Proof-of-Work (PoW) mechanism. Dogecoin (DOGE) and Litecoin (LTC) announced that the coins invested in the staking program that he recently launched for the company will remain on the exchange and will not be loaned to anyone else to earn additional returns.
“Dogecoin Revenues Coming Directly From Us, We Do Not Stake or Lending”
Using only the Proof of Stake mechanism cryptocurrencies can earn additional income with the staking system. A spokesperson for the company said:
“LTC and DOGE are not staking on-chain for network validation as these are non-proof-of-stake tokens. User funds remain with Binance and we have strict risk management controls to keep them safe.”
The announcement comes after many prominent social media influencers and investors rejected the program after its launch on Tuesday, questioning how it is possible to stake coins like DOGE and LTC as their main blockchain uses a proof-of-work (PoW) consensus mechanism.
Dogecoin, Litecoin and Bitcoin (BTC) Blockchains use energy-intensive proof-of-work (where miners solve a computer problem to verify transactions, as opposed to proof-of-stake, which requires market participants or validators to deposit or hold a certain number of coins to verify transactions in exchange for rewards). It uses the PoW mechanism.
As such, DOGE, LTC and BTC holders do not have the option to stake their coins individually on a network or via an exchange in exchange for rewards. Only native tokens of PoS blockchains such as Polkadot, Cardano, and Avalanche can be staked to earn rewards that represent a passive income.
In response to these concerns, a Binance spokesperson said, “We do not stake or lend users’ LTC and DOGE, and the APR rewards for this campaign come directly from us.”
*Not investment advice.