Glossary
Staking
Staking means locking up coins on a proof of stake blockchain to help validate transactions, directly or through a provider, in exchange for rewards paid in the same coin.
Also called Crypto staking, Delegation, Liquid staking, Validator staking
See also
Staking is the act of committing cryptocurrency to a proof of stake network so that it can be used to secure the blockchain. In return, the protocol pays rewards, usually in the same coin. Staking is not lending: on the native level, your coins back a validator’s honest behaviour rather than being handed to a borrower.
How staking works
Validators propose and confirm blocks. Their weight in the network depends on how much is staked with them. Rewards come from new coin issuance and part of the transaction fees. There are several ways to take part:
- Solo staking: you run your own validator and keep your keys. On Ethereum, this requires 32 ETH and a machine online around the clock.
- Delegation: on networks such as Cardano, Solana or Polkadot, you assign your stake to a validator of your choice from your own wallet.
- Pooled and liquid staking: you deposit any amount into a protocol and receive a token that represents your staked position and can be used elsewhere.
- Exchange staking: a platform stakes on your behalf, simple but custodial.
A concrete example
Imagine you stake ETH worth $1,000 through a pool at a hypothetical 3% annual reward rate. After a year, if the rate stayed the same, you would hold about 3% more ETH. Your gain in dollars, however, depends entirely on the ETH price: if ETH fell 20% over the year, your position would still be worth less than when you started.
Why it matters for users
Staking lets holders earn a yield on coins they plan to keep and take part in network security. Staying in control of your keys, when possible, keeps you in line with the principle of self-custody.
Risks and limits
- Price risk: rewards are paid in a volatile asset.
- Slashing: a misbehaving or badly run validator can lose part of the stake.
- Lock-up: some networks impose waiting periods before you can withdraw.
- Counterparty risk: an exchange or staking provider can fail, freeze withdrawals or change its terms.
- Smart contract risk for liquid staking tokens, which can also trade below the value of the underlying coin.
- Tax: in many countries, staking rewards are taxable; check local rules.
Advertised yields are variable and never guaranteed.