What is staking?

Staking is when you lock up your coins to help a blockchain run, and earn rewards in return. It is the main way proof-of-stake blockchains such as Ethereum, Solana and Cardano stay secure.

How staking works

Instead of miners spending electricity, a proof-of-stake network picks validators to confirm transactions. To qualify, a validator has to put up coins as a deposit. If they do their job honestly, they earn rewards. If they cheat or go offline for long periods, part of their deposit can be taken away, which is called slashing.

Ways to stake

• Run a validator yourself. This needs technical knowledge, and on Ethereum a deposit of 32 ETH.
• Delegate to a validator. Some networks let you assign your coins to a validator and share the rewards.
• Use an exchange or a staking service. This is the simplest route, but the provider takes a fee and often holds your coins.
• Liquid staking. You deposit coins and receive a token that represents them, which you can use elsewhere while your coins earn rewards.

What it can earn

Rewards depend on the network, how many people are staking and the fees charged. They are paid in the same coin, so if the coin’s price falls, the value of your rewards falls too.

The risks

• Price risk. Rewards do not protect you from a falling price.
• Lock-ups. Some networks take days or weeks to release your coins after you unstake.
• Slashing and provider risk. A faulty validator or a failed service can cost you coins.
• Smart contract risk. Liquid staking relies on code that can contain bugs.

Staking is one of the topics where the headline yield looks simple and the details matter. Read the terms before you lock anything up.