Staking is the process of locking cryptocurrency to help secure a proof-of-stake blockchain. In return, stakers earn rewards — typically paid in the same token being staked.
The mechanism
Proof-of-stake networks use locked tokens as collateral to validate transactions. Validators (or the validators you delegate to) process blocks and earn rewards. You are not mining with hardware — you are providing economic security to the network.
Exchange staking: the platform handles technical operations and pays you a share.
On-chain staking: you delegate directly from your wallet to a validator.
Rewards and lock-ups
Rewards are quoted as annual percentage yield (APY) but accrue continuously or daily. Rates vary by network and demand.
Most networks impose an unbonding period — days or weeks during which staked tokens cannot be sold after you request withdrawal. This prevents mass exits during stress events.
Staking rewards are paid in the staked asset. If that asset’s price falls, yield may not offset the loss.
Key risks
- Platform risk (exchange staking): you trust the company holding your tokens.
- Validator risk (on-chain): malicious or unreliable validators can be slashed, reducing your stake.
- Price risk: rewards do not protect against declines in the underlying asset.
Staking is not equivalent to a government-insured savings account. Understand which network you’re staking on, who holds the keys, and whether the asset’s price risk is acceptable before locking tokens.