Staking (Earn)

Staking is how Proof of Stake (PoS) blockchains choose who validates new blocks. Instead of spending electricity on mining, validators put up coins as collateral. The protocol pays them rewards for honest work and can cut their stake (slashing) if they misbehave. Ethereum, Solana, Cardano, Polkadot, Cosmos, Tezos and many other networks work this way. Holders who do not run a validator can still take part by delegating to one or by staking through an exchange.

How staking works

A validator locks coins in the protocol, runs node software that proposes and checks blocks, and earns a share of newly issued coins plus transaction fees. Delegators assign their coins to a validator and receive part of its rewards after the validator's commission.

When you stake on an exchange, the exchange pools customer deposits, runs or hires validators and credits rewards to your account, usually daily or weekly. It keeps a cut. Your coins stay in the exchange's custody the whole time.

Most networks have an unbonding period. Once you ask to unstake, coins stop earning and stay locked until the period ends. Cosmos-based chains use about 21 days, Polkadot about 28 days, and Ethereum depends on the length of the exit queue. Solana unstakes at the end of an epoch, roughly two days.

Types of staking products

Exchange "Earn" pages often mix true staking with other yield products such as savings, lending, dual investment or launchpools. Those pay from different sources and carry different risks. Check which one you are actually buying.

Why it matters

Staking lets long-term holders earn on coins that would otherwise sit idle. Rates follow each network's issuance and how much of the supply is already staked. Ethereum usually pays a few percent a year, while some smaller networks advertise much more. High nominal rates often come from heavy inflation, so the coin's supply grows and the real gain is smaller than it looks.

Limits and risks

• Price risk. Rewards come in the staked coin. If its price falls 30%, a 5% yield will not cover the loss.
• Lock-ups and unbonding. You cannot sell quickly during a crash.
• Slashing. If a validator misbehaves or goes offline, part of the stake can be lost. Some exchanges cover this, others pass it on.
• Custody risk. An exchange can freeze withdrawals or fail. Read the terms on who owns the staked assets, and check Proof of Reserves where it is published.
• Regulation. Staking services are restricted or offered differently in some countries and US states, so availability varies by region.
• Tax. In many countries, including the US, rewards count as income when you receive them, and you pay tax again on any gain when you sell.

What to check when comparing platforms

• Supported coins and whether staking is native, delegated, liquid or a lending product labelled "Earn".
• Net rate after the platform's commission, and whether the advertised APY is fixed or variable.
• Flexible vs locked terms, unbonding time and early redemption penalties.
• Minimum amounts and any caps per user.
• Payout frequency and whether rewards compound automatically.
• Slashing coverage and what the terms say about custody if the platform goes bankrupt.
• Availability in your country and the tax reports provided.

Related terms

Staking vs lending: staking rewards come from the protocol, while crypto loans and lending products pay interest from borrowers, which brings counterparty risk. Staking vs yield farming: farming means providing liquidity to DeFi pools for fees and incentive tokens, usually through a Web3 wallet, and it carries impermanent loss.