Staking
Staking is locking coins to help secure a Proof of Stake network and earning rewards for it. Risks: the coins are frozen for a period, and validators can be penalized.
How it works
In Proof of Stake (PoS) networks, blocks are confirmed by validators who put up coins as collateral. If a validator behaves honestly, the network pays it rewards in new coins and fees. If it breaks the rules, part of the stake can be destroyed; this is called slashing.
Running your own Ethereum validator takes 32 ETH and a server. So most people delegate coins to a validator, stake through an exchange or use liquid staking pools that give back a receipt token. Rewards are usually shown as an annual rate (APR) and change over time.
Rewards are paid in the same coin, so staking does not protect you from a price drop. Withdrawing often takes time: on some networks the unbonding period is up to 21 days. Staking through an exchange or service adds the risk of that middleman.
You stake 100 coins at $20 ($2,000) at 5% a year. After a year you have 105 coins. If the price fell to $14, they are worth $1,470, less than you put in despite the reward.
You decide to unstake, and the network has a 21-day unbonding period. If the price drops sharply during that time, you cannot sell until the coins unlock.
A common mistake is looking only at the rate and treating staking as a risk-free deposit. A high APR is often paid in new coins that add to the token's inflation, and the price can fall more than you earn. Judge the coin itself, check the unbonding period and avoid unknown services promising above-market yields.
Questions and answers
What is staking in simple terms?
You lock coins in a network, they help secure it, and you get rewards in the same coin. It looks like interest on a deposit, but with no guarantee and with price risk.
Can you lose money staking crypto?
Yes. The coin's price can fall more than the reward earns, a validator can be slashed, and the service you stake through can go bankrupt or be hacked.
What is the difference between staking and mining?
Mining (Proof of Work) secures a network with computing power from hardware, while staking (Proof of Stake) secures it with coins put up as collateral. Staking needs no special hardware, but it does need the coins.
Related terms
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Updated: 2026-10-19