What is Staking?
Staking is locking up your crypto to help secure a network — and earning rewards in return. It's the crypto equivalent of earning interest, but the mechanics are different.
Staking is a way to earn yield on certain cryptocurrencies (like ETH, SOL, ADA) by helping run the network that issues them.
Here's the mechanic in plain English: networks that use proof-of-stake consensus need participants (called validators) to lock up tokens as collateral. In exchange for putting that capital at risk and processing transactions correctly, validators earn newly-minted tokens.
You generally have three options:
- Solo staking — You run your own validator. Highest yield but technically demanding (24/7 uptime, big initial deposit — 32 ETH for Ethereum), and you risk slashing if you mess up.
- Pooled staking — You join a pool that runs validators on behalf of many people. Lower yield because the pool takes a cut, but accessible to anyone with any amount.
- Liquid staking — You deposit your tokens with a service like Lido or Rocket Pool, and you get a tradeable receipt token (like stETH) that earns staking rewards. You stay liquid because you can sell or use the receipt token in DeFi.
Annual yields vary by network and over time, but are typically 3-10% for major chains.
Key risks: validator slashing (rare but possible), smart contract bugs in liquid staking protocols, and the underlying token price falling more than your yield offsets.