Staking

What Staking means

Staking is the proof-of-stake equivalent of mining. Instead of spending electricity, participants lock a quantity of the network's native asset as collateral and are selected to propose and attest to blocks in proportion to the amount staked. Honest participation earns newly issued coins and a share of transaction tips; being offline forfeits rewards, and provably harmful behaviour such as signing conflicting blocks results in slashing, where part of the stake is destroyed. Ethereum has operated this way since the Merge in 2022.

Running a validator directly requires a substantial minimum stake and reliable infrastructure, so most holders use intermediaries. Pooled staking services combine smaller amounts, liquid staking protocols issue a tradeable token representing the staked position so the capital is not idle, and exchanges offer staking as a product. Each layer adds convenience and a counterparty. Advertised yields are typically quoted as an annual percentage that varies with total participation, since rewards are shared across all staked capital.

The caveats are frequently understated. Staked assets are not instantly liquid; entry and exit queues can delay withdrawals for days or longer during heavy demand. The reward is paid in the same volatile asset being staked, so a 4 percent yield means nothing if the asset falls 40 percent. Slashing, validator downtime, smart contract bugs in liquid staking protocols and the solvency of a custodial provider are all live risks, and staking is treated as a taxable event in many jurisdictions.