Staking

Staking is the act of locking up cryptocurrency to help secure a proof-of-stake blockchain, in exchange for rewards paid in that network's token. Validators — the computers that propose and confirm blocks — must put tokens at stake as collateral; if they act honestly they earn rewards, and if they cheat or fail badly they can lose part of their stake through slashing. This economic bond replaces the energy expenditure that secures proof-of-work chains like Bitcoin.

A concrete example: on Ethereum, running your own validator requires 32 ETH, but most people stake smaller amounts through pools, exchanges, or liquid staking protocols such as Lido, which aggregate deposits and share the rewards. Rewards come from newly issued tokens and transaction fees, typically yielding a few percent annually on major networks.

A common misconception is that staking is a risk-free savings product. The risks are real: slashing if your validator misbehaves, lock-up or exit periods during which you cannot sell, smart contract risk when using a staking protocol, and the token's own price volatility, which can dwarf the reward rate. It is also worth distinguishing true protocol staking from marketing uses of the word, where platforms label any lock-up-for-yield product as staking even when no blockchain validation is involved.