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Staking

Locking up cryptocurrency to support blockchain operations (validation, security) in exchange for rewards, similar to earning interest.

What is Staking?

Staking involves locking up cryptocurrency to participate in blockchain network operations. In return, stakers earn rewards, similar to interest on a savings account.

How Staking Works

Proof of Stake (PoS)

  1. Lock tokens as collateral
  2. Validate transactions and secure the network
  3. Earn rewards proportional to stake
  4. Risk slashing (penalty) for malicious behavior

Delegated Staking

Don't run a validator yourself - delegate to a validator and share rewards.

Types of Staking

TypeLock PeriodRiskRewards
Native StakingVariableSlashingNetwork inflation
Liquid StakingNoneSmart contractSlightly lower
Exchange StakingFlexibleCounterpartyVariable
DeFi StakingVariableSmart contractOften higher
  • ETH: ~3-4% APY via Lido, Rocket Pool
  • SOL: ~6-7% APY
  • ATOM: ~15-20% APY
  • DOT: ~12-15% APY

Liquid Staking

Stake and receive a liquid token (stETH, rETH) that:

  • Can be traded or used in DeFi
  • Continues earning staking rewards
  • No unstaking waiting period

Risks

  1. Lock-up Period: May not access funds for days/weeks
  2. Slashing: Validator misbehavior can lose funds
  3. Smart Contract Risk: Bugs in staking protocols
  4. Opportunity Cost: Can't use staked funds elsewhere
  5. Price Risk: Token value may drop while staked