What is staking
Staking is the process of locking cryptocurrency in order to participate in securing a blockchain network and earning a block reward.
Staking is commonly used in networks that rely on the Proof of Stake consensus mechanism.
In many cases, staked assets must remain locked for a certain period. If the user withdraws them early, the accumulated rewards may be lost.
Staking explained simply
Staking is a way to earn cryptocurrency by holding it in the network and helping maintain the blockchain.
Unlike yield farming, staking supports network consensus rather than supplying liquidity to a trading or lending protocol.
How staking works
A typical staking process includes:
- locking cryptocurrency in the network
- helping secure the blockchain
- receiving rewards for participation
Example of staking
In the Ethereum network, users can stake ETH to participate in block validation.
Where staking is used
Staking is widely used in networks such as:
- Ethereum
- Solana
- Cardano
Derivatives such as liquid-staking products may integrate with DeFi, adding smart-contract risk to the underlying network risks.
Related concepts
FAQ
Can you lose funds when staking?
In some cases, validators may be penalized if they behave incorrectly.
How is staking different from mining?
Mining uses computational power, while staking relies on locking cryptocurrency as collateral.