Put very simply, staking is a way to use crypto to earn more crypto. Rewards vary widely, but for many coins they tend to land somewhere around 5% to 10%, and higher for others. Staking is also an essential component of a popular type of blockchain. It allows transactions to be added to the network while also preventing people from cheating.
The whole thing can seem a bit complicated, so it's understandable to have some questions. Maybe you're wondering how you, a regular person who may or may not know a lot about crypto, can get into staking. You might want to know how much you can stake, and for how long. While we can't tell you exactly what to do, we can help you understand exactly how staking works — and how you can get involved.
What is crypto staking?
Crypto staking is when you offer some of your own crypto as collateral in order to be the one to validate transactions on a blockchain. Whoever validates the transactions is given a reward: more crypto.
How does staking work, and why put up your crypto?
With your money on the line, you're less likely to cheat or help someone else cheat. If you are busted cheating — maybe you allowed someone to use the same coins to buy two different things — then you would lose the money you staked. The more money you put up, the better your chance of being chosen to validate the transactions and earn those rewards.
Proof of work vs. proof of stake
Before you can stake, you have to pick the right network. Most crypto networks use one of two systems: proof of work or proof of stake. You can't stake with a proof-of-work network, but you can with proof of stake.
In order to record new transactions on a proof-of-work blockchain, your computer has to guess a long, long number before other computers do. Coming up with that number takes a lot of processing power, which needs a lot of electricity, which costs a lot of money.
Since a majority of computers on the network have to agree on every transaction before it's recorded, if you wanted to cheat, you'd have to control more than half of the computers guessing that long number — and pay for all the energy that required. To do that would cost a lot more than what you stand to earn, so you probably wouldn't do it.
Here's a helpful metaphor: Contestant's Row on The Price Is Right. But instead of just guessing one number — and hoping for the chance to hug Drew Carey and maybe even win a car — each person is screaming out thousands of numbers a second until someone gets it right.
With proof of stake, instead of all of those computers guessing numbers and burning all that electricity to deter cheating, people put up their crypto as collateral. It's newer, more accessible, and easier on the Earth.
How to stake your crypto
Bitcoin is a proof-of-work network. Ethereum, Solana, Cardano, Cosmos, VeChain, and Tezos are proof-of-stake networks.
Once you've decided which network to stake, you have a couple of options. Doing it on your own gets a little complicated, because you'd need to:
set up and run your own validator node;
meet the hardware and software requirements and know your way around the blockchain;
put up a lot of money, since most networks require very high minimums — think tens of thousands of dollars.
There's a way around that, though, and it's called a staking pool.
What is a staking pool?
Staking pools are formed when crypto traders combine their funds to meet a network's minimum and have a better chance of being selected as a validator. Smaller pools have a worse chance of getting chosen but pay off better when they do, since there are fewer people to share with. Large pools can limit rewards so much that they're not worth it. Mid-size pools tend to strike a balance between the two.
To join one, you can go out and vet different pools until you find one that feels trustworthy.
Types of staking
Solo (validator) staking: you run your own validator node and stake the full network minimum yourself. It offers the most control and the largest share of rewards, but it needs technical know-how and a sizable amount of crypto.
Delegated staking: you assign your crypto to an existing validator who does the technical work. You keep ownership of your coins and share in the rewards.
Pooled staking: you combine your funds with other people's to meet a network's minimum together, then split the rewards.
Liquid staking: you stake your crypto but receive a token in return that represents your staked assets, so you can keep using or trading it while it earns.
How much can you earn from staking?
Many platforms and validators take a small cut of the rewards. With all these people taking cuts, how much you earn depends on the network you're staking and how you stake it.
As for timing, staking involves something called a warm-up period. You're basically waiting for the next cycle of transactions to begin. How long that is depends on the network. It can be hours, days, or weeks. There's a similar delay on the back end, too, called a cooldown. In either period, your money is essentially frozen.
Is staking crypto safe?
As with anything in crypto, there are risks. Crypto values fluctuate quickly, and if the value of the assets you stake decreases, then your reward decreases with it.
Staking vs. yield farming
They're similar, but yield farming takes a lot more effort. Whereas staking is providing funds to be used by a network, farming is when you use platforms to loan crypto to other users. Not only do you need to manually monitor and move assets a lot more than with staking, you need to know more about the economics of the platforms you stake them on.
Yield farming can result in higher yields, but farmers are constantly switching up which tokens they want to invest in which platforms. Think of it like the difference between sticking a self-watering kit in a cactus and actually sowing seeds and rotating crops. Whichever path you're weighing, understanding how each one works is the first step toward deciding what fits your goals and your comfort with risk.
