If you have spent any time in crypto, you have heard people talk about “staking” their coins to earn rewards, almost like earning interest in a savings account. But what actually is staking, how does it work, how much can you really earn, and what are the risks? This plain-English guide explains everything you need to know about crypto staking, whether you are completely new or just want the details straight.
What is staking in crypto?
Staking is the process of locking up your cryptocurrency to help support the operations of a blockchain network, and earning rewards in return. In simple terms, you commit your coins to the network, the network uses them to stay secure and process transactions, and you get paid for your contribution, typically in more of the same cryptocurrency.
Think of it a little like putting money in a savings account that pays interest. You deposit your coins, they get put to work, and you earn a yield over time. The key difference is that instead of a bank using your deposit, a blockchain network is using your staked crypto to validate transactions and stay secure.
Staking only works on blockchains that use a system called Proof of Stake, which we will explain next.
How does staking work?
To understand staking, you need to understand the problem it solves. Every blockchain needs a way to agree on which transactions are valid, without a central authority in charge. This agreement process is called consensus.
Older networks like Bitcoin use Proof of Work, where powerful computers compete to solve puzzles (called mining) to validate transactions. That is energy-intensive. Proof of Stake, the system that enables staking, takes a different approach. Instead of miners using computing power, it uses validators who lock up (stake) cryptocurrency as a security deposit.
Here is the basic flow. Validators stake their coins as collateral. The network selects validators to confirm transactions and create new blocks, with those staking more having a higher chance of being chosen. When a validator does its job honestly, it earns rewards. If a validator tries to cheat or fails to do its job, it can lose part of its stake, a penalty called “slashing.” This system gives everyone a financial incentive to keep the network secure and honest, because misbehaving costs real money.
What are staking rewards, and how much can you earn?
Staking rewards are the payments you receive for staking your crypto, usually expressed as an annual percentage yield (APY). The reward comes from a combination of newly created coins (the network issuing new supply) and transaction fees paid by users.
How much you earn depends on the specific cryptocurrency. As a rough guide, major networks tend to offer annual yields in the range of about 2% to 7%, though some smaller networks advertise higher rates. Ethereum, for example, typically offers a staking yield in the low single digits, around 2.8% to 3.5%. The rate varies based on how many people are staking (more stakers can mean lower individual rewards) and the network’s specific rules.
It is worth being realistic: staking is a way to earn a modest yield on crypto you plan to hold, not a get-rich-quick scheme. The rewards are meaningful over time, but they will not turn a small holding into a fortune on their own.
The different ways to stake
There are several ways to stake, ranging from hands-on to fully hands-off.
Running your own validator gives you full rewards and control, but it is technical and usually requires a significant minimum amount of crypto (Ethereum, for instance, requires 32 ETH to run a solo validator). This suits advanced users.
Staking pools let multiple people combine their coins to stake together, sharing the rewards. This lowers the barrier to entry, so you can stake smaller amounts.
Exchange staking is the easiest option. Many crypto exchanges let you stake with a few clicks, handling all the technical work for you in exchange for a cut of the rewards. It is the most beginner-friendly route.
Liquid staking is a newer option where you stake your coins but receive a token representing your staked position, which you can use elsewhere while still earning staking rewards. This solves the problem of your coins being locked and unusable.
The risks of staking
Staking is not risk-free, and understanding the risks matters as much as the rewards.
The biggest risk is price volatility. Your staking rewards are paid in cryptocurrency, and if that crypto’s price falls, your rewards (and your original stake) can lose value in dollar terms, potentially by more than the yield you earned. A 5% yield means little if the coin drops 30%.
There is also lock-up risk. Many networks require your coins to be locked for a period, during which you cannot sell them. If the price crashes while your coins are locked, you may be unable to exit. Some networks have an “unbonding” period of days or weeks before you can access your coins again.
Other risks include slashing (losing part of your stake if a validator you use misbehaves or has technical failures), and platform risk if you stake through an exchange or service that could be hacked or fail. As always, the higher the advertised yield, the more carefully you should investigate why.
Which cryptocurrencies can you stake?
Staking is available on cryptocurrencies that use Proof of Stake. Major stakeable coins include Ethereum, Solana, Cardano, Polkadot, and many others. Bitcoin cannot be staked because it uses Proof of Work, not Proof of Stake. Before staking any coin, check its specific staking rules, including the minimum amount, lock-up period, and expected yield.
Is staking worth it?
Whether staking is worth it depends on your goals. If you are planning to hold a Proof of Stake cryptocurrency for the long term anyway, staking can be a sensible way to earn additional yield on coins that would otherwise sit idle. It puts your holdings to work.
However, staking is not a reason to buy a cryptocurrency you would not otherwise want, and the yield does not protect you from the coin’s price falling. The smart way to think about it: staking is a nice bonus on top of a long-term holding you believe in, not a strategy that makes a bad investment good. As always, this is not financial advice, and you should only stake what you can afford to keep locked and exposed to volatility.
Bottom line
Staking is the process of locking up Proof of Stake cryptocurrency to help secure a blockchain network and earn rewards in return, typically 2% to 7% annually on major networks. It works by having validators stake coins as collateral to confirm transactions, earning rewards for honest work and risking penalties for misbehavior. You can stake by running a validator, joining a pool, using an exchange, or through liquid staking.
The rewards are real but modest, and the risks, especially price volatility and lock-up periods, are equally real. Staking makes the most sense as a way to earn extra yield on long-term holdings you already believe in, not as a standalone way to get rich. Understand the specific rules and risks of any coin before you stake.
This is not investment or financial advice. Cryptocurrency is highly volatile, and staking carries risks including loss of value. Always do your own research and never stake more than you can afford to lock up and expose to volatility.
Frequently Asked Questions
What is staking in simple terms?
Staking is locking up your cryptocurrency to help a blockchain network operate and earn rewards in return, similar to earning interest in a savings account. It works on networks that use Proof of Stake, where your staked coins help secure the network and validate transactions.
How much can you earn from staking?
Staking rewards on major networks typically range from about 2% to 7% annually, expressed as APY. Ethereum offers roughly 2.8% to 3.5%. The exact rate depends on the cryptocurrency, how many people are staking, and the network's rules. Some smaller networks advertise higher rates.
Is staking crypto safe?
Staking carries risks despite being a common practice. The main risks are price volatility (your rewards and stake can lose dollar value if the coin falls), lock-up periods (your coins may be locked and unsellable), slashing (losing part of your stake if a validator misbehaves), and platform risk. It is not risk-free.
Can you lose money staking crypto
Yes. While staking itself earns rewards, you can lose money if the cryptocurrency's price falls more than your yield, if your coins are locked during a price crash, or through slashing penalties or a platform failure. The yield does not protect against the coin's price dropping.
Which crypto can you stake?
You can stake cryptocurrencies that use Proof of Stake, including Ethereum, Solana, Cardano, Polkadot, and many others. Bitcoin cannot be staked because it uses Proof of Work. Always check a coin's specific staking rules before starting.
How do I start staking?
The easiest way for beginners is through a crypto exchange that offers staking, which handles the technical work for you. You can also join a staking pool, use liquid staking, or run your own validator if you have the technical skills and required minimum amount. Check the minimum, lock-up period, and yield first.
