Staking

Staking means putting crypto to work to help secure a network. In return, you may receive rewards in the form of extra tokens.

What is staking?

With staking, you commit tokens to a blockchain network. A blockchain is a digital record of transactions. The network uses the committed tokens to choose participants who check transactions.

These participants are called validators. If they do their job well, they receive rewards. You can be a validator yourself, or you can stake tokens through a staking pool or platform.

Sometimes your tokens are temporarily locked while they’re staked. During that time, you can’t sell or send them. The value of your tokens can also drop sharply, even if you receive rewards.

An example of staking

You hold tokens on a network that uses staking. You choose to stake them through a platform or staking pool. The tokens then help verify transactions on that network.

In return, you may receive extra tokens regularly. This is similar to earning interest, but your crypto isn’t lent to other people. You’re putting it to work for the network itself.

Why is staking important in crypto?

Staking helps some blockchains check transactions and secure the network. This system is called Proof of Stake. It’s an alternative to mining, which involves computers doing a lot of calculations.

Crypto news may cover staking when reporting on new rewards, rule changes, or a network update. In those cases, pay attention to conditions such as a lock-up period, reward amounts, and possible fees.

A higher advertised yield doesn’t automatically mean staking is risk-free. The token’s price can fall. With some types of staking, you can also lose tokens if a validator makes mistakes or acts maliciously.