Glossary

Staking

Plain-language definition Crypto glossary

Key takeaways

Staking is locking up cryptocurrency as collateral to help operate and secure a proof-of-stake network, earning rewards in return.
A validator stakes the network's token and runs software to propose and confirm blocks, while users who do not run a validator can delegate their tokens to one and share the rewards.
The main trade-offs are lock-up periods, reliance on the chosen validator's reliability, and the risk of "slashing," where misbehaviour or downtime can cost part of the stake.

Definition

Staking is locking up cryptocurrency to help operate and secure a proof-of-stake network. In return for putting capital at risk and behaving honestly, stakers earn rewards, typically paid in the same token.

How it works

A validator deposits the network’s token as collateral and runs software that proposes and confirms blocks. Users who do not want to run a validator can often delegate their tokens to one and share in the rewards. Misbehaviour or extended downtime can be penalised by “slashing” part of the stake, which keeps validators aligned with the network’s rules.

Why it matters

Staking replaces mining’s energy cost with economic commitment, and it gives long-term holders a way to earn yield while supporting the network. The trade-offs are lock-up periods, the risk of slashing, and reliance on the chosen validator’s reliability.

Example

Ethereum holders can stake to help secure the network, either by running a validator or by delegating through a staking service.

FAQ

Frequently asked questions

How is staking different from mining?

Mining secures a proof-of-work network through energy-intensive computation, while staking secures a proof-of-stake network through economic commitment. Instead of spending electricity, stakers put capital at risk as collateral and are rewarded for behaving honestly.

What is slashing and when does it happen?

Slashing is a penalty that destroys part of a validator's stake when it misbehaves or suffers extended downtime. It exists to keep validators aligned with the network's rules, since acting dishonestly or being unreliable becomes financially costly.

Is staking a safe way to earn yield?

Staking offers rewards but is not risk-free, and this is not financial advice. The trade-offs include lock-up periods that limit access to your tokens, the possibility of slashing, and dependence on the reliability of your chosen validator, all of which should be weighed against the expected return.