Glossary · S
Staking
The process of locking cryptocurrency to support a blockchain network's operations and earn rewards. In Proof of Stake blockchains, validators stake ETH (or other assets) as collateral for the right to validate transactions. In DeFi, 'staking' is also used loosely to describe depositing tokens into a protocol to earn yield.
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How Staking works in practice
Staking locks tokens to help secure a proof-of-stake network, earning rewards for honest participation and risking penalties for misbehaviour. Confusingly, the same word is used for locking tokens in an application for rewards, which is a completely different activity with different risks.
Worked example
Staking ETH with a validator earns consensus rewards and exposes the stake to slashing if the validator double-signs or is offline persistently. Staking a governance token in a protocol earns a share of fees and exposes it to that protocol's contract risk instead.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Network staking and application staking are not the same product. The first has protocol-level slashing and exit queues; the second has smart-contract risk and often a token whose price is the real variable.
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Staking: common questions
- What is Staking?
- The process of locking cryptocurrency to support a blockchain network's operations and earn rewards. In Proof of Stake blockchains, validators stake ETH (or other assets) as collateral for the right to validate transactions. In DeFi, 'staking' is also used loosely to describe depositing tokens into a protocol to earn yield.
- How does Staking work in practice?
- Staking locks tokens to help secure a proof-of-stake network, earning rewards for honest participation and risking penalties for misbehaviour. Confusingly, the same word is used for locking tokens in an application for rewards, which is a completely different activity with different risks.
- Can you give an example of Staking?
- Staking ETH with a validator earns consensus rewards and exposes the stake to slashing if the validator double-signs or is offline persistently. Staking a governance token in a protocol earns a share of fees and exposes it to that protocol's contract risk instead.
- What do people get wrong about Staking?
- Network staking and application staking are not the same product. The first has protocol-level slashing and exit queues; the second has smart-contract risk and often a token whose price is the real variable.
- Where can I learn more about Staking?
- Our full guide, What Is Crypto Staking?, covers Staking in depth with worked scenarios and the risks involved. This glossary entry is the short definition.