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What is staking in crypto?

In one line: Staking is locking up crypto to help secure a proof-of-stake blockchain, in return for rewards paid in that same crypto.

Trading glossary · Updated 2026-10-21

How it works

On a Proof of stake blockchain, there are no mining machines. Instead, "validators" lock up coins as a deposit and take turns checking and adding transactions.

If they do the job honestly, they earn rewards. If they cheat or break the rules, part of their deposit can be cut. That's called "slashing."

Staking is taking part in this, either by running a validator yourself or by handing your coins to a service that does it for you. Ethereum switched to proof of stake in September 2022. Running your own Ethereum validator takes 32 ETH.

A simple example

Say you stake 10 units of a coin, and the network pays about 3% a year in rewards. After a year you'd have about 10.3 units, if the rate held. That's a math example, not a promise.

The catch: those 10.3 units could be worth less in dollars than the 10 were, if the coin's price fell. The reward is paid in the coin, not in dollars.

Why it matters

Staking is often pitched as "earning yield." The real risks are easy to skip:

• Price risk: the coin can fall far more than the reward.
• Lock-ups: some networks make you wait days or weeks to unstake.
• Slashing: a validator's mistakes can cost part of the stake.
• Platform risk: if a company holds your coins and fails, you may not get them back.

A common mistake

Chasing the highest reward rate. Very high rates often mean a newer, riskier coin, or a platform taking big risks with your deposit. Several crypto lenders that promised high rates collapsed in 2022.

In the US, staking rewards are generally treated as income when received; talk to a tax professional.

Questions