Not financial, legal, or tax advice. Staking rewards are not guaranteed and staked assets can lose value or be subject to lockup periods.

Staking means locking up cryptocurrency to help secure a Proof of Stake network, in exchange for a share of the rewards that network pays out. It's both a technical requirement for validating transactions and a way for everyday holders to earn on assets they already own, part of the ecosystem covered in \[pillar hyperlink: What Is DeFi\].

Definition

When you stake, you commit your tokens as collateral backing the network's security. In return, you receive a portion of newly issued tokens or transaction fees, proportional to your stake.

Staking is the mechanism that makes Proof of Stake work at all. Validators are chosen to propose blocks based on their staked amount, and can lose part of their stake for misbehaving. See Proof of Work vs Proof of Stake for how this compares to mining.

Rewards

Reward rates vary by network and change over time based on total amount staked and protocol rules. Higher advertised rates often come with higher risk or less liquidity, not a free lunch.

Lockups

Many staking systems require your tokens to remain locked for a set period, or an "unbonding" window, before you can withdraw them, meaning you can't always sell immediately if prices move against you.

Risks

Beyond lockups, risks include slashing penalties for validator misbehavior, the staked asset's price falling regardless of rewards earned, and, for some setups, smart contract risk. See Staking vs Yield Farming for how staking compares to other yield strategies.