Staking
The process of locking up cryptocurrency to support blockchain operations (like validating transactions) in exchange for rewards. Similar to earning interest on deposits.
Last updated: January 5, 2025
What is Staking?
Staking is the process of locking up your cryptocurrency to help secure a blockchain network. In return, you earn rewards - similar to earning interest at a bank, but often with higher returns.
How Staking Works
Proof of Stake (PoS) Basics
- Lock tokens in the network
- Become eligible to validate transactions
- Earn rewards for participating honestly
- Risk slashing for malicious behavior
Who Can Stake?
- Validators: Run nodes, stake significant amounts
- Delegators: Stake through validators, smaller amounts
- Exchange staking: Stake through platforms like Binance
Staking Rewards
Typical APY Ranges
| Cryptocurrency | Est. APY |
|---|---|
| Ethereum (ETH) | 3-5% |
| Solana (SOL) | 5-7% |
| Cardano (ADA) | 4-6% |
| Polkadot (DOT) | 10-14% |
| Cosmos (ATOM) | 15-20% |
Rates vary based on network conditions, staking provider, and market
Where Rewards Come From
- New token issuance (inflation)
- Transaction fees
- Network incentives
Ways to Stake
1. Exchange Staking
Pros: Easy, no minimum often Cons: Custodial, exchange takes cut Examples: Binance, Coinbase, Kraken
2. Native Staking
Pros: Direct control, full rewards Cons: Technical complexity, higher minimums Example: Running an Ethereum validator (32 ETH)
3. Liquid Staking
Pros: Stay liquid while staking Cons: Smart contract risk Examples: Lido (stETH), Rocket Pool (rETH)
4. Staking Pools
Pros: Lower minimums, shared rewards Cons: Pool operator trust Examples: Stakewise, Marinade
Staking Risks
Lock-Up Periods
- Funds locked for days/weeks
- Can’t sell during crashes
- “Unbonding” period to withdraw
Slashing
- Penalty for validator misbehavior
- Can lose portion of stake
- Mostly affects validators, not delegators
Opportunity Cost
- Locked funds can’t be used elsewhere
- May miss trading opportunities
- Market could crash during lock-up
Smart Contract Risk
- For liquid staking protocols
- Code vulnerabilities possible
- Use established protocols
Staking Calculator Example
Staking 10 ETH at 4% APY:
- Daily: 10 × 0.04 / 365 = 0.0011 ETH
- Monthly: 10 × 0.04 / 12 = 0.033 ETH
- Yearly: 10 × 0.04 = 0.4 ETH
Plus potential price appreciation
Exchange Staking Comparison
| Exchange | ETH Staking | SOL Staking | Fees |
|---|---|---|---|
| Binance | ~3.5% | ~6% | 0-10% |
| Coinbase | ~3.2% | ~4.5% | 25% |
| Kraken | ~3.5% | ~5% | 15% |
Is Staking Right for You?
Good if you:
- Plan to hold long-term anyway
- Want passive income
- Believe in the project
- Don’t need immediate liquidity
Maybe not if you:
- Trade frequently
- Need access to funds
- Can’t handle lock-up periods
- Want maximum flexibility
Ready to Start Trading?
Now that you understand staking, explore the best exchanges to begin your crypto journey.