What is staking in crypto? How it works, rewards and risks
Staking in crypto means locking up coins to help run a proof of stake blockchain, in return for rewards paid in the same coin. Your staked coins act as a deposit that lets validators confirm new transactions; if they do the job honestly, the network pays them, and they share those rewards with you.
You can stake on many crypto exchanges with a few taps, or yourself with your own validator. Either way, rewards are variable, not a fixed interest rate, and your coins can lose value while they are staked.
What is staking in crypto?
Staking is a way to take part in the consensus mechanism of a proof of stake (PoS) blockchain. Instead of using processing power to secure the network, as miners do in a proof of work blockchain such as Bitcoin, PoS networks ask validators to put up coins as collateral. The more coins at stake, the harder and more expensive it is to attack the network.
Validators are randomly chosen, with a chance roughly in line with their stake, to propose new blocks and verify transactions from other validators. For that work they receive rewards: newly created coins and part of the transaction fees. If they cheat or break the rules, the network can destroy part of their stake, a penalty called slashing.
Popular tokens you can stake include ether (ETH), solana (SOL), cardano (ADA) and polkadot (DOT). Bitcoin can’t be staked natively, because it uses proof of work.
How does crypto staking work?
Crypto staking works by locking coins in a validator, either your own or one run by someone else, for a period of time. The network checks the validator’s work and pays staking rewards to the stake behind it.
In practice, there are four ways to start staking:
| Method | What you do | Who controls the coins | Main trade-off |
|---|---|---|---|
| Solo staking | Run your own validator node on your own hardware | You | Most control, but needs technical know-how and, on Ethereum, 32 ETH per validator |
| Delegated staking | Assign your coins to an existing validator from your own crypto wallet | You (the coins stay in your wallet) | Your chosen validator’s performance affects your rewards |
| Pooled staking via an exchange | Click “stake” in the exchange app | The exchange | Easy, but you take on platform risk and pay a commission |
| Liquid staking | Stake through a smart contract and receive a liquid staking token in return | A protocol | You can trade or use the token, but you add smart contract risk |
Exchange staking pools combine the coins of many other users so that even small amounts can earn rewards. The pool’s node operators run the validators and keep a share of all the rewards.
Lock-up periods and unstaking
Many networks have a lock-up period: when you unstake, there is a waiting period before the coins are back in your account. It ranges from none to several weeks, depending on the network and provider. During that time you can’t sell, so you carry the full price risk even if the market falls. Liquid staking tokens are one way around this, because you can sell the token instead, although it may trade below the value of the staked coins during a sell-off.
Staking rewards: what you actually receive
Staking rewards depend on the network, how much is staked in total, how well your validator performs and what your provider charges. They are quoted as an annual percentage rate (APY), but the rate changes over time and is never fixed.
Commissions make a real difference. Coinbase, for example, states that its standard staking commission is 35% of rewards for assets such as ETH, SOL and ADA, lower for Coinbase One members (see our Coinbase review). So for every €10 of rewards the network pays on your staked coins, you receive €6.50 and Coinbase keeps €3.50. Always compare the rate after the provider’s cut.
And rewards are paid in the staked coin. Say you stake €1,000 of ETH. If the ETH price falls 30% during the year, your stake is worth about €700 plus the rewards received, which won’t come close to covering that fall. Staking adds more crypto to your holding; it doesn’t make a volatile coin stable, and it is not like a savings account.
Staking vs lending and yield farming
Staking is often grouped with other “Earn” products, but they work differently:
- Staking rewards come from the network itself, for helping to secure it. The risks are mainly price, slashing and the provider.
- Lending means the platform lends your coins to borrowers, and the interest comes from them. If a borrower fails, your coins can be lost, which is what happened to many lending customers in 2022.
- Yield farming means providing tokens to DeFi protocols in return for fees and reward tokens. It adds smart contract risk and impermanent loss on top of price risk.
None of these works like a savings account. A bank deposit in the EU is covered up to €100,000 by the deposit guarantee; staked crypto is not.
Why staking matters to you: the EU angle
In the EU, staking is often not covered by MiCA, which is the most important thing to know before you stake with a licensed exchange. MiCA regulates the custody and trading of your crypto, but staking products on top are frequently outside its scope.
Exchanges say this themselves. Bitvavo states that its staking and lending (Earn) products are not regulated under MiCA (see our Bitvavo review), and Crypto.com says the same about its Earn and staking products (see our Crypto.com review). That doesn’t make them bad products, but it means you should read the staking terms as carefully as the exchange’s main terms.
Before you stake on any platform, check:
- Who runs the validators, and whether your coins are lent to a third party instead. In 2022 Bitvavo had about €280 million lent to Genesis for off-chain staking that became inaccessible when Genesis froze withdrawals; Bitvavo said customer withdrawals were not affected.
- Who pays if a validator is slashed: the provider or you.
- How long unstaking takes, and whether there is a monthly fee or minimum.
- How rewards are taxed where you live. Staking rewards can count as income or as part of your wealth, depending on the country.
Our list of the best platforms for staking compares licensed options for EU residents.
Risks of staking crypto
Staking carries the same risks as holding the coin, plus a few of its own:
- Price risk. The biggest one. Staked coins fall with the market.
- Lock-up risk. You may not be able to sell quickly during a crash.
- Slashing. A validator that breaks the rules loses part of the stake. Read more on proof of stake and slashing.
- Platform risk. If an exchange or lending partner fails, staked assets can be frozen.
- Smart contract risk. Liquid staking and DeFi yield farming add code that can be hacked.
Do your own research on each network, and treat any very high advertised staking rate as a warning sign rather than an opportunity.
The bottom line
Staking is a way to earn rewards in a coin you already hold by helping a proof-of-stake network validate transactions. It suits long-term holders of coins such as ETH or SOL who accept the price risk anyway. In the EU, check whether the staking product sits outside MiCA, compare rewards after commission, and know how long it takes to get your coins back.
Related terms
Questions people ask
Can I lose my crypto if I stake it?
Yes. The coin's price can fall while it is staked, a validator can be slashed, and the platform you stake with can fail or freeze withdrawals. Staking rewards don't protect you from any of these.
Is staking worth it?
It can be if you planned to hold a proof-of-stake coin for years anyway, because rewards add to your holding. It is rarely worth buying a coin just to stake it, since price swings usually outweigh the rewards.
How much can I make staking crypto?
It depends on the network, the provider's commission and how many others are staking. Rates change constantly and are often quoted before fees, so compare the net rate after commission and remember that rewards are paid in the coin, whose price can fall.
Is crypto staking regulated in the EU?
Often not. MiCA regulates custody and trading by licensed providers, but staking products are frequently outside its scope, and several EU exchanges state in their terms that their staking is not regulated under MiCA.
Can I unstake at any time?
Not always. Some networks and providers let you unstake straight away, others have a waiting period of days or weeks before you get your coins back, during which you can't sell them.