Staking

Staking means committing coins to a proof-of-stake network so they can be used as collateral by validators. In return, stakers receive a share of the network's rewards. Ethereum staking has yielded roughly 3 to 4 percent per year in recent years, while chains with higher issuance such as Solana or Cosmos have paid more. The rewards are paid in the chain's own coin.

There are several ways to stake. Running your own validator gives full control but requires technical skill and, on Ethereum, 32 ETH. Delegating to a validator, which is how Solana and Cardano work, lets you keep custody while assigning your stake's voting weight. Liquid staking services such as Lido issue a tradable token like stETH that represents your stake and can be used in DeFi. Exchanges also offer staking, with the exchange handling everything for a cut.

Staking is not risk-free. The staked coin's price can fall by far more than the yield. Validators can be slashed for misbehavior. Unstaking often involves a waiting period, and liquid staking tokens can trade below the value of the underlying coin in stressed markets. Staking rewards are generally taxable as income in the United States and elsewhere.