Staking is one of the most talked-about strategies in crypto, and with good reason. In 2024, staking yields ranged from 2 percent to over 18 percent across crypto assets. Ethereum staking returns currently sit between 3 and 6 percent, while tokens like STRK offer upwards of 9.74 percent. For many, the numbers speak for themselves. Compared to traditional savings or stock market investments, staking offers competitive returns within the crypto ecosystem.
Crypto staking is also core to the way many blockchains function. Staking helps keep networks decentralized and secure by encouraging users to participate honestly in the system, ensuring the entire Proof-of-Stake (PoS) chain works.
In this post, we’ll break down what staking is in blockchain terms, why it matters, and how you can get involved, including the rewards you can expect, and the penalties you’ll want to avoid (yes, slashing is real). By the end, you’ll walk away with a clear understanding that staking some coin isthe right move for you.
What does staking in blockchain mean?
There are two common ways people use the term staking in blockchain, and it is worth understanding both.
- The first is what most users encounter: staking as locking up crypto to earn rewards. You deposit your tokens into a smart contract or staking service, and over time, you earn more of the same token. The amount you earn depends on the asset, the network, and how long you commit your funds.
- The second is protocol staking. Staking is what gives validators the right to take part in the network. They put up tokens as collateral and, in return, can be selected to verify transactions and propose new blocks. If they do the job right, they receive rewards. If they don’t, they risk losing part of their stake through a penalty known as slashing.
The two definitions are linked. What looks like a simple reward mechanism on the surface is actually a core part of how many blockchains stay secure and decentralized.
Staking in Proof-of-Stake (PoS) systems
At the network level, staking refers to the Proof-of-Stake mechanism used by blockchains like Ethereum to decide who gets to propose new blocks. Validators are chosen from a pool of participants who have locked up a minimum amount of the network’s native token.
On Ethereum, that means running validator software and depositing 32 ETH as collateral. These funds make a participant eligible and hold them accountable for following the protocol’s rules, so don’t think of them as a fee or payment. The amount you stake also determines your responsibilities, your chances of being selected to participate, how much you can earn, and what you stand to lose if you go offline or break protocol rules.
For most users, the 32 ETH requirement is a high bar. This setup, often called solo staking, is one way to take part in the network. But don’t worry, there are other methods that allow you to stake with less or without running your own validator; we’ll cover those a little later.
Starknet is in the process of transitioning to a PoS system, becoming the first major Layer 2 to introduce a native staking mechanism. This move is a key milestone on the path to full decentralization. As staking gradually rolls out on Starknet, users will be able to participate either by running a validator or by delegating their STRK to one.
Understanding Proof-of-Stake vs. Proof-of-Work
You can’t stake on a Proof-of-Work (PoW) network. And that’s by design.
Ethereum originally used a PoW mechanism, just like Bitcoin. In PoW, nodes compete to solve a math problem. The first one to solve it gets to propose the next block in the chain and collect areward. Everyone else just burns electricity for nothing.
It’s a system that works, but it’s wasteful. All those machines keep guessing until one of them wins, which means a lot of energy is spent on computations that go nowhere. And as more machines join and enhance decentralization, the network makes the puzzles harder, which only increases the energy demands.
That’s why, in September 2022, Ethereum made the switch from PoW to PoS in an event known as “The Merge.” Instead of expendingpower, participants stake their crypto to take part. The network randomly selects validators based on how much they’ve staked. If they follow the rules, they can earn well. If not, they can lose someof their funds. PoS isstill secure, but without the energy burn.
The result: a much more sustainable and eco-friendly solution, dropping Ethereum’s energy consumption by an estimated 99.95%.
Why crypto staking matters for users
It’s easy to think of crypto staking as just a way to earn passive rewards. But it also plays a much bigger role in keeping blockchain networks secure and decentralized, and that matters for anyone using them.
In PoS systems, validators have to lock up their own funds to participate. That financial stake gives them skin in the game. If they go offline or try to cheat the system, they risk losing someof their tokens through a penalty called slashing. The idea is simple: when the cost of misbehaving is high, validators are more likely to act honestly.
Staking also helps spread responsibility across the network. Instead of relying on a few mining pools, PoS chains can give more users a chance to take part in keeping things running smoothly. The more people who stake, the harder it becomes to attack or manipulate the network.
And from a user perspective, staking offers something rare: a way to earn rewards while actively supporting the chain. On Ethereum, for example, more than US $90 billion worth of ETH is staked. That makes the network much harder to attack, but it’s also a signal of how many users believe in the system enough to lock up their assets to help secure it.
How does crypto staking work?
The full staking process isn’t instant. Depending on the network, it can take anywhere from a few minutes to a few weeks, which makes sense once you see how many steps are involved.
- You lock up your tokens by depositing them into a smart contract on the network. If you’re not running your own validator, you can delegate to someone who is.
- One validator is randomly selected every 12-second slot to propose a new block. The more crypto they have staked, the higher their chances.
- The selected validator assembles a block of transactions and sends it to the network for review.
- Other validators are assigned to review and attest to the block. These attestations act as votes confirming that the block is valid.
- Some validators are chosen to join sync committees, which help lightweight nodes keep up by signing off on recent block data.
- Validators earn rewards for proposing blocks, attesting correctly, and staying online. The better their performance, the more they earn.
- Validators who go offline or act against the rules can be penalized. In serious cases, they can lose part of their staked crypto through slashing.
- While your tokens are staked, they remain locked. You can’t use or withdraw them until you initiate an unstaking process, which takes varying amounts of time, once again, depending on the network you use.
A note on lock-up/bonding periods:
Most staking involves a waiting period on both ends. After you stake, there’s often a short wait before your tokens start earning. That’s the bonding period. When you unstake, there’s another delay before you can access them, known as the unbonding period.
During both, your tokens are locked. You can’t trade them, and they typically don’t earn rewards. These delays help stabilize the network and discourage short-term speculation. They also impact liquidity, so if you’re planning to stake, it’s worth knowing how long your funds will be tied up.
Different ways to participate in staking
There’s more than one way to stake your crypto, and not all of them require running your own validator or locking up 32 ETH. While staking is often framed as a technical commitment, there are options for almost every level of user, from solo operators to hands-off participants.
Solo staking
This is the most direct way to take part in staking. On Ethereum, it involves running your own validator, keeping dedicated hardware online at all times, and locking up 32 ETH as collateral. On Starknet, solo validators will need to lock 20,000 STRK and run a full node. This method offers full rewards and full control, but also requires technical expertise and a meaningful capital commitment.
Delegated staking and staking pools
For users who are not interested in running a validator, delegation offers an easier way to participate. On Starknet, anyone can delegate their STRK with no minimum requirement. You support a validator with your stake and receive a share of the rewards with the validator in return. The validator takes care of the operations, while you retain the benefits of participation without the infrastructure overhead. Pooling operates on a similar principle, where users combine resources to earn rewards collectively.
Liquid staking
Liquid staking lets users stay active while keeping their assets liquid. In networks like Ethereum, some platforms issue representative tokens in exchange for staked assets. These tokens continue to earn staking rewards but can also be used across the decentralized finance (DeFi) ecosystem.
Exchange staking and staking-as-a-service
Centralized exchanges also offer staking options that require minimal effort from the user. You deposit your tokens and the exchange manages the validator process behind the scenes. This approach can be convenient, especially for newcomers, but it introduces tradeoffs. Centralizing large amounts of staked capital can reduce network resilience and shift power away from individual users.
Liquid staking explained
We touched on liquid staking earlier, but it’s worth spending a bit more time here. This is because it’s one of the more flexible ways to participate in staking, and it’s changing how users think about locking up their tokens.
With traditional staking, your tokens are locked. You can’t trade them, use them in DeFi, or move them around until you unstake. Liquid staking takes a different approach. When you stake through a liquid staking protocol, you get a new token in return, one that represents your staked position and continues to earn rewards over time.
These are called liquid staking tokens (LSTs). For example, if you stake ETH, you might get stETH. That stETH can be traded, used as collateral, or added to a liquidity pool, all while still tracking your share of staking rewards in the background.
As hinted in its name, the main benefit of liquid staking is its… liquidity. You’re no longer stuck choosing between staking rewards and using your assets elsewhere. Liquid staking makes it possible to do both. It also lowers the barrier to entry. There’s no need to run a validator or stake a large minimum—just deposit and go.
That said, liquid staking isn’t without risks, especially when using third-party protocols, but the concept is simple and easy to wrap your head around: your tokens stay staked, and your capital stays usable.
Crypto staking rewards vs. risks
Rewards and risks usually go hand in hand, and when it comes to staking, this can also be the case.
Where staking rewards come from
Staking rewards are issued by the protocol for proposing blocks, attesting to others, and participating in sync committees. The base reward depends on how many validators are active; the more there are, the smaller each share will be. On Ethereum, validators also earn extra for fast attestations and collect priority fees (user tips) when proposing blocks.
If you use a staking service, expect operational fees to be deducted. Your rewards depend on how well the service runs its validators.
What can go wrong when staking crypto
A validator that’s slow or offline misses out on rewards, and if you’ve delegated to them, so do you.
Slashing is a more serious penalty. It means losing a portion of your stake. It can happen if a validator:
- Proposes multiple blocks in the same slot
- Double votes for the same block
- Attests to a block that surrounds another
These mistakes are rare and are usually caused by technical errors, not bad intent, but they still lead to penalties. If you’re staking through someone else, you’re trusting them to avoid mistakes you can’t control, so keep your head in the game!
The broader benefits of crypto staking
We’ve spent a lot of time talking about rewards, risks, and staking mechanics, but there’s more to staking than just earning yield. Beyond the economic incentives, staking plays a bigger role in the long-term health of the blockchain ecosystem, contributing to:
- Network security and decentralization: Staking helps keep the network secure by making attacks expensive and coordination difficult. The more users who stake, the more distributed the system becomes.
- Protocol stability: Locked tokens reduce the supply in circulation, which can help limit volatility and create steadier network conditions.
- Governance participation: On some networks, staking gives users a say in protocol decisions, from parameter changes to treasury spending.
- Lower barrier to entry compared to mining: You don’t need specialized hardware or deep technical knowledge. Most staking models let users get started with just a wallet and a few tokens.
- Support for environmentally friendly infrastructure: PoS is significantly less energy-intensive than PoW. In this way, staking helps secure the network without contributing to high energy consumption.
- Positive feedback loop for token value: Staking encourages holding, which can reduce sell pressure and, in some cases, contribute to long-term value appreciation.
How to start staking crypto
If you’re new to staking, the good news is you don’t need to know everything about blockchain infrastructure to get started. Just follow the steps below.
- Pick a PoS network. Not all blockchains support staking. Start by choosing a PoS network you want to support. Ethereum, Solana, and Polygon are among the more common options.
- Buy or transfer the token. You’ll need to hold the network’s native token to stake. Whether you buy it or transfer it from another wallet, make sure you have enough to meet the minimum, if there is one.
- Choose a staking method. Decide whether you want to stake directly (like running a validator), delegate to someone else, join a pool, or use a staking service. On Starknet, you can become a validator or delegate your stake with relative ease.
- Stake your tokens. Use a wallet, exchange, or platform that supports your chosen method. On Starknet, you can use Argent or Braavos (or a different Starknet wallet). Follow the instructions to lock up your tokens, and start earning.
What staking looks like on Starknet
Starknet is in the process of transitioning to a PoS system, becoming the first major Layer 2 to introduce a native staking mechanism, as part of its transition to a more decentralized network. Staking V2 is now live on the Starknet mainnet, allowing users to participate either as validators or delegators. Validators stake at least 20,000 STRK and operate a full node to help keep the network secure. Delegators can stake any amount of STRK by selecting a validator to back. Both roles earn rewards based on the amount staked and the validator’s performance.
With the latest staking V2 update, validators now also handle block attestations, giving the community a clearer way to assess validator reliability. Validators can also set a commission on rewards earned from delegators, further shaping incentives as the network matures.
- Choose whether you want to become a validator or a delegator.
- If you’re running a validator, set up a full node using supported software like Juno, Madara, or Pathfinder.
- Fund your wallet with STRK. Validators stake at least 20,000 STRK, while delegators can stake any amount.
- Stake your tokens directly on Starknet using your wallet. Validators will also choose a rewards address and an operational address.
- Start earning rewards. Validators receive full rewards for their work and share a portion with their delegators.
- When ready to withdraw, initiate the unstaking process. There’s a 21-day waiting period before your tokens become available again.
In this way, staking on Starknet serves as a direct way to help secure the network and supports its gradual shift toward decentralization; by staking STRK, you are actively participating in how the network is governed and maintained.
Conclusion
As more crypto users take part through solo staking, delegation, or liquid staking, using methods that let them earn rewards without having to become a validator or needing expensive equipment or deep technical knowledge, participation becomes more accessible. But the core idea stays the same: when you stake, you help run the network.
Staking is both a way to earn and a way to contribute. And the more people who take part, the stronger the ecosystem becomes.
Ready to stake on Starknet’s decentralization? Join the community by staking STRK as a validator or delegator.
