Staking
In short: Staking means locking tokens to support a blockchain’s network operations, mainly validating transactions on a proof-of-stake network, and earning…
Staking means locking tokens to support a blockchain’s network operations, mainly validating transactions on a proof-of-stake network, and earning rewards in return. The staked tokens act as collateral that encourages validators to behave honestly.
Why it matters
Staking is how proof-of-stake networks are secured, and it lets holders take part and receive rewards, usually paid in the same token. You can run your own validator, delegate tokens to one, stake through an exchange, or use liquid staking, which gives you a tradable token that represents your staked position. Rewards are not fixed, because they depend on the network’s rules, the total amount staked, and validator performance. The main risks are price swings in the staked token, lock-up or unbonding periods during which funds cannot be moved, and slashing penalties if a validator misbehaves.
Example
A holder of a proof-of-stake coin delegates their tokens to a validator from their wallet. The validator uses the combined stake to take part in block production. Rewards build up over time and are shared with delegators after the validator’s commission. When the holder later decides to unstake, the tokens may go through a waiting period before they can be transferred again.