Staking is the process of locking up a certain amount of cryptocurrency to support the operations of a blockchain network that uses a proof-of-stake system. In return for committing your coins and helping validate transactions, you typically earn additional coins as a reward.
This works differently from mining, which relies on computing power to solve puzzles. Proof-of-stake networks instead select validators partly based on how many coins they have staked, which is generally far more energy efficient than mining.
Staking can be done directly by running your own validator node, which usually requires technical knowledge and a minimum amount of coins, or through a staking pool or exchange that handles the technical side for a share of the rewards.
Frequently Asked Questions
Is staking the same as keeping coins in a savings account?
They share some similarities, since both involve locking up funds for a return. However, staking rewards depend on network conditions and coin price, and staked coins may be locked for a period before you can withdraw them.
Can I lose money while staking?
Yes. While staking itself does not directly cost you coins under normal conditions, the price of the staked coin can fall, and some networks apply penalties called slashing if a validator misbehaves.
