This is a practical, detailed guide on staking. We cover how it works, how to do it safely, how to pick assets and platforms, how to compare returns, and how professionals manage their risks.
It includes instructions, comparison tables, and checklists. You can bookmark this page to return later and use it to build yourself a personal staking strategy. Use the navigation below to skip to a particular topic of interest, or start from the top and read all the way through.
Staking has become one of the most reliable ways for crypto investors to earn income while supporting the very networks they believe in. Instead of relying on energy-hungry mining rigs, staking uses a financial pledge of tokens to keep proof-of-stake blockchains secure. In exchange, the participants earn rewards.
It sounds simple, but the strategies, risks, and opportunities involved are anything but simple. The information below is designed to be a pillar of reference for anyone serious about using staking as part of their crypto strategy.
What is staking crypto?
At the most basic level, staking means locking up a certain amount of cryptocurrency in a proof-of-stake blockchain. This staked crypto serves two purposes. First, it signals your commitment to the network. Second, it allows validators to be selected to confirm transactions and add new blocks to the chain. Validators who behave honestly and reliably earn rewards in the form of the same network’s tokens.
I can go on all day about the importance of staking in the crypto ecosystem but in order to save time, let’s summarize it – staking is the backbone of security for proof-of-stake cryptocurrency chains.
Cryptocurrency networks need stakers to supply economic guarantees. In return, those who stake are rewarded with some newly minted tokens and transaction fees. Pretty cool right?
Brief history and evolution of staking
The history of staking goes back over a decade. Early projects like Peercoin and Nxt experimented with proof-of-stake (PoS) as an alternative to proof-of-work. In recent years, delegated proof-of-stake systems and large platforms like Ethereum are shifting to PoS. Staking is slowly becoming mainstream.
Leveraged staking – liquid staking
Today, staking has matured into an entire ecosystem that goes far beyond simply delegating tokens to a validator. One of the biggest innovations has been liquid staking, where you receive a derivative token (such as stETH for Ethereum) that represents your staked assets. This token can be traded, used in DeFi, or even collateralized for lending, which gives you yield from staking while still keeping your capital liquid.
How restaking works
Another concept you may hear about is restaking. Restaking is when the same collateral that secures one network is “reused” to acquire other services or protocols. It’s like leaving money in a savings account to earn interest, while at the same time allowing the bank to lend it out to multiple borrowers.
This creates opportunities for higher yields, but it also adds layers of complexity and risk since your assets are tied into multiple systems and assets at once.
Institutional staking in a mature market
The rise of institutional-grade staking services has opened the door for funds, custodians, and large investors. These services provide professional infrastructure with strict uptime guarantees, regulatory compliance, and in some cases insurance against slashing.
For smaller investors, the benefit is that the staking landscape is now more mature, liquid, and diversified than ever, offering options that suit amateur investors, advanced DeFi traders, and institutional players alike.
How crypto staking actually works
To understand staking, you first need to grasp proof-of-stake. In a PoS system, validators are chosen to confirm blocks based on the size of their stake and their past performance. Validators who act honestly earn rewards, those who misbehave can lose part of their stake. Delegators, on the other hand, do not run nodes themselves. Instead, they assign their tokens to validators and share in the rewards and risks.
Compared to proof-of-work mining, there are so many differences. PoS is far more energy-efficient, since it does not rely on solving computational puzzles, and it allows anyone with tokens and a wallet to participate by delegating. Not to mention finality (the assurance that a block is permanent) is usually faster in PoS. Here are the other main differences:
| Feature | Proof-of-Stake (PoS) | Proof-of-Work (PoW) |
| Rewards | New tokens + transaction fees for stakers | Block rewards + transaction fees for miners |
| Participation | Anyone can delegate with a wallet | Requires specialized, costly hardware |
| Security model | Validators risk losing stake if dishonest | Miners compete with computing power |
| Finality | Faster economic finality | Depends on cumulative work over time |
Types of staking and participant roles
There are several different ways you can take part in staking crypto, each with its own trade-offs:
- Native staking: This is when you delegate tokens directly from your wallet to a validator on the blockchain.
- Exchange staking: This is when a centralized platform handles the staking for you, often with a simpler setup but has the added custodial risk and additional fees.
- Liquid staking: When you receive a tradable token that represents your staked crypto. This token can then be reused in trading while your original stake continues earning rewards.
- Restaking: Your existing stake is “reused” to secure additional value.
- Locked vs. flexible staking: Some options require you to lock funds for a fixed period, while others let you unbond at will (usually with a waiting period).
Your responsibilities also depend on which role you want to play. Validators are expected to run secure, reliable infrastructure, maintain constant uptime, and keep their software updated, any failure can lead to penalties.
Delegators don’t run infrastructure, but they must choose trustworthy validators, keep an eye on performance, and manage unbonding periods. Both groups are essential to keeping proof-of-stake networks secure and functional.
Benefits and risks of staking
Staking offers some real benefits. It provides investors with a way to earn passive income. When rewards are regularly claimed and restaked, compounding interest can lead to meaningful long-term growth.
Staking also aligns your incentives with the network itself, giving you voting power in how the cryptocurrency will evolve. Compared to mining, staking is simpler for the average participant, since you don’t need expensive equipment.
But the risks are real. Validators that go offline or misbehave can and do get slashed, reducing your rewards as a penalty. And of course, all returns are denominated in volatile crypto assets whose price can swing dramatically day to day.
Staking benefits & risks comparison
| Benefits | Risks |
| Passive income in native tokens | Slashing penalties if validator misbehaves |
| Potential to compound your money | Hacks, bugs, or custodial mismanagement can result in losing access to your funds |
| Stakers have voting rights in protocol upgrades and decisions | Many staking systems require you to lock tokens for days or weeks. During this time, you cannot sell or move them |
| Lower barrier than mining | Staking yields aren’t fixed. They shift based on validator performance, total participation, inflation schedules, and network health |
| You get a tradable token representing your staked position. This token can be used for lending, borrowing, or farming | Your overall portfolio value can drop if the token’s market price falls faster than you earn new coins |
How professionals manage staking
Pro traders don’t just buy in and hope for the best, they actively manage the risks involved. Let me teach you some of their most common tricks:
- Diversify stakes across multiple validators and even across different blockchains, so one bad actor or crash doesn’t pull all your funds into the red.
- Stick with trusted protocols for liquid staking or smart contracts. Find those with a long track record, clean security audits, and strong community support.
- Always keep a liquidity buffer by holding part of your portfolio in assets that can be accessed quickly to cover emergencies or take advantage of new opportunities (BTC, ETH, USDT).
- Watch liquid staking tokens carefully. You’re basically tracking whether they trade at a discount or premium compared to the underlying asset. You want to avoid risky leverage loops. That’s where you try to “double-dip” or “stack” yields by using your already staked assets as collateral again and again. This can look profitable when everything goes smoothly, but you pile on risks that can unwind quickly if prices or liquidity fall.
- Stay alert to changing rules, remember tax laws and regulations can shift without warning. Always leave room in your strategy to adjust for new costs or restrictions.
In short, treat staking like any other professional investment – balance the upside with some safeguards, and never rely on a single asset, platform, or strategy.
How to stake crypto
First, as with any investment, you want to define your goal. Whether it’s steady income, compounding growth, or active participation in governance you know what your target is. Setting up a wallet is the next critical step. Hot wallets are fine for small balances, but hardware wallets are the best choice for significant amounts.
👉 Want to learn more about wallets? Check out – Staking with Hardware Wallets
Next, you choose which assets you want to stake. When picking, always consider their mechanics, lock-up periods, and reward structure. These are key questions that you will be faced with finding the answers for in the future. Once you’ve decided on an asset, you need to select the method: direct wallet transfer, exchange staking, liquid staking, or restaking.
Choosing a validator or platform is perhaps the most important decision. Look at performance history, commission rates, uptime, and slashing records. Always start with a small stake to ensure the process works as expected.
👉 Links to the Best Platforms for Staking in 2025
Once you’re comfortable, you can scale up. I recommend enabling compounding of rewards, and establishing a regular monitoring schedule. This helps you create a daily workflow. Document everything, transaction hashes, dates, amounts, and costs. You may need to file tax returns later, so research crypto tax laws in your country and record all this information from the start.
👉 If you want a deeper walkthrough, click here – How to Stake Crypto.
Comparing staking with other strategies
It’s important to compare staking to other yield strategies. Yield farming, for example, often pays higher rates in the short term, but the risks are greater. Farming exposes you to smart contract exploits, impermanent loss if you provide liquidity, and rapidly changing incentive programs.
👉 Want to learn more about farming? Check out Staking vs. Yield Farming.
Staking, by contrast, is more stable because rewards are tied to the core functioning of the network. Many investors use staking as their anchor strategy and deploy a smaller share into yield farming for higher and riskier returns.
| Feature | Staking | Yield Farming | Holding |
| Risk | Moderate (slashing, validator risk) | High (smart contract, impermanent loss) | Low (only market volatility) |
| Liquidity | Limited (unbonding periods apply) | Variable, often higher than staking | Full liquidity |
| Rewards source | Network inflation + fees | Incentives, trading fees, lending | None |
| Best suited for | Long-term investors, governance users | Advanced DeFi users seeking high yield | Holders prioritizing flexibility |
Compared to simply holding, staking sacrifices some liquidity in exchange for income. Holding keeps your tokens tradable, but they don’t generate rewards.
Staking introduces lockups or unbonding delays, yet it offsets token inflation and provides a predictable yield. The choice will ultimately depend on whether you want liquidity or income generation.
👉 What’s the difference between Staking vs. HODLing?
Selecting assets for staking
Not all tokens are created equal when it comes to staking. Evaluating assets requires looking at the security model, validator distribution, inflation rate, governance structure, and unbonding mechanics. You also need to consider whether the network is growing and has real usage, since rewards are only valuable if the token itself holds value.
👉 Learn more about How to Choose the Right Crypto for Staking
Popular staking cryptos
If you’re looking for the best use case, Ethereum remains the most important staking asset, with a huge list of validators and a mature ecosystem of liquid staking and restaking services.
Solana offers fast block times and vibrant consumer applications, but validator quality and uptime are lagging. Cosmos chains each have their own staking economies, where governance and community culture play a large role.
Polkadot uses nominated proof-of-stake with parachain auctions, adding fresh financial incentives. Cardano allows liquid staking with no lock-in. Avalanche, Near, Aptos, and Sui each bring new designs, while Tezos continues its long history of on-chain governance.
How do stablecoins fit in?
Stablecoins deserve a special mention here. Most fiat-backed stablecoins don’t offer any native staking. What some platforms market as “staking” on stablecoins is usually lending or liquidity provision, which introduces a whole set of different risks. Treat these carefully and take the time to research them and how they differ from real proof-of-stake rewards.
👉 If you want a focused guide to stablecoin yields and risks, click here – Staking Stablecoins.
Understanding rewards and returns
The economics of staking rewards are calculated based on protocol inflation, transaction fees, your share of total staked tokens, validator commission, and performance. The formula is actually very simple: if more people stake, your share of the rewards goes down. Validators typically take a small commission, it ranges between 5% and 20%, so be prepared.
👉 But how much can you make? – How Rewards Are Calculated in Staking
The Annual Percentage Rate (APR) and Annual Percentage Yield (APY) are often confused. APR is the simple annual rate without compounding, while APY reflects the effects of compounding. Your actual APY depends on how frequently you claim and restake, and on whether gas costs make frequent claims worthwhile. Compounding monthly or quarterly is often more efficient than daily claims.
👉 APY vs. APR in Staking and Yield Farming
Major Staking Assets
| Asset | Typical APY Range | Unbonding Period | Ecosystem |
| Ethereum | 3–6% | ~3–5 days for exits (via validators). It’s instant with liquid staking | Largest staking ecosystem, mature liquid staking options |
| Solana | 6–8% | ~2 days | Fast chain, validator performance lagging |
| Cosmos | 10–15% (varies) | ~21 days | Active governance, rewards vary by zone |
| Polkadot | 12–14% | ~28 days | Nominated PoS, parachain auctions matter |
| Cardano | 3–6% | None (liquid staking) | Accessible, flexible staking model |
| Tezos | 4–6% | ~21 days | Proven history, governance baked in |
Professionals also rely on trackers to monitor rewards. Tools like block explorers, trackers, and crypto-portfolio apps can really help a lot in gathering information. Tax software is essential as well, since it categorizes rewards and disposals correctly and makes managing crypto income and expenses that much easier.
👉 If you want a deeper breakdown of reward math, How to Track Staking Rewards.
Common mistakes in staking
Even experienced investors make mistakes. One of the biggest is concentrating too much on a single validator. If that validator is slashed, you lose. Others forget to claim and compound, or rely too heavily on custodial platforms without understanding the risks. Here are the most common mistakes in staking you should try to avoid:
- Staking everything with a single validator.
- Ignoring unbonding periods and locking up funds you may need.
- Chasing unsustainably high APRs.
- Forgetting to claim or compound rewards.
- Relying entirely on custodial platforms.
- Not testing wallet recovery before staking large amounts.
If you want the full list of mistakes and how to prevent them check out: Common Mistakes in Staking and Farming.
Taxes and regulation
As a general overview of legal issues, staking rewards are usually taxable as an income when received, and later down chain uses can trigger additional capital gains or losses. Airdrops or restaking points may have tax consequences once they’re converted into tokens.
Record-keeping is critical here if you want to have an easy time doing your taxes. This means saving transaction hashes, amounts, dates, and fiat values at the time of receiving the funds.
If you’re a validator you have additional compliance practices to uphold. They may include using regulated platforms, keeping audit trails of transfers, and separating personal and business funds as a legal entity.
👉 If you want a practical tax checklist click here: Taxes on Staking Rewards.
Future trends in staking
The staking world is evolving quickly. Restaking is one of the new hottest developments, letting staked assets secure multiple streams of income simultaneously. Liquid restaking tokens aim to keep capital liquid while adding new yield layers, though they carry peg and contract risks.
Solo staking is becoming easier, with consumer-grade validator kits and managed services the barriers for entry have never been this low. Networks are experimenting with programmable incentives to bootstrap usage in specific regions or sectors. And institutions, from custodians to asset managers, are increasingly staking at scale, shaping the landscape with professional risk controls.
👉 If you want a forward look at staking and yield ecosystems click here: Future of Staking and Yield Farming.
Final Checklist Before You Stake
- Look up the unbonding period and withdrawal process.
- Diversify your activity (different validators and staking methods).
- Test your wallet backup and recovery process.
- Decide on a compounding schedule (monthly, quarterly).
- Track rewards and cost basis for taxes along the way.
- Schedule periodic reviews to rebalance and update validators.
Frequently asked questions on staking crypto
Are staking rewards taxable?
In most jurisdictions, yes. Staking rewards are typically treated as income when you receive them, valued at the fair market price on that day. For example, if you earn 1 ETH as a staking reward and ETH is worth $12,000 when it hits your wallet, you may owe income tax on $12,000. Later, if you sell that ETH for $12,500, the $500 difference becomes a capital gain. Tax rules vary widely depending on your country, so it’s important to keep records of dates, amounts, and prices when rewards are credited. Some regions are still clarifying laws around staking, so check with a tax professional for the latest rules where you live.
Can I lose my crypto if I stake it?
Yes, there are scenarios where staked crypto has been lost or reduced. The most direct risk is “slashing,” a penalty applied if a validator acts maliciously or fails to follow the rules. As a delegator, you share in that risk because you’ve assigned your tokens to that validator.
Can I sell crypto after staking?
It depends on the method you’re using. If you stake directly on-chain (native staking), your crypto is usually locked for an unbonding period that can last anywhere from a few days to several weeks. During this time, you cannot sell or transfer those tokens. With liquid staking, however, you receive a token (such as stETH for Ethereum) that represents your staked assets. That token can usually be sold or traded immediately, though it might trade at a discount to the underlying asset. Centralized exchanges often offer flexible staking options with easier withdrawals, like vTrader.
Can you lose money staking crypto?
Yes, even without slashing, there are several ways staking can result in losses. The most common is through token price volatility: if the underlying asset falls sharply, the value of your rewards and principal decreases, even if you earned yield. For liquid staking tokens, you may lose if they depeg, meaning they trade below the value of the underlying staked asset.
Can you stake crypto with any wallet?
Not every wallet supports staking. To stake directly on a network, you need a wallet that integrates with that chain’s staking functions.
For example, MetaMask supports Ethereum staking through certain providers, while Keplr supports Cosmos-based chains. Hardware wallets like Ledger and Trezor also offer staking for specific tokens, often in combination with third-party apps.
If your wallet doesn’t support staking natively, you may still be able to connect it to a staking platform. The safest approach for significant amounts is to use a hardware wallet that supports the network you want to stake on.
How do I choose the best crypto for staking?
Choosing the right asset comes down to balancing yield, risk, and fundamentals. Look at the network’s security model: does it have a large, diverse validator set? Examine the token’s inflation and reward structure: are yields sustainable, or are they artificially high?
Assess real-world demand: is the chain being used for transactions, DeFi, NFTs, or other applications? Governance is also worth considering: staking gives you voting rights, which may matter if you want influence over the network’s future.
In short, don’t just chase the highest APR, consider whether the token and chain have staying power.
How often should you claim staking rewards?
It depends on the network’s design, gas fees, and your personal strategy. Claiming frequently allows you to compound rewards faster, which boosts long-term returns. However, every claim may involve a transaction fee.
On Ethereum, for example, high gas costs might make daily claiming impractical. Many stakers find that monthly or quarterly claiming strikes a good balance between compounding efficiency and cost. Some platforms even offer auto-compounding, which handles this for you, often at a small fee.
Is staking better than holding?
It depends on your priorities. Holding (or “HODLing”) keeps your crypto liquid, ready to sell or transfer at any time, but it doesn’t generate any yield. Staking ties up your tokens, sometimes for weeks, but provides consistent rewards that can offset inflation and compound over time.
If you believe strongly in the long-term growth of an asset, staking can be a way to maximize exposure by accumulating more of it. If you need flexibility or expect short-term volatility, holding may be safer. Many investors combine the two: they stake a portion of their holdings for yield and keep the rest liquid for trading or emergencies.
Is staking crypto safe?
Staking is safer than many high-yield strategies, but it isn’t risk-free. The safety depends on the asset, platform, and method. Native staking on a large, established chain with a reputable validator is relatively low risk compared to yield farming or speculative lending. The safest approach is to diversify across validators, keep custody of your own keys whenever possible, and avoid chasing unsustainably high returns. With those precautions, staking can be a reliable and relatively safe way to grow your crypto holdings.
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
