Key Takeaways
- Crypto staking is a method to ensure that blockchain transactions are accurate. In return for staking crypto, stakers receive crypto rewards from network transaction fees.
- Crypto staking is a great way for people to earn passive income on crypto they’re holding for price appreciation.
- The main risks in staking crypto center on working with misbehaving “validators” that could be penalized by “slashing,” which reduces the value of your stake.
What Is Crypto Staking, Exactly?
OK, so the term “staking” really gives off strong Buffy Summers vibes. We get it—but there’s nary a vampire nor a Hellmouth to speak of.
The term staking suggests that there’s something at stake. And there is (your crypto). But there are also crypto staking rewards you can earn.
Imagine you’re having a spirited debate with your buddy over how many career home runs Barry Bonds had. You know, a typical Friday night. You bet the next round of drinks on this crucial matter, stating that the correct answer is 762. Your buddy insists that it's only 726. Then, you ask the others at the bar, who all shout, “762!”
In the end, that mistake will cost your buddy the next round. You earned a little something for proposing the idea–and for being right. In crypto, staking creates a financial incentive to get the numbers right in each blockchain block. Wrong answers can be costly.
Proof-of-stake blockchains work on consensus, a group agreement, like asking everyone in the bar how many home runs Barry Bonds had. But instead of home runs, the debate is over the transactions in each block.
Crypto staking lets token holders pledge their crypto to verify the right answer. In return, stakers are rewarded with a portion of the network’s transaction fees, called “staking rewards.”
Many popular blockchains like Ethereum and Solana use proof-of-stake consensus mechanisms. (What the heck is that, you rightly ask? Scroll to “What is Proof-of-Stake?” for a full definition, but the short answer is: a way to verify new transactions on the blockchain and prevent double-spending.)
Staking can yield anywhere between 3% to 10% annually on your original holdings. Cool.
By the way:If you want to learn about all the ways to earn passive income on your crypto, check out our complete guide to how to earn interest on crypto.
Some of the most popular blockchains pay staking rewards in their native cryptocurrency to encourage users to stake their crypto. It’s like a weird, crypto version of an employer matching your retirement savings with company stock.
Where do these crypto rewards come from? Proof of stake networks pay rewards from network transaction fees, in many cases, but also through token inflation rates. Basically, the network mints more tokens. We don't want to get too far into the weeds here, but it's worth a mention.
Token Inflation Rates Explained
Token inflation works much like inflation in fiat currencies. In a nutshell, the more units there are, the less each one is worth as part of the total market. But token inflation plays a unique role in proof-of-stake networks: It incentivizes the validation on the network by providing tokens as staking rewards.
How To Calculate Crypto Staking Rewards
Say you stake 10 Ethereum tokens worth each $2,000—for a total of $20,000—through the Coinbase platform. Let's assume a 4.25% annual yield (APY) on ETH. At the end of the first year, you will have earned $900 on your investment, so your grand total is now $20,900. Leave it staked for another year at the same APY, and your balance will become $21,840.50. And so on.
But let’s say Ethereum loses 4.25% of its value during year one. (It often fluctuates more than that.) That means you’ve merely broken even.
So, how profitable is crypto staking? In most cases, you won't need a crypto-staking calculator with scientific functions to do the math. Comparing the yield to the expected change in price points you in the right direction.
The lesson? Pay attention to the relationship between a platform’s APY and a token’s volatility.
To channel the legendary Rob Base and DJ E-Z Rock: “It takes two to make a thing go right / It takes two to make it outta sight.”
Hit it!
How Does Staking Work?
There are a number of different ways to stake, from the basic (using a centralized exchange) to the very advanced (running your own validator). We’ll go into that in more detail in “What Types of Staking Are There?” but for now, keep reading.
Ultimately, all staked crypto ends up in the same place—helping to validate the blockchain through a validator node, a computer that verifies the transactions in each block.
But most staked crypto does not come from individuals running their own validator nodes—which can get complicated. (To paraphrase Boromir: “One does not simply run their own validator node.”) Most staked crypto comes from people with little technical knowledge who delegate their crypto to those who know how to run nodes.
Those two parties come together thanks to various entities, such as exchanges and crypto staking pools. String it all together, and you’ve got a staking process. And good news for crypto newbies: In many cases, staking is as simple as choosing how much crypto you’d like to stake and clicking a button.
Like any good financial process, fees are added along the way to make each party’s contribution worth the trouble. But these are well worth it for most people. Someone else does the setup work.
You can bypass the fees by running your own validator. Possible, but akin to working on your own classic Porsche 928s, the kind with the 82-inch timing belt. Sometimes, it’s cheaper to find a pro.
And just a reminder: Staking is only available for proof-of-stake blockchains, so proof-of-work blockchains like Bitcoin won’t support it. Bitcoin staking isn't a thing. Bitcoin is validated by mining instead, and that's a whole other topic.
What Is Proof-Of-Stake?
Proof-of-stake is a consensus (agreement) mechanism used to run the blockchain. This means it uses distributed computers (called “nodes”) to agree on the state of the blockchain.
What really happened, and when? That’s what validators collectively determine.
It’s not the only consensus mechanism in crypto. The original is called proof-of-work and is the mechanism that Bitcoin uses. What’s the difference?
- Proof-of-work uses computational work to validate a block. The process makes it prohibitively expensive to change an existing block.
- Proof-of-stake uses crypto staked to validators that reach a consensus, with some blockchains slashing (removing a percentage) the stakes for misbehaving validators.
You can see proof-of-stake in action with Ethereum or Solana.
Pros And Cons Of Staking Crypto
Pros
- Earn passive income with compounding
- Offset natural token inflation
- Help secure the network
Cons
- Conventional staking often requires token lock-up, meaning you can’t access your tokens for a certain period of time
- “Slashing,” while rare, can reduce the value of your holdings
- You may need to change validators if yields change or the pool becomes saturated, meaning there are too many stakers on one stake pool, making the network less decentralized
Benefits Of Staking Cryptocurrencies
If you’re the buy-and-hold type or a long-term investor, staking offers a consistent way to earn additional money on funds that you don’t plan to move in the short term. We wouldn’t call it free money, but we wouldn’t not call it that, either.
Plus, the secret engine of wealth creation is at work: compound interest. Because your crypto staking rewards are paid in the same token you invested—and because those crypto rewards are usually added to your staked position automatically—you’ll earn compound interest that can supercharge your returns over time.
And if you’re the kind of person who’s alarmed by the considerable energy consumption of proof-of-work networks like Bitcoin, you can rest easy knowing that their proof-of-stake brethren are comparatively lightweight. For example, Bitcoin proof of work uses up to 50,000 times more energy compared to Ethereum proof of stake. Great Scott!
One more thing: As we’ve said before, staking helps ensure the network's security, which in turn helps your investment. After all, a robust network is better for long-term appreciation of the coins or tokens you’re holding.
Risks Of Staking Cryptocurrencies
Staking is generally a low-risk way to earn a yield in crypto. But there are a few possibilities to consider that could make your milk curdle.
The first: platform risk. Staking is most easily done through a centralized exchange like Coinbase. When you stake your crypto through these services, your funds leave your wallet and become the custody of the crypto staking platform. You can see where this goes. Platform hack? A risk. Platform insolvency? A risk. And these things aren’t as impossibly rare in the wild world of crypto as you’d hope. (Delegating to a validator or a staking pool—or running your own validator, you brainiac!—somewhat mitigates these risks.)
The second: liquidity as it pertains to market volatility. There’s often a cooldown period after you “unstake,” during which some or all of your crypto can’t be traded. And, of course, you can’t trade crypto that’s staked. All bad news if you’re the kind of person who prefers to react to the market quickly. (But HODL, right? …right?)
The third: Yields aren’t guaranteed. An inefficient or slow validator may be passed over for voting and rewards. A misbehaved validator—such as one that approves invalid transactions—may be penalized, leading to “slashing.” Also, and more commonly, yields can vary based on staked supply and network demand. So, they vary.
And, of course, there are also the risks common to all cryptocurrencies: you misplace the keys to your crypto wallet, or the wallet itself is breached. Fun times.
Who Should Stake Crypto?
Staking isn't for everyone, but it can work well for some.
- People who want to earn passive income.Staking earnings accumulate from crypto rewards, no additional action necessary.
- People who invest over the long term. The staking process isn’t made for hopping in and out of the pool. The greatest rewards go to people who HODL.
- People who don’t mind some illiquidity. Your tokens are usually locked when staking (with Cardano as a notable exception). If you need to make a quick change, you might not be as nimble as you’d like. Unstaking often takes a few days.
How To Stake Crypto In 5 Steps
You can stake crypto in many ways, including exchange staking, staking to a validator, or running your own validator. We’ll cover all the options in more detail later, but here’s a quick getting-started guide.
Let's explore how to make money crypto staking, shall we?
Step 1: Purchase A Proof-Of-Stake Cryptocurrency.
If you have a favorite exchange, go there first. If you’re not sure, use our guides below. Choose an exchange by scrolling to “Where to Stake Crypto” and choose a cryptocurrency by reading “Which Crypto Can You Stake?”
Step 2: Choose A Wallet.
Your wallet must support staking—and specifically, staking for your preferred cryptocurrency. MetaMask (Ethereum and ETH-compatible) and Atomic Wallet (multiple blockchains) are both popular choices, as is the browser-based Phantom Wallet (Solana and Ethereum only). You can also use a hardware wallet, like Ledger.
Step 3: Transfer Your Crypto To Your Wallet.
Using your own wallet, rather than an exchange, offers an additional layer of safety.
Step 4: Join A Staking Pool Or Stake Directly To A Validator.
Review fees and yields and choose the best pool or validator for you. (Not sure? Read on to “Where to Stake Crypto.”)
Step 5: Earn Rewards and Profit!
The crypto staking rewards you earn on many popular blockchains are automatically added to your staked amount, compounding your earnings.
Awesome. And there you have it. Crypto staking explained, no Ph.D. required.
Which Crypto Can You Stake?
Popular token choices for crypto staking include Ethereum, Solana, Matic, Binance Coin, Avalanche, Polkadot, and Cardano.
But the number of cryptocurrencies that support staking continues to grow, and there are hundreds of proof-of-stake coins or tokens in the wild today.
The number of viable staking options, though? That figure is quite a bit smaller. (Some coins or tokens trade so infrequently, or are altogether not viable in the long term, that they prove to be poor choices.)
So if your risk profile is even a little bit conservative, focus on established crypto assets and those that show a promising future.
We'll break down a few popular options in the table below. But first, a quick note:
We haven’t yet mentioned the term “epoch,” which you probably last used in seventh-grade social studies class. To fully understand the table, you'll want to know what an epoch means. Check the dropdown below for a full rundown.
Not sure which crypto to stake? Check out our guide to crypto research tools, which could help you decide.
Epoch Explained
In the world of crypto, “epoch” means a predetermined period of time that contains multiple blocks of a blockchain. You can think of them like chapters in a book—and the book is the blockchain.
Popular Cryptos For Staking
| Ethereum | 6.16% | Centralized exchange, Custodial & liquid staking pools, Running your own validator | ~6.4 minutes | Indefinite (pending upcoming upgrade) | 0.52% | MetaMask |
|---|---|---|---|---|---|---|
| Matic | up to 20% | Exchange, delegating, liquid staking, running a validator | ~3 hours | Varies by platform | ~5% | MetaMask (as a delegator or validator) |
| Binance Coin | varies by platform and lockup length | Lockup on an exchange, liquid staking via third party | daily calculations; monthly payouts | varies; generally in 30 day increments (i.e. 30, 60, 90, 120 days) | ~2.35% | Trust Wallet |
| Solana | 7.79% | Centralized exchange, Delegating to validators, Custodial & liquid staking pools, Running your own validator | ~2 days and 6 hours | No lockup | 6.63% | Phantom |
| Cardano | 5.24% | Centralized exchange, Custodial & liquid staking pools, Running your own validator | 5 days | No lockup | 1.90% | Yoroi |
Often the best staking crypto, especially for beginners, is one that has a large market (so you can exit your position easily) and lots of ways to get started.
Want to learn more about staking specific coins? Check below for more information.
Ethereum Staking
Since Ethereum (ETH) moved to proof-of-stake in 2022, a budding industry of staking solutions has emerged. There are several ways to stake ETH, including:
- Staking through a centralized exchange
- Custodial staking pools
- Liquid staking pools
- Running your own validator
We’ll cover all these in more detail later. Oh, there is a caveat for that last one, too: Running your own validator node requires you to have 32 ETH.
Ethereum Staking Rewards
An average of 4.08%
Matic Staking
Though Polygon is its own layer 2 blockchain, staking Polygon tokens needs to be done on the Ethereum network. You can avoid some gas fees by staking on a centralized exchange such as Binance or Kraken, instead, but those options generally require locking your tokens up for a specified time. However, for those willing to get a little more technical, anyone can run a validator node for the Polygon network, using as little as 1 MATIC!
Matic Staking Rewards
Up to 20%
Binance Coin Staking
Binance Coin, or BNB, is the utility token for the Binance ecosystem. This includes the Binance exchange, where holding BNB provides discounts on fees, and the BNB tokens can be used to pay the trading frees, as well as the Binance Chain, where BNB tokens function as the underlying token for the chain and are used to pay any gas fees.
And though the Binance exchange is the primary home to BNB staking, there are a growing number of third party services which offer staking options as well. For those who don't want to lockup their tokens, some crypto staking services, such as Stader Labs, offer users the option of liquid staking their BNB tokens, allowing withdrawals at any time.
Binance Coin Staking Rewards
Varies based on lockup period. Up to 12.99% for a 120-day lockup.
Solana Staking
Solana (SOL) uses both proof-of-stake and yet another consensus mechanism we haven’t already mentioned—proof-of-history—to validate transactions on the network. The mix affords Solana a rewards system similar to other cryptocurrencies (that’s the PoS at work) and a speed and capacity advantage (that’s the PoH piece).
You can stake Solana by joining a pool or by running your own validator. You can also delegate directly to a specific validator without using a pool. Since running your own validator node requires a significant investment and technical knowledge, most SOL investors choose to stake with a pool.
Solana Staking Rewards
An average of 6.65%
Avalanche Staking
If you’re looking for a higher return through staking rewards, Avalanche (AVAX) deserves a closer look. The reward APY can be up to 50% higher than with other crypto assets. However, the bar for entry is high: you’ll need at least 25 AVAX to delegate for staking—or 2,000 AVAX to run a validator node.
Avalanche Staking Rewards
An average of 8.94%.
Cardano Staking
Cardano (ADA) is similar to Solana in that its staking ecosystem revolves around pools. With more than 1,000 pools for staking as well as options to stake through Coinbase and other platforms, investors have plenty of ways to get started.
Here's what's different: Unlike ETH and SOL, you can sell your ADA, send it to someone else, or use it as collateral while it's staked. The Cardano blockchain supports liquid staking natively. Cool. More on liquid staking in a bit.
Cardano Staking Rewards
An average of 3.26%
Best Crypto Staking Platforms 2026
| Coinbase | Newbie-friendly platform with support for ETH, SOL, ADA, and more | 2% to 6.12%, depending on the asset | ETH: $0 SOL: $1 ADA: $1 | None | Industry-leading encryption and multifaceted risk management | Daily to quarterly, depending on the asset |
|---|---|---|---|---|---|---|
| Nexo | ETH Smart Staking with daily payouts | 3.5% to 12% | $10 | None (swap NETH for ETH) | Third-party custodians for customer assets | Daily |
| Kraken | No waiting period; start earning right away | No waiting period; start earning right away | None | None | ISO/IEC 27001:2013 certification, Cold storage wallets | Once or twice a week, depending on the asset |
| Crypto.com | Boost staking rewards with CRO, Crypto.com's native token | Varies by asset and lock-in duration | ETH: 0.02 SOL: 0.1 ADA: 25 | Flexible holding term1-month fixed term3-month fixed term | 100% of user funds are held in cold storage wallets | Weekly |
| Stader Labs | Easy staking and unstaking; integrated defi | 3.5% to 15% depending on the asset | None | None (liquid staking) | Third party audits; on-chain monitoring; hefty bug bounties | Liquid tokens accrue value until cash-out |
| Lido | User friendly; liquid staking; connect with popular crypto wallets | Up to 20% depending on asset | None | None (though withdrawals may take a few days) | Third party audits | Daily |
| Origin | Origin Dollar - a yield generating stablecoin; OETH, yield generating ETH token | 5.75% | None | None | Third party audits; hefty bug bounties; guaranteed 48 hour withdrawal period before any new code implementations | Constant; auto-compounding |
| Jito | Liquid staking for SOL token; | ~7% | None | None | JitoSOL token gains value over time | |
| Rocketpool | Liquid staking on any amount; no lockup periods; validator pools | Varies - currently 2.89% | 0.01 ETH | None | Smart contracts audited and open-source | Users give rETH tokens which gain value over time |
4.5
4.9
4.6
Founded in 2021, Stader Labs has been an innovator in crypto staking, bringing point-and-click liquid staking solutions to chains like Polygon. The protocol now supports seven assets, including Ethereum. One unique feature is the ability to stake MATIC on the Polygon chain, where fees are much lower.
4.3
4.8
4.6
What Types of Crypto Staking Are There?
There are several types of crypto staking—with varying degrees of difficulty. Below, we outline the most common staking methods.
Just remember:No matter how you stake, you’ll receive crypto rewards for doing so from the blockchain to which you are staking.
- Use a centralized exchange (very easy): Many major crypto trading platforms also support staking of popular crypto assets. (See “Where to Stake Crypto” above.) These exchanges "custody" your tokens and fulfill the staking process automatically. You can use their services at the push of a button.
- Delegate to a validator (easy): Many proof-of-stake blockchains allow you to delegate your tokens directly to an individual validator. This validator may be a single person or a corporation that runs a validator node. This method allows you to earn staking rewards while keeping your tokens inside your wallet and not giving up custody.
- Use a custodial staking pool (intermediate): Pool your crypto tokens together with others and stake to the blockchain as a single entity. This process allows you to engage in minimal intermediaries while also avoiding the complexities of running your own validator node. This method will require you to hand over custody of your tokens to the pool.
- Use a liquid staking pool (intermediate):Liquid staking pools provide a “liquid” token that can be traded in place of your crypto while it’s staked. This is a popular staking method and offers some of the highest staking yields since you can lend out your liquid token to earn additional rewards.
- Run your own validator (hard): The most complex yet direct way to stake is to run your own validator node. This requires substantial technical know-how. But once you set it up, you can start recruiting stakers (called delegators) who send you tokens to stake on their behalf and collect fees from their staking rewards.
| Setup Difficulty | Very Easy | Easy | Intermediate | Intermediate | Hard |
|---|---|---|---|---|---|
| APY | Medium | Low | Medium | High | High |
| Custody Of Assets | Held by the central exchange | Coins stay in your wallet | Held by the staking pool | Custodied by the staking pool | Coins stay in your wallet |
| Ease Of Tax Reporting | Receive prepared documents showing your transactions and balances | Have to keep your own records or pull the data from the blockchain | Have to keep your own records or pull the data from the blockchain | Have to keep your own records or pull the data from the blockchain | Have to keep your own records or pull the data from the blockchain |
| Pros | Easy to implement | Get to keep custody of your tokens | Stake low amounts | Get a liquid token that can be used in place of your staked crypto | Most direct method, no fees involved |
| Cons | Platform risk as they hold your tokens | Validator fees can really eat into staking APYs | Exposed to potential protocol penalties | Extra taxable event when you swap for the liquid token | Technically challenging |
What To Consider
- How much you’ll earn. Different platforms offer different yield rewards, or APY, even for the same cryptocurrency. Look out for promotions that sweeten the pot with reduced fees.
- The platform’s reputation. It’s important to pick a well-established and secure platform when staking because some platforms, in hindsight, have turned out to be bad eggs. (Looking at you, FTX.)
- Which crypto you can stake. Not all platforms have staking support for all cryptocurrencies, so make sure your platform of choice does everything you need.
Step-By-Step Guide
In the below example, we will be staking Ethereum using Uphold.com.
Note: Uphold no longer supports staking for US customers.
Step 1: You will first need to create an Uphold account, which includes going through some identity verification checks. After you’ve created an account, you can navigate to Uphold’s staking page and click “Start Staking.”
Step 2: Uphold will take you to your wallet page. Next, click “Go to Staking.”
Step 3: Once you’ve looked over the instructions, click “Next.”
Step 4: The next page will show you a list of cryptocurrencies that you can stake through Uphold. For this example, we will be staking ETH.
Step 5 (ETH-specific): As of November, 2022, when staking Ethereum, you will not be able to withdraw your ETH until the Ethereum blockchain undergoes a planned upgrade. Acknowledge this notice to proceed.
Step 6: Click “Start staking ETH.”
Step 7: Here is where you enter the amount that you would like to stake. When you’re done, click “Preview staking.”
Step 8: Review the final details, including your staked amount and the terms of your rewards. When you’re ready to finalize, click “Confirm Staking” to stake your ETH.
What To Consider
- The validator’s reputation: Validators range from individuals managing small sums to companies staking millions of dollars of tokens. It’s critical to do your research on the validator you have selected to make sure they are reliable. You can research validator stats to help you compare.
- The validator’s fees:Most validators take a cut before passing staking rewards on to you. Validators justify this fee because they’re providing you a service—running the validator itself (hard) and staking on your behalf. How much? Compare.
A staking pool is a group of token holders coming together to pool their tokens and stake directly to the blockchain. The pool must set up a validator, and the main organizers of the pool do the heavy lifting. This allows token holders to maximize staking rewards without needing to run a validator node themselves. Staking pools often charge a fee for facilitating the technical aspect of staking. This fee is taken out of staking rewards paid each epoch.
What To Consider
- The staking pool’s reputation: If the staking pool does not uphold its responsibilities as a node validator, you may be in danger of losing some or all of your funds due to protocol penalties (slashing).
- Whether the staking pool has a minimum: Some staking pools have a minimum staked amount that must be met in order to stake your tokens with them. Depending on the token balance you are looking to stake, these minimums may be a factor in your decision.
- How much the pool fees run. Like delegated staking or liquid pools (covered next), staking pools charge a fee that might make them a great deal–or not so great.
Step-By-Step-Guide
(It’s so similar to “delegating to a validator” that it’s helpful to read that step-by-step guide.)
Liquid staking pools are similar to regular staking pools in that you collectively put your tokens together, validate, and earn money. However, liquid pools provide a “liquid token” that represents the type of crypto you have staked.
You can think of a liquid token kind of like a stunt double—it looks and acts like your staked crypto token, but it isn’t. Liquid staking allows you to earn rewards on your staked crypto without locking up your crypto.You can have your cake and eat it, too.
This liquid token normally tracks the value of the underlying crypto. For example, a common liquid token for Ethereum, stETH, closely follows the price of ETH but includes a staking yield through a method called rebasing. When you stake ETH to the liquid staking provider Lido, you receive stETH back that can be traded on the open market and used like any other cryptocurrency. Boom!
Note: If you want to liquid-stake ETH, you can just swap ETH or another token for stETH on a decentralized exchange like Uniswap. With a few clicks, you’re staking ETH like a liquid-staking pro and earning stETH rewards. You might even save a few bucks by doing it the easy way.
What To Consider
- The value of the platform’s liquid tokens:Liquid staking tokens are platform-specific, meaning each liquid staking pool generates its own liquid tokens for cryptos like ETH and SOL. It’s important that these liquid tokens have large enough market value and enough liquidity to trade easily. Staking with smaller liquid staking pools may leave you holding tokens that are hard to trade.
- The platform’s fees: Since liquid staking pools are providing a service, they naturally also charge fees. For example, Lido charges a 10% fee, which is deducted from your staking rewards. Translation: you’ll get 10% less in rewards (but you can stake small amounts and sell anytime).
- The platform’s risk:Because each liquid staking platform has its own liquid tokens, and their value is tied to the platforms’ viability, these tokens rise and fall with their platform. In other words: If the platform goes boom, so does the platform’s liquid token. And your investment. (Oops.)
Step-By-Step Guide
Below is an example of how to stake Ethereum using the popular liquid staking pool platform Lido.
Step 1: Navigate to the Lido’s ETH Staking page and click “Stake Ethereum.”
Step 2: Use the “Connect wallet” button to connect your wallet.
Step 3: Enter the amount of ETH that you would like to stake and click “Submit.”
Step 4: Use the blue “Confirm” button to confirm the transaction. Do this through your wallet interface.
Step 5: You will receive a confirmation through the Lido website, and your stETH (Lido’s liquid ETH token) will now be available inside your wallet.
All tokens that are staked — regardless of the method — eventually end up staked directly to the blockchain. This means that, if you really wanted to, you could skip the staking platforms and manage the staking process yourself by running your own validator.
Running a validator definitely takes some tech know-how. The process is complex and requires upfront investment in an advanced computer to run the process. You’ll also need a solid understanding of the roles and responsibilities of validators—those responsible for validating and sometimes building each subsequent block in the blockchain.
Step-By-Step-Guide
Step 1: Get the minimum amount of tokens you’ll need: For blockchains like Ethereum and Avalanche, running your own validator requires a minimum number of tokens.
Step 2: Get the computer and software you’ll need:You can’t be a validator without the proper gear. You’ll need a specialized computer, specific software, and a solid internet connection, as the computer will be running 24/7.
Step 3: Generate and store your security keys:A validator key works like an ID on the network, certifying your validator to participate in consensus and earn rewards. Follow the instructions for your chosen network.
Step 4: Follow protocol.Be sure you understand the responsibilities of a validator. Largely, these focus on following the consensus rules for each blockchain and making sure your node is always online. Crypto never sleeps, and it's your crypto at stake.
The instructions and requirements for setting up a validator vary by blockchain. Here are the guides for some of the big ones:
What’s The Difference Between Staking And Lending?
When lending crypto, you make money (interest) off the money you lend to the borrower. As you might imagine, lending comes with risks, like a borrower defaulting on the loan.
When staking crypto, you allocate your crypto tokens to a computer (validator) on the blockchain. Usually, the more tokens a validator has staked, the better chance they have to build a new block, for which they earn rewards.
Basically, a validator needs your cash to attract earnings and then pays the majority of those earnings back to stakers (like you) after taking their cut.
| Rewards | Rewards are really just interest paid by borrowers. | Rewards come from newly issued tokens and network transaction fees. |
|---|---|---|
| Leveraged Returns | Nope. You lent your tokens and now someone else has them (so you can't use them). | Liquid staking lets you use your tokens in DeFi apps to earn more yield while still earning rewards. |
| Minimums To Get Started | Usually low | Often low, but can be high with some methods. |
| Risks | The platform could run into money troubles, preventing withdrawals. | If the validator you choose misbehaves or goes offline, you could lose some of your crypto or miss out on earnings. |
What Is DeFi Staking?
DeFi staking refers to staking tokens on a decentralized application (dApp) to earn rewards. This differs from staking to help validate transactions on the network.
To Sum It Up
Staking offers passive income–or not so passive if you’re running a validator. But for most of us, it’s easy money with minimal effort and reasonable safety.
Staking rewards also help offset token inflation common to many proof-of-stake blockchains.
You have to choose your staking provider carefully, though. Validator downtime and other missteps can cost you money, so it’s important to do your research before you start clicking buttons.
Frequently Asked Questions
Yes, but there’s really only one way that can happen: through “slashing.” That’s when the validator to which you have delegated your staked crypto—or maybe your validator if you set up your own—engages in activity, often malicious, that doesn’t follow the protocol and ultimately undermines the security of the blockchain. This may result in the loss of your staked funds. Other than slashing, the only other way to lose your staked crypto is if the platform you’re working with gets hacked or goes belly up.
We’re not here to recommend a specific crypto to stake because everyone’s goals are different. So, consider the big picture. A healthy yield is a consideration, but it’s only part of the equation—what if the coin or token price is making a beeline toward zero? In general, look for well-established cryptocurrencies with a strong network and a history of consistent yields.
Or put another way: which cryptocurrencies can you stake? Currently, nearly 300 cryptocurrencies use proof-of-stake. Some popular staking choices include:
- Ethereum
- Solana
- Cardano
- Avalanche
- Polkadot
- Polygon
- Binance Chain
Read “Which Crypto Can You Stake?” for more.
There are three factors that affect your potential earnings from staking crypto.
- First, the annual percentage yield for your chosen crypto type.
- Second, the yield for your chosen platform or pool (after fees).
- And third, the supply and demand relationship presents in that moment: if the network needs more crypto for validations, yields climb. If it doesn’t, yields fall.
You can expect many popular staked cryptocurrencies to pay between 3% and 10% APY. And remember, much like savings account interest at a bank, staking rewards compound automatically in most cases.
Simple: Stake some crypto—then stick it out for a while. Earn rewards at the end of each epoch and let compound interest boost that amount naturally. Some blockchains, like Cardano, might require moving your stake occasionally, but generally, staking doesn’t require additional attention.
Yes. It's important to educate yourself about tax on cryptocurrency in the US. Staking rewards are taxed as income by the federal government and very likely by your state, too. Income tax is calculated according to the fair market value of your crypto at the time of receipt. So if you receive 0.1 ETH in staking rewards on a day when Ethereum is trading at $2,000, in the eyes of the IRS, you have received $200 in income, and you will be taxed on that amount regardless of future ETH price fluctuations. Crypto appreciation is also a taxable event. If your 0.1 ETH in staking rewards appreciates from $200 to $250 and you sell it, you are liable for paying a capital gains tax on the $50 of appreciation. Check out our tax page for information, or talk to your accountant for the most up-to-date information about crypto taxes.
Staking crypto can mean two things, with the most common being using your crypto to help validate transactions on a proof-of-stake crypto network. For example, Ethereum uses proof of stake to ensure all transactions are valid. People who stake Ethereum (ETH) earn a yield (paid in ETH) for helping to secure the network. The easiest way to start staking Ethereum is to use an exchange like Coinbase that supports ETH staking. We cover other types of crypto staking in the article above. Crypto staking is also built into some decentralized apps. For instance, on GMX, a popular trading app, you can stake GMX tokens to earn a percentage of the fees paid on the platform.
Staking crypto makes the most sense when you're planning to hold the crypto anyway. Here's the primary reason: Often, crypto staking comes with lock-up requirements or cool-down periods, which means you might not be able to exit your position quickly.
But if you're in for the long haul, staking crypto can be a relatively safe way earn passive income on crypto assets you were planning to hold anyway.
Staking crypto on proof-of-stake networks like Ethereum, Solana, Cardano, or Polkadot can give you yields of 3% and higher. It's like being paid to wait. But be sure to read the article above to understand the pros and cons first.