Staking

On a proof of stake blockchain, staking means locking up tokens to help run and secure the network. Validators stake their own tokens. Other holders can usually join in by delegating, which means assigning their tokens to a validator or a staking service, often without handing over control of them. In return, stakers earn rewards, usually paid in more of the same token.

Staking is what keeps a proof of stake network honest, because validators have something to lose. On Ethereum, for example, a validator that cheats can have part of its stake taken away and be forced out of the network, a penalty called slashing. Not every network slashes, and the rules differ from one to the next. Because the rewards look a little like earning interest, banks and asset managers that hold these tokens, or hold them for clients, are interested in staking.

Possible risks include losing tokens to penalties, waiting to get your tokens back (a few days on Solana, and from about a day to several weeks on Ethereum, depending on how many people are leaving at once), the token’s price falling while it’s locked, and relying on a third party to run the validator. What these mean depends on your role. Staking your own tokens, staking for clients and running a staking service are very different jobs, with different risks.