Staking is a way to participate in the operation of certain blockchain networks. Participants commit cryptocurrencies to support transaction validation and, depending on the protocol’s rules, may receive rewards.
Staking does not guarantee a profit. The cryptocurrency’s price can change, reward rates are variable, and some methods involve waiting periods, penalties, or additional technical risks. Understanding the mechanism is essential before deciding whether it fits your situation.
What is cryptocurrency staking?
Staking is used by networks that run on Proof of Stake (PoS). Under this consensus mechanism, validators commit assets as economic collateral to propose or confirm blocks of transactions.
Each network has its own method for selecting validators. A validator that performs its duties correctly may receive protocol rewards. A validator that breaks certain rules may face a penalty called slashing.
Running a validator is not the only way to participate. A person can also delegate assets to an existing validator, join a pool, or use a service provider that manages the technical process. Each option has different conditions and risks.
For a closer look at the consensus mechanism, visit the Proof of Stake glossary entry.
Proof of Stake vs. Proof of Work
Proof of Stake and Proof of Work (PoW) both help a distributed network agree on valid transactions, but they rely on different resources.
| Feature | Proof of Stake | Proof of Work |
|---|---|---|
| Main resource | Cryptocurrencies committed as collateral | Computing power and energy |
| Participants | Validators | Miners |
| Potential penalty | Loss of part of the stake under the protocol’s rules | Loss of the resources spent competing |
| Well-known networks | Ethereum, Solana, and Cardano | Bitcoin |
Ethereum uses Proof of Stake. Bitcoin continues to use Proof of Work and does not support native BTC staking.
How does staking work?
The details vary by network, but the process usually includes these steps:
- 01
Choose a compatible network
Not every cryptocurrency supports staking. The asset must belong to a network that uses Proof of Stake or a related mechanism.
- 02
Select a participation method
You may run a validator, delegate to one, join a pool, or use a service provider.
- 03
Commit the assets
Depending on the network, funds may be locked, delegated, or subject to a waiting period before withdrawal.
- 04
Participate in consensus
The validator confirms transactions and follows the network’s technical rules.
- 05
Receive rewards, when applicable
Distribution can depend on network issuance, total participation, validator performance, and fees.
- 06
Request withdrawal
Some networks allow flexible withdrawals; others require an unbonding period. Check the rules before participating.
Types of staking
Solo staking
Solo staking means running your own validator node. It offers more control, but may require a minimum amount of assets, reliable infrastructure, and technical knowledge. Incorrect configuration or extended downtime can reduce rewards or trigger penalties.
Delegated staking
Delegation assigns the weight of your assets to an existing validator without requiring you to operate a node. The validator manages the infrastructure and typically deducts a fee from rewards. Delegation does not remove risk, so review the validator’s performance and the network’s rules.
Staking pools
Pools combine assets from multiple participants. This can make participation more accessible when solo staking has a high minimum, but it adds reliance on the operator, its fees, and its reward-distribution method.
Liquid staking
Some protocols issue a token that represents a staking position. That token may be transferred or used in other applications, but it adds smart-contract, liquidity, and price-divergence risks.
Staking through a platform
Some platforms manage validator selection and technical operations. Before using one, confirm which entity provides the service, which assets are eligible, how rewards are calculated, whether fees apply, and what withdrawal conditions exist.
How are staking rewards calculated?
Staking rewards are neither a fixed rate nor a promise of results. They can vary based on:
- The protocol’s issuance rules.
- The total amount of assets staked.
- Validator performance and fees.
- Periods of activity or inactivity.
- Market conditions.
- Fees charged by a pool or service provider.
Some services display an estimate as APR or APY. APR represents an annual rate without compounding, while APY assumes a compounding frequency. Both are estimates and do not guarantee what you will receive. Learn more in the APR and APY glossary entry.
Risks of staking
Market volatility
Rewards are usually paid in the same cryptocurrency that is staked. Even if the number of units increases, a price decline can reduce the position’s total value.
Lock-up and unbonding periods
Some networks require participants to wait before withdrawing. During that time, the assets may not be available to sell or transfer.
Slashing
Certain networks can penalize a validator for behavior that conflicts with the protocol. Depending on the network and participation method, the penalty may affect delegated assets.
Technical risk
Validator software, smart contracts, bridges, and liquid-staking tokens may contain errors or vulnerabilities. An audit can reduce uncertainty but cannot eliminate risk.
Provider risk
When a platform, pool, or custodian is involved, participants also depend on its controls, operating conditions, and ability to provide the service.
Staking is not a savings account
Staking is sometimes compared with a savings account because both may produce periodic payments. They are legally and economically different.
| Topic | Staking | Savings account |
|---|---|---|
| Asset | Cryptocurrency | Government-issued currency |
| Source of payments | Protocol rules or a provider’s strategy | Rate defined by a financial institution |
| Change in principal value | Depends on the cryptocurrency’s market price | Depends on the account terms and currency |
| Access to funds | May include an unbonding period | Depends on the account type |
| Applicable protection | Depends on the protocol and provider | Depends on the institution and local law |
What to check before staking
Before committing assets, verify:
- How rewards are generated and distributed.
- Whether the displayed rate is APR or APY and whether it can change.
- Which fees the validator, pool, or provider charges.
- Whether a minimum period or unbonding period applies.
- How slashing could affect the position.
- Who controls or holds the assets.
- Which additional risks a liquid-staking token introduces.
- Whether the service and asset are available in your jurisdiction.
- What tax treatment may apply to your circumstances.
Staking services and Bitso’s English-language experience
Bitso’s Help Center explains that Earnings may use staking for certain eligible assets. Availability, rates, requirements, and conditions can change. Review the current information in the app, the product terms, and the risk disclosure before enabling a feature.
The us version of this article provides English-language educational information. It does not confirm that Bitso or a particular staking service is available to every person in the United States. Eligibility depends on the applicable jurisdiction and current product terms.
See the English Help Center article on what staking is and how it works at Bitso.
Key takeaway
Staking allows participants to support consensus on Proof of Stake networks and may produce protocol-defined rewards. The method—solo, delegated, pooled, liquid, or platform-based—changes the costs, liquidity, and risks involved.
Before making a decision, review the network’s rules, the asset’s volatility, fees, withdrawal timing, and provider terms. An estimated reward does not remove the possibility of loss.
Frequently asked questions about staking
No. Rewards can change, and the cryptocurrency’s price can rise or fall. Fees, unbonding periods, slashing, and technical risks may also affect the outcome.
No. Staking is associated with Proof of Stake networks and uses assets committed as collateral. Mining is associated with Proof of Work and uses computing power.
Yes. Market price changes, slashing, technical failures, or provider problems can affect the position. The specific risk depends on the network and participation method.
APY is an annual estimate that assumes a compounding frequency. It is not guaranteed and can change with protocol rules, fees, and market conditions.
No. Some networks and services offer more flexibility, while others have lock-up or unbonding periods. Review the conditions before participating.
Not natively. Bitcoin uses Proof of Work. A service that offers payments for depositing Bitcoin uses a different mechanism with its own conditions and risks.
