Blockchain & Cryptocurrency Glossary

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Staking

1 min read
Pronunciation
[stā-king]
Analogy
Staking is like depositing money in a high-yield savings account: you lock up funds and earn interest (rewards) for helping the bank (network) operate.
Definition
The act of locking up cryptocurrency tokens in a proof‑of‑stake network to support consensus operations and earn rewards.
Key Points Intro
Staking secures PoS networks via:
Key Points

Collateral lock: Tokens are bonded to validate or nominate.

Reward generation: Earn block rewards or fees proportionally.

Slashing risk: Misbehavior can forfeit a portion of stake.

Governance rights: Stakers often gain voting power on protocol changes.

Example
On Ethereum 2.0, users stake a minimum of 32 ETH in the deposit contract to become validators and earn ~4–6% APR.
Technical Deep Dive
Stakers deposit tokens into a staking contract. The protocol’s validator selection uses a pseudo‑random function weighted by stake. Validators attest to blocks and propose new ones; correct behavior yields rewards, while failures or equivocation trigger slashing conditions enforced by on‑chain smart contracts.
Security Warning
Keep validator keys secure—compromise can lead to slashing and loss of staked funds.
Caveat
Staked tokens are illiquid during the lock‑up and unbonding periods, limiting user flexibility.
Related Terms
Proof-of-Stake
Validator
Slashing
Staking Pool

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