Staking is the process of locking cryptocurrency in a blockchain protocol to participate in network consensus and earn rewards. In Proof of Stake networks, stakers (validators) lock tokens as collateral to gain the right to validate transactions – earning newly issued tokens and transaction fees as compensation. For users who do not want to run validator infrastructure, delegated staking allows token holders to delegate their stake to validators who operate on their behalf, sharing in rewards. Staking rewards vary widely: Ethereum validators earn ~3-4% APR; Cosmos chains typically offer 10-20% APR; some newer chains offer higher rates to attract early capital. Staking is not risk-free: tokens may be slashed if the validator misbehaves; staked tokens often have unbonding periods (14-28 days on Cosmos chains) during which they cannot be sold; and validators who perform poorly earn suboptimal rewards. Liquid staking (via protocols like Lido or Rocket Pool) solves the illiquidity problem by issuing transferable tokens representing staked positions – stETH on Lido can be traded or used in DeFi while the underlying ETH remains staked.
Example: Example: A Cosmos (ATOM) holder with 1,000 ATOM delegates to a high-performing validator charging 5% commission. The network inflation provides 15% APR before commission. After the cut, the staker earns ~14.25% APR – 142.5 ATOM over a year, paid daily. During the 21-day unbonding period to unstake, tokens cannot be sold – planning is essential.
Learn more: Ethereum.org – Staking
