How Does Crypto Staking Work?
Staking explained — Proof of Stake, liquid staking, what you earn, and the risks. Everything about ETH and SOL staking.
Staking is the process of locking up cryptocurrency to help validate transactions on a Proof of Stake blockchain. In return, stakers earn rewards — typically 3-8% APY depending on the network.
How Proof of Stake works
Bitcoin uses Proof of Work — miners compete to solve puzzles and earn rewards. Ethereum, Solana, and most modern blockchains use Proof of Stake. Validators are chosen to create new blocks based on how much they've staked. More stake = more chance to validate = more rewards.
What is liquid staking?
Traditional staking locks your ETH for a period. Liquid staking protocols like Lido (stETH), Rocket Pool (rETH), or Jito (jitoSOL) let you stake while keeping your funds liquid. You deposit ETH, receive stETH — a token that earns staking rewards and can be used elsewhere in DeFi.
- →No minimum requirement (Lido accepts any amount)
- →Instant liquidity — sell your stETH anytime
- →Earn staking rewards automatically
- →Can use stETH as collateral in Aave or Compound
- →Small fee charged by the protocol (Lido takes 10% of rewards)
Current staking yields
Ethereum staking currently yields approximately 3.5-4.5% APY — this comes from network transaction fees and protocol issuance. Solana staking yields approximately 6-7% APY. These rates change based on network activity and total staked amounts.
Staking risks
- →Slashing: validators can be penalized for misbehavior — liquid staking protocols guard against this
- →Smart contract risk on liquid staking protocols
- →Depeg risk: stETH can trade below ETH in extreme market conditions
- →Lock-up period on native staking (no liquid version)