Staking

Staking means committing cryptocurrency to a network and receiving rewards in return. It resembles deposit interest but works on an entirely different principle.

Blockchains need participants to validate transactions, and those who stake coins take that role. Validation rights scale with the amount staked, and honest validation earns newly issued coins as a reward.

Staked coins are locked for a period. Unstaking often takes days or weeks, during which you cannot sell even if the price collapses — the most practical risk involved.

A high reward rate is not automatically a gain. Earning 10% a year while the coin falls 30% is a loss. Rewards are paid in the coin, so the outcome rests on that coin's value.

Staking through an exchange is convenient but adds exchange risk. If the exchange fails, the staked coins may be unrecoverable. Convenience and risk have to be weighed together. There are also penalties that slash part of your stake for faulty validation. If the validator you delegated to misbehaves, you are affected too.