Glossary
What is staking?
In one sentence
Staking means locking up coins to help secure a proof-of-stake network, earning a reward in return — with real risks behind the advertised yield.
On a proof-of-stake chain, staking is how the network is secured. You commit coins as collateral, the protocol uses your stake to weight your role in validating, and you receive newly issued coins as a reward.
The advertised percentage is not a savings rate, and treating it as one is the most common mistake. Consider what it actually involves:
- Price risk. Rewards are paid in the same coin you staked. A 5% yield is meaningless if the coin falls 40%.
- Lock-up. Many arrangements prevent withdrawal for a period. You may be unable to sell during exactly the fall you would want to exit.
- Slashing. Validator misbehaviour or downtime can destroy part of the stake, including when you have delegated to someone else.
- Counterparty risk. Staking through a platform means trusting that platform, which is a different risk from staking directly.
Yields well above what the protocol itself pays are coming from somewhere else — usually token emissions or someone else’s deposits. Ask where, and be sceptical of the answer.
For example
A "12% APY" staking product is not a 12% return; it is 12% more of an asset whose price can halve.