What crypto staking is
Staking means locking coins on a Proof-of-Stake blockchain so they can be used to validate transactions. In return the network pays out newly issued coins and a share of transaction fees. That is the whole mechanism. Everything else, from exchange staking programmes to liquid staking tokens, is a wrapper around it.
The word gets used loosely. Exchanges call fixed-term deposit products "staking", DeFi protocols call liquidity mining "staking", and some projects call any lock-up "staking". This guide is about the real thing: putting coins at stake to secure a network. How Proof of Stake compares with mining is covered in the PoW vs PoS guide; here we look at what staking means for you as a holder, in practice.
Some numbers to anchor it: more than a third of all ETH is staked as of September 2026, about 43 million coins spread over roughly 1.35 million validator slots. On Solana, Cardano and Cosmos the staked share is higher still, typically 60 to 70 percent. Staking is not a niche. It is what most holders of these coins do with them.
Where staking rewards actually come from
Staking rewards are not interest. Nobody borrows your coins and pays you for the privilege. The reward has two sources:
- Issuance. The protocol mints new coins and hands them to validators for doing their job. This is inflation, distributed to those who stake. If a third of a network stakes and shares 100 percent of the new issuance, stakers gain relative to non-stakers, who are diluted.
- Fees and tips. Users pay to have transactions included. On Ethereum, priority fees and MEV (the value validators extract from ordering transactions) go to the validator who proposes the block. This part depends on how busy the chain is.
Two consequences follow. First, the rate is variable and falls as more people stake. On Ethereum the mechanism is written into the protocol: total issuance grows with the square root of the total stake, so the pot does get bigger as validators join, but the base reward per validator shrinks by the same square root, and fees and MEV on top of it swing with network activity. Ethereum's rate has drifted from around 5 percent in 2022 to roughly 2.5 to 3 percent in 2026 for exactly this reason. Second, the reward is paid in the coin. A 4 percent reward on a coin that loses 40 percent of its dollar value in the same year is a loss in euros. Staking does not protect you from price.
Three ways to stake, and who holds the keys
The method you pick decides who controls the coins, what you can lose and how fast you get out.
| Native (own validator or delegation) | Exchange staking | Liquid staking | |
|---|---|---|---|
| Who holds the coins | You (your wallet) | The exchange | A smart contract |
| Minimum | 32 ETH for an Ethereum validator; often none for delegation on SOL, ADA, ATOM, DOT | Usually none | Usually none |
| Exit | Protocol unbonding period | Exchange terms; sometimes instant, sometimes a fixed lock | Sell the token any time, or redeem via protocol queue |
| Extra risk | Your own uptime and key management | Exchange insolvency, regulatory shutdown | Smart contract bugs, token trading below the coin |
| Fee | Validator commission (delegation), or none | Typically 10 to 25 % of rewards | Typically 10 % of rewards |
Native staking and delegation
Running your own Ethereum validator needs 32 ETH, a machine that is online around the clock and someone who knows what they are doing. Most people do not do this. On chains built for delegation (Solana, Cardano, Cosmos, Polkadot, Avalanche) you keep the coins in your own wallet and point them at a validator who does the work. The validator takes a commission, typically 5 to 10 percent of your rewards. Your coins never leave your address. This is the version with the fewest middlemen.
Exchange staking
You send coins to an exchange, click "stake", and the exchange runs validators on its own infrastructure. Convenient, and it hides all the complexity. It also means the exchange holds your coins. In February 2023 the US SEC charged Kraken over its staking-as-a-service programme; Kraken paid 30 million dollars and shut the product for US customers. Whatever you think of the case, it shows the risk: a third party between you and the protocol can be forced to change the terms. Read what the exchange actually promises: some pass through protocol rewards minus a fee, others pay a fixed rate from their own pocket and do whatever they like with your coins in between. Those are different products with the same name.
Liquid staking
You deposit ETH into a protocol such as Lido or Rocket Pool and receive a token (stETH, rETH) that represents your staked position and accrues rewards. You can trade or lend that token while the underlying ETH stays staked. The two big ones account for rewards differently. stETH is a rebasing token: your balance grows every day and one stETH is meant to be redeemable for one ETH. rETH is an exchange-rate token: your balance stays fixed and each rETH is redeemable for a growing amount of ETH; Rocket Pool's own documentation uses 1 rETH = 1.25 ETH as its worked example. Liquid staking solves the lock-up problem and created a new one: the token is only worth its redemption value if the market agrees. In June 2022, when Celsius and Three Arrows Capital were forced to sell, stETH traded as low as 0.93 ETH against a one-ETH claim. It recovered, and since Ethereum enabled withdrawals in 2023 the redemption path keeps such gaps small. But a liquid staking token is a claim, and claims can trade below what they are redeemable for when everyone wants out at once, whichever accounting model they use. Lido alone holds about a fifth of all staked ETH (down from over 30 percent in 2023), which also raises a concentration question for the network that has nothing to do with your personal risk but gets debated constantly.
Lock-ups and unbonding: how fast can you get out?
Most Proof-of-Stake networks put a delay between the moment you ask for your coins back and the moment they are spendable: the unbonding period. What happens inside that window differs by network more than most guides admit. Cardano has no lock at all; delegated ADA stays spendable. Cosmos and Polkadot (about two days for nominators since July 2026) have a fixed wait during which the coins earn nothing. Ethereum is the odd one: a validator in the exit queue keeps its duties and keeps earning until its exit epoch, and only after that does a roughly 27-hour withdrawability delay begin, followed by the automatic sweep that actually moves the ETH out. The table gives the headline numbers as of September 2026.
| Network | Unbonding | Note |
|---|---|---|
| Ethereum | Variable: exit queue, then about 27 hours, then the sweep | Rewards continue while the validator waits in the queue. The queue length depends on how many validators are leaving; in summer 2025 it exceeded 40 days. |
| Solana | Until the end of the current epoch, about 2 to 3 days | |
| Cosmos (ATOM) | 21 days | No rewards during unbonding. |
| Polkadot | About 2 days for nominators | Since referendum 1910 (6 July 2026): 2 eras, a maximum of two days. Was 28 days before; requests started before the upgrade ran out on the old 28-day schedule. Nominators are no longer slashable. |
| Cardano | None | Delegated ADA stays spendable; rewards arrive with a delay of a few epochs. |
The Ethereum exit queue deserves a closer look because people are surprised by it. The protocol limits how many validators can leave per epoch, so when many exit at once, a queue forms. In July 2025 it went from under an hour to more than eight days within a week, and later that year the wait passed 40 days. The queue is not dead time in the Cosmos sense, since the validator still earns and can still be penalised while it waits, but the ETH is just as unavailable. If you might need the money on short notice, that is the number to plan around, not the advertised reward rate.
Slashing and other penalties
Slashing is the protocol destroying part of a validator's stake for provable misbehaviour: signing two conflicting blocks, or voting for two conflicting versions of history. It is designed to make attacks expensive. It is not designed to punish honest mistakes, and in practice it is rare: fewer than 500 Ethereum validators out of more than a million have ever been slashed, almost all of them because of misconfigured setups running the same key on two machines.
The penalty on Ethereum: an initial cut of the validator's balance (since the Pectra upgrade in May 2025, 1/4096 of the effective balance, about 0.008 ETH on a 32 ETH validator, down from 1 ETH before), a forced exit, and a correlation penalty that scales with how many other validators were slashed around the same time. A lone misconfigured validator loses little. A large operator whose whole fleet misbehaves simultaneously can lose most of it, which is the point.
More relevant for most stakers are inactivity penalties: a validator that is offline slowly bleeds a small amount, roughly what it would have earned while online. Not dramatic, but it is why validator uptime matters when you pick a delegation target. Not every network slashes at all: Solana's protocol has no automatic slashing in force as of 2026; the consequence of a bad validator there is missed rewards, not lost stake. Cosmos slashes 5 percent for double-signing and 0.01 percent for extended downtime. If you delegate, you usually share in the penalty; Polkadot is the exception since July 2026, where only the validator's own stake can be slashed. Check a validator's history before you commit.
The risks, in plain terms
- Price risk. The biggest one by far. Rewards are paid in a volatile asset. A staking reward will not offset a bear market.
- Liquidity risk. Unbonding periods and exit queues. You cannot react to news with staked coins.
- Counterparty risk. Exchange staking puts your coins in someone else's custody. Celsius paid staking-style yields until it froze withdrawals in June 2022 and filed for bankruptcy a month later.
- Smart contract risk. Liquid staking protocols are code. Audits reduce the risk; they do not remove it.
- Depeg risk. A liquid staking token can trade below the coin it represents, especially when you most need to sell.
- Slashing and downtime. Small on most networks, but real, and shared with your validator.
- Tax. In Germany, staking rewards are taxable income at the moment you receive them, valued at that day's price, with a 256 euro exemption limit per year for this category. Selling them later is a second taxable event. Details in the German crypto tax guide.
How to estimate what staking would pay
The maths is simple: amount × rate × time, compounded if rewards are automatically re-staked (Solana and Cardano do this by default; Ethereum validators do since Pectra if they opt into the new balance type). 10 ETH at 3 percent is 0.3 ETH a year before commission. The CoinVett staking calculator does this for nine PoS coins with editable rates and shows simple versus compound over 30 days to three years. Treat the default rates as a starting point and overwrite them with what your validator or platform actually shows, after fees. The calculator holds the coin price constant; reality will not.
Frequently asked questions
Is staking passive income?
Not in the sense the phrase usually carries. What arrives is a variable protocol reward, paid in a coin whose price moves, for coins that are locked or queued while they earn. Nothing about it is fixed: the rate changes with how many others stake, the network can cut it, and a bad validator or a failed exchange can turn it negative. It is closer to a dividend paid in company shares than to a savings account, and the rewards are taxable income the moment they arrive.
Can I lose coins by staking?
Through slashing or downtime penalties, yes, though on most networks the amounts are small and rare. Through an exchange that fails, yes, and then it is all of it. Through a liquid staking token that trades at a discount, you lose if you sell during the discount. The largest loss in practice comes from the coin's price, which staking does not touch.
Are staking rewards taxed in Germany?
Yes. Rewards count as other income at the market value on the day they arrive, with a 256 euro exemption limit per year for this category (an exemption limit, not an allowance: exceed it and the whole amount is taxable). The Federal Ministry of Finance letter of 6 March 2025 is the current reference. Ask a tax adviser for your case.
Which coins can be staked?
Any coin on a Proof-of-Stake network: ETH, SOL, ADA, DOT, AVAX, ATOM, NEAR, TON, SUI and many more. Bitcoin cannot be staked; it is Proof of Work. Anything offering "Bitcoin staking" is either lending, a wrapped-token scheme or something else wearing the word.
Notice: Staking rewards are variable, paid in the staked coin and not guaranteed. This page describes how the mechanism works; it is not investment advice.