What Is Staking?
Staking is the process of locking cryptocurrency in a proof-of-stake blockchain to help validate transactions and secure the network. In return, stakers earn rewards — typically 3-15% APY depending on the network. It's analogous to earning interest in traditional finance, but with the added purpose of network security.
How Staking Works
You delegate or deposit your tokens with a validator node (or run your own). The network selects validators to propose and confirm blocks based on stake size and other factors. Validators earn block rewards and transaction fees, which are distributed proportionally to stakers. Most staking requires a lock-up period (unbonding period) during which you can't access your tokens.
Liquid staking (Lido, Rocket Pool) solves this by issuing derivative tokens (stETH, rETH) that represent your staked position, allowing you to use the staked value in DeFi while still earning rewards.
Why It Matters for Traders
Staking affects token economics directly: staked tokens are removed from circulating supply, reducing sell pressure. High staking ratios indicate network confidence. For yield-seeking traders, staking provides baseline return that compounds over time, and liquid staking derivatives enable leveraged staking strategies.