Staking is the process of locking up cryptocurrency to support blockchain operations (like validating transactions) in exchange for rewards. It's primarily used in Proof-of-Stake (PoS) blockchains as an alternative to energy-intensive mining. Stakers help secure the network and earn passive income, similar to earning interest in a savings account.

Staking rewards vary by blockchain and can range from 4-20% annual percentage yield (APY). The more you stake, the higher your chances of being selected to validate blocks and earn rewards. However, staked assets are typically locked for a period and subject to slashing penalties if validators behave maliciously.

Key Characteristics of Staking

  • Passive Income: Earn rewards for helping secure the blockchain
  • Proof of Stake: Alternative to energy-intensive mining
  • Lock-Up Periods: Staked assets may be inaccessible for days/weeks
  • Slashing Risk: Validators can lose staked assets if they act maliciously
  • Delegated Staking: Can delegate your stake to validators without running a node

Real-World Example

Staking 32 ETH on Ethereum 2.0 makes you a validator, earning approximately 4-7% APY in ETH rewards. Alternatively, you can stake smaller amounts on exchanges like Coinbase, which handles validation for you (for a fee).

Understanding Staking is easier when you're familiar with these related concepts:

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