Short answer. Staking is how proof of stake blockchains are secured: holders lock up coins to help validate transactions and earn rewards in return. Rewards come from new coins and transaction fees. You can stake directly, through an exchange, or with a liquid staking token, and each route has different risks, lock-ups and fees.
Last updated 30 October 2026
By participating in decentralised networks, trust must be established despite participants being geographically dispersed and unknown to one another. Employing consensus mechanisms to record transactions on a public ledger can achieve this.
The computational-heavy and electricity-intensive nature of blockchains that use proof of work (PoW) as their consensus mechanism, most notably the Bitcoin blockchain, has led to other blockchains using proof of stake (PoS) and delegated proof of stake (DPoS).
Read: Proof of Work vs Proof of Stake
What Is Staking?
PoS involves tokens being withheld on a blockchain to validate transactions, therefore supporting the security and operations of a blockchain.
“The digital assets (coin/tokens) serve as security collateral in crypto networks.”
Stakers help secure and operate a PoS blockchain by staking assets on-chain via a node. (A node is a participant in a blockchain network that communicates with other nodes to ensure its security and integrity.)
Block validators are randomly selected to append a new block to the blockchain. Generally speaking, the more tokens staked, the greater the chance that they are selected to validate new blocks.
Stakers are compensated in native token-denominated rewards. For example, Ethereum stakers are rewarded in ETH for helping to validate the network. They are financially incentivised to stake because if they did not, then their holdings would dilute due to new tokens constantly adding to supply.
Different blockchains refer to stakers in different ways. They are called validators in Cosmos and Ethereum, bakers in Tezos, and block producers in EOS, among others.
What Are Staking Rewards?
Newly minted tokens are rewarded to validators for the creation of new blocks. Total circulating support increased with each token minted.
In this way, block rewards are not derived from the earnings of the blockchain, but more so from increasing token supply. This token supply inflation mechanism has the potential to dilute investors and is a short-term mechanism to grow a nascent blockchain into a thriving ecosystem. Staking returns are a type of seigniorage that accrues to stakers via inflation in the coin supply.
Block rewards depend on each blockchain and what factors they take into account. For example, a blockchain may consider the staking amount (asset-weighted), duration of staking (time-weighted), and inflation rate. Rewards can be fixed or variable, and can be denominated in the blockchain’s native token or a secondary token.
Other forms of rewards validators can earn include gas or transaction fees, network taxes and seigniorage rewards based on the current token price and the cost of minting and distributing a newly minted asset.
How to Stake
To stake, token holders either send tokens to a certain smart contract address or hold their tokens in a certain wallet. However, there are many choices in tokens to stake and unique rules of staking for each blockchain.
For example, staking can be seen as a savings account from a bank that also helps secure the bank as collateral.
Centralised exchanges (CEXes) offer staking services where investors are typically required to deposit tokens into a ‘vault’ or simply hold the tokens on the exchange.
Staking service providers operate ‘staking pools’ and provide ‘staking-as-a-service’ by running nodes for decentralised PoS protocols on behalf of investors, ensuring investors can participate in the security (and yield) of the network without the time and technical demands of running a node.
By pooling funds, this increases the chance it is selected for transaction validation. This is because the probability of your node being selected to create the next block is proportional to the size of the node’s stake relative to the total amount staked in the network. Staker service providers charge a service fee.
Read: Ultimate Guide To Staking Cryptocurrency
Staking Practises
Self-custody staking using a Web3 wallet like Ledger enables token holders to receive staking rewards while simply holding the tokens in their wallet.
Operating a validator node and staking tokens on their own node is an option for the technically competent and time-committed.
Governance staking involves locking your tokens into the governance vault of a given organisation, or holding your tokens and using them to vote on improvement proposals. Because one vote typically equals one vote, large token holders have a disproportionate influence on the organisation’s direction, relative to if one address equalled one vote.
Risks of Staking
Whilst staking can be likened to depositing assets into a bank savings account, the additional duties required of a validator are more stringent than that of a bank depositor.
Operationally, if the validator exhibits bad behaviour or fails to participate in governance, they are punished, typically through slashing the amount of staked tokens, which in some instances can also punish delegated stakers through loss of funds.
Counterparty risk arises if investors delegate their tokens to a staking service and therefore delegate control of their tokens. This act exposes investors to the risk that service providers may default on the required payment of a validator, who may also be uninsured or unincorporated, leaving the investor with little recourse. Selection of a competent and trustworthy validator is essential.
Stakers and delegators are exposed to the risks of maintaining a long-term position in volatile and highly fluctuating assets. Staking rewards, therefore, provide incentives to keep long-term interest in ownership of the blockchain’s token despite this volatility.
The yield % rewarded through staking should consistently be compared to yields investors can realise by lending that same token in the open market. If on-chain lending rates are consistently higher than the rates of on-chain staking, funds may move from staking to lending and thereby decreasing network security. Block rewards need to be calibrated above on-chain lending rates to ensure PoS network security.
Staking in 2026: what to check
The basics in this guide still apply. In October 2026, the Research Hub recorded a record 43.8 million ETH staked on Ethereum. It also recorded two reminders that staking carries operational risk: MetaMask’s staking business took its Ethereum validators offline after a security incident in its infrastructure (it said wallets were not affected), and Solflare’s staking validator stopped producing rewards after its third-party node provider reported a security problem.
In both cases the stake was not lost, but rewards were interrupted while validators were moved. Spreading stake across reputable providers and understanding lock-up and exit times helps you handle events like these calmly.
- Check the lock-up and unbonding period before you stake.
- Understand who runs the validator: you, an exchange, or a third party.
- Compare providers on a site such as Staking Rewards.
- Watch for slashing and smart contract risk with DeFi staking.
- Keep records of rewards for tax.
Watch: Ben Simpson on this topic
Key takeaway: Ben explains realistic ways to earn income on crypto, including staking on proof of stake networks, and the risks to understand first.
How Collective Shift explains staking rewards
The Collective Shift lesson on where crypto yield comes from (March 2026) explains that proof of stake networks pay rewards to those who help secure them, which is why staking is one of the more understandable sources of yield. The team asks members to know where any yield comes from before chasing it.
The Knowledge Hub lists Staking Rewards as a site members use to compare staking providers and rates across many assets before depositing.
- Rewards come from securing the network.
- Each route has different risks.
- Check exit times.
“What does earn a yield? Proof-of-stake chains earn a yield.”
Collective Shift lesson Where Crypto Yield Actually Comes From (March 2026)
Where this guide comes from
This guide is written and reviewed by the Collective Shift research team. Collective Shift is a crypto research and education company founded in 2020 in Melbourne, and a research and education partner to Coinbase, Swyftx and CoinSpot. Sources used in this update:
- Video: How To Earn Income On Your Crypto (Without Getting Wrecked), Ben Simpson on YouTube (2026-04-06)
- Collective Shift Knowledge Hub: Lesson: Where Crypto Yield Actually Comes From (5 Mar 2026) (ref e196c961)
- Collective Shift Knowledge Hub: Research Hub: Ethereum staking reaches record 43.8 million ETH (21 Oct 2026) (ref 5c5d4e24), original source: thedefiant.io
- Collective Shift Knowledge Hub: Research Hub: MetaMask pulls Ethereum validators after security incident, Decrypt (2 Oct 2026) (ref 052530f1), original source: decrypt.co
- Collective Shift Knowledge Hub: Research Hub: Solflare plans validator migration after node provider reports security issue, Unchained (29 Oct 2026) (ref 93aec424), original source: unchainedcrypto.com
- Collective Shift Knowledge Hub: Knowledge Hub tool profile: Staking Rewards (May 2026) (ref 5664af82), original source: www.stakingrewards.com
Last updated 30 October 2026. General information only, not financial advice. Consider your own circumstances and seek professional advice before making investment decisions.
Frequently Asked Questions
Where do staking rewards come from?
They come from newly issued coins and transaction fees paid to those who help secure a proof of stake network.
Is staking on an exchange different from staking myself?
Yes. On an exchange, the exchange runs the validator and holds your coins. Staking yourself or through a wallet keeps you in control but needs more care.
Where can I learn more about yield?
The Collective Shift Accelerator membership is a 12-month guided program that starts with 4 live weeks and covers staking, yield and risk management. More free guides are on Collective Shift Insights.