TL;DR: Crypto staking is like earning interest* on your digital coins. By “locking up” your cryptocurrency to support a blockchain network, you earn rewards in return.

Crypto Staking in Plain English

Think of staking as putting your crypto to work. Instead of just sitting in your wallet, staked coins help run and secure certain blockchains (like Ethereum). In return, you receive extra crypto—similar to earning interest on a savings account.

Definition: Staking means committing your cryptocurrency on a Proof-of-Stake network to help validate transactions and secure the chain. In return, the protocol may pay staking rewards (variable, not guaranteed).

Why Does Staking Exist?

Blockchains need a way to confirm transactions and keep the system trustworthy. In Proof of Stake networks:

• Validators are chosen at random but with odds proportional to the amount staked; poor performance or rule-breaking can lead to slashing (a penalty).

• The more coins staked, the higher the chance of being selected to validate a block.

• In return, validators receive rewards (extra crypto).

This replaces the energy-heavy process of “mining” used in Bitcoin’s Proof of Work system.

How Crypto Staking Works

1. You stake your coins → Lock up your crypto in a staking wallet or exchange platform.

2. Validators are chosen → The network picks validators based on their staked amount.

3. Transactions are confirmed → Validators verify transactions and add them to the blockchain.

4. Rewards are earned → Validators (and people who delegated coins to them) receive new tokens as a reward.

Benefits of Staking

• Earn passive income – You receive rewards simply by holding and staking your coins.

• Support the network – Your stake helps keep the blockchain secure and efficient.

• Eco-friendly alternative – Uses less energy than mining.

Risks of Staking

• Locked funds – Staked coins are often locked for a period; you can’t sell them instantly.

• Price volatility – Even if you earn staking rewards, if the coin’s market value drops, the total worth of your rewards (and your staked coins) will also decrease.

• Validator risks – If the validator misbehaves (e.g., goes offline), part of your stake could be “slashed” as a penalty.

• Technical issues or hacks – Because staking usually happens via online wallets, exchanges, or protocols, there is always a risk of software bugs, outages, or even hacking attacks that could lead to losses.

• Lack of regulation – Staking is currently an unregulated activity in EU/EAA. This means there is limited legal protection if something goes wrong, unlike with traditional savings accounts or regulated investments.

Common Terms Explained

• Proof of Stake (PoS): The consensus mechanism that powers staking.

• Delegated staking: Letting an exchange or pool stake your coins for you.

• APR (Annual Percentage Rate): The rate of return you can earn from staking.

• Slashing: A penalty when validators break the rules.

A Simple Analogy

Imagine a neighborhood watch program:

• You and your neighbors each contribute time (or money) to help keep the community safe.

• The more people participate, the safer the area.

• In return, participants get a small reward—like a community discount or recognition.

Staking works the same way: you “lock in” your crypto to support the blockchain community and receive rewards for helping.

Flexible Staking with bunq

One important thing to know is that not all staking works the same way.

• In many crypto networks, staking involves a lock-up period. Once your coins are staked, you can’t sell or move them until the lock-up ends (this can range from days to weeks, depending on the blockchain). That means you’re unable to react quickly if prices move.

• With bunq and Kraken, staking is flexible. You can withdraw or unstake at any time without waiting for a lock-up period to end. This gives you more control over your money while still letting you earn staking rewards.

This flexibility is useful if you want to keep access to your crypto, or simply avoid the commitment that traditional staking requires.

Quick FAQs

• What is crypto staking in one sentence?
  Staking is locking up crypto to support a blockchain and earn rewards.
  
  

• Do all cryptocurrencies allow staking?
  No—only those using Proof of Stake (e.g., Ethereum, Cardano, Solana).
  
  

• Is staking risk-free?
  No—you can lose value if the crypto price drops, or face penalties from validator issues.
  
  

• How do I start staking?
  Through wallets, exchanges, or staking pools that support your coin.

Final Thought

Crypto staking isn’t as intimidating as it sounds. At its core, it’s just a way to put your coins to work, support a network, and earn rewards. By understanding the basics, you can decide if staking fits into your crypto journey.

Ready to Try Crypto Staking?

With bunq, you can start investing in crypto with as little as €1. Explore staking, learn how it works, and grow your portfolio step by step.

👉 Check out bunq Crypto and download the bunq app today to begin your crypto journey.

Disclaimer: Crypto trading involves risk of loss. Spot trading provided by Payward Europe Solutions Limited t/a Kraken, authorised by the Central Bank of Ireland. Staking is unregulated and provided by Payward Commercial.

* Not investment advice. Crypto trading involves risk of loss. Crypto services are provided by Payward Europe Solutions Limited t/a Kraken, authorized by the Central Bank of Ireland.