Staking 101: A Beginner’s Guide to the DeFi Concept of Staking

“Staking” — You’ve heard the term, but what is it?

Decentralized Finance (DeFi) has been gaining a lot of attention in the crypto space, and for good reason. It allows for a decentralized and transparent way of managing and investing in financial assets, without the need for intermediaries. One of the ways to participate in the DeFi space is through staking. In this article, we will explore what staking is, how it works, and the benefits and risks associated with it.

What is Staking?

Staking refers to the process of holding and locking up a certain amount of tokens in order to support the security and stability of a blockchain network. Similar to how a bank pays interest on deposits, many blockchain networks also offer rewards to stakers in the form of newly minted coins or a share of transaction fees.

An example of a staking platform is Ethereum 2.0, an upgrade to the current Ethereum network that utilizes a proof-of-stake consensus mechanism. To participate in staking on Ethereum 2.0, one must hold and lock up a certain amount of ETH in a validator node. In return for staking their ETH, stakers earn a share of the block rewards.

How does Staking work? Staking works by participating in the consensus mechanism of a blockchain network. In…