Introduction to Crypto Staking

Explaining how a crypto holder can earn rewards on their assets

Rishi Sidhu
Chorus One
Published in
11 min readMay 28, 2021

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Overview

What is Staking?

Your crypto-assets earn while you sleep!

Staking is an umbrella term used to denote the act of pledging your crypto-assets to a cryptocurrency protocol to earn rewards in exchange. Staking allows users to participate in securing the network by locking up tokens. Consequently, users are rewarded for securing the network in the form of native tokens.

The higher the amount of crypto-assets you pledge, the higher the rewards you receive. The rewards are distributed on-chain, which means the process of earning these rewards is completely automatic. All you have to do is to stake them. This means your crypto-assets earn while you sleep!

Simplified Staking

Where do these rewards come from?

Every time a block is validated new tokens of that currency are minted and distributed as staking rewards

Proof-of-stake (PoS) assets like Solana, Tezos, etc let you earn rewards on your staked assets. There are two types of rewards that get distributed

  1. Staking rewards/inflationary rewards
  2. Transaction fees

Note: I use the terms protocol, network, and cryptocurrency interchangeably. They mean slightly different things but convey the same logical concept

Staking rewards — You stake your crypto-assets with a PoS node (a server running the protocol stack) to validate a block of transactions. If the node you have delegated to successfully signs or attests to blocks, you receive staking rewards — thereby increasing your net crypto-assets. In case your node is unresponsive or malign (double-signing), a portion of the node’s assets, and hence your assets, can get slashed or destroyed.

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Rishi Sidhu
Chorus One

Blockchain | Machine Learning | Product Management