// GLOSSARY -- DEFI

What is Staking?

1 min read Updated

Staking is the process of locking cryptocurrency to support blockchain operations — either validating PoS consensus or participating in protocol mechanisms — earning rewards in return.

WHY IT MATTERS

Staking serves double duty: it secures PoS blockchains (validators stake to participate in consensus) and it's used by DeFi protocols for various mechanisms (governance participation, liquidity bootstrapping, reward distribution).

The simplest form: stake ETH to run an Ethereum validator and earn ~4% APY. Liquid staking (Lido, Rocket Pool) makes this accessible without 32 ETH minimum or running infrastructure — deposit any amount and receive a liquid receipt token.

Staking yields come from: new token issuance (inflationary rewards), transaction fees, and MEV. The source matters — inflationary rewards dilute non-stakers, while fee-based rewards reflect real economic activity.

FREQUENTLY ASKED QUESTIONS

What's the difference between staking and lending?
Staking locks tokens to support protocol operations (consensus, governance). Lending supplies tokens to borrowers for interest. Different mechanisms, both earn yield.
Can staked tokens be lost?
Validator staking: yes, through slashing (penalty for misbehavior). DeFi staking: smart contract risk. Liquid staking: depeg risk of the receipt token.
What is liquid staking?
Staking that gives you a tradeable receipt token (stETH, rETH). You earn staking rewards while the receipt token remains liquid and usable in DeFi.

FURTHER READING

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