For crypto holders seeking passive income, staking has become an increasingly attractive option. It allows users to earn rewards from their digital assets—without selling or actively trading them. Think of staking as the crypto equivalent of a high-yield savings account. Instead of keeping coins idle in your wallet, you lock them into a blockchain protocol where they contribute to network operations. In return, you earn staking rewards, which often surpass traditional bank interest rates.
How Does Crypto Staking Work?
Staking is exclusive to blockchains that operate on the proof-of-stake (PoS) consensus mechanism, such as Ethereum 2.0, Solana, Tezos, Polkadot, and Algorand. When you stake your crypto, you effectively become a network participant or validator. The blockchain selects validators to propose and confirm new blocks, and the probability of selection increases with the amount of crypto you’ve staked. Unlike proof-of-work (PoW) systems that rely on energy-intensive mining, PoS allows block production without specialized hardware.
New blocks are essential for blockchain security and performance. They validate transactions, prevent double-spending, and deter attacks by distributing power among honest validators.
How Are Staking Rewards Calculated?
Reward structures vary by blockchain. Some networks offer a fixed percentage, while others use dynamic formulas based on:
• The amount you stake
• Duration of your stake
• Total amount staked on the network
• Inflation rate of the token
According to Staking Rewards, the average annual yield across 214 crypto assets is around 10.57%. However, this figure is subject to change based on market fluctuations. Also keep in mind that staking rewards are paid in the same token (or a related token), meaning your return also depends on the market value of that cryptocurrency.
What Is a Staking Pool?
If you don’t own enough tokens to qualify as an individual validator, you can join a staking pool. These pools aggregate the assets of multiple participants, boosting the group’s chances of earning rewards. Returns are then distributed proportionally based on each participant's contribution.
Benefits of Staking Crypto
• An easy way to generate passive income
• Contributes to blockchain decentralization and security
• No need for expensive mining equipment
Risks to Consider
Staking is not without downsides:
• Volatility: If the value of your staked coin drops, your earnings may be negated or result in a loss.
• Lock-up Periods: Most PoS networks require you to lock your coins for a set time. During this period, you can’t sell or move them.
• Unstaking Delays: Some protocols may take seven days or longer to release your assets after unstaking.
How to Start Staking
You’ll need to hold a PoS-compatible asset. Top choices include Ethereum (ETH), Cardano (ADA), Solana (SOL), Polkadot (DOT), and Tezos (XTZ). If you don’t already own one, you can buy them from exchanges like Coinbase, Binance, or Kraken, which also offer built-in staking features.
Alternatively, you can explore dedicated staking platforms like Everstake, BlockDaemon, or Figment, which often provide higher yields. However, each service has different terms, lock-up periods, and fees—so thorough research is essential before committing.
What About Monero (XMR)?
Monero operates on a proof-of-work (PoW) consensus, meaning it’s not eligible for staking within its native protocol. Although certain platforms like Coinloan, Binance, and OKX advertise XMR staking, it’s important to know that such offerings are not true PoS staking. They typically require users to give up control of their funds and complete full KYC verification—contradicting Monero’s privacy ethos.
Whether you’re staking or simply holding your XMR, it’s vital to keep it secure. The best way to do this is by using a non-custodial wallet that aligns with Monero’s privacy values. If you’re seeking a user-friendly, open-source, web-based Monero wallet, consider creating a free account with XMRWallet. It allows seamless, fast, and anonymous transactions—while giving you full control over your private keys.
