Staking

Staking is how most modern blockchains secure themselves without burning electricity. Instead of miners competing to solve puzzles (as in Bitcoin’s proof of work), stakers lock up tokens as collateral. In exchange for pledging that collateral, they earn the right to validate transactions and receive a share of the network’s rewards.

The collateral is the key part. If a staker approves fraudulent transactions, goes offline, or misbehaves in other ways, a portion of their stake can be confiscated by the protocol (called “slashing”). This gives stakers a direct financial incentive to play by the rules. The bigger the stake, the bigger the penalty if they cheat, and the more the network can trust them.

Most staking on today’s networks is “delegated,” which means you don’t run a validator yourself. Instead you assign your tokens to an operator who runs the infrastructure and takes a small cut of the rewards. This makes staking accessible to anyone holding the token, not just people with the technical skills to operate a validator. NEAR, Ethereum, Solana, and nearly every modern Layer 1 use delegated staking.

Rewards come from two sources depending on the network: newly minted tokens (inflation-based rewards) or a share of transaction fees (fee-based rewards). Inflation-based rewards are predictable but dilute holders who don’t stake. Fee-based rewards scale with network usage, which rewards stakers when the chain is busy and punishes them when it’s quiet. Many networks use a mix of both.

A final subtlety: the “yield” advertised in staking APYs is nominal, not real. If the network has 5% inflation and you earn 5% staking yield, your purchasing power is unchanged. Real yield is the gap between your staking rewards and the inflation rate, which is why projects that cut emissions while maintaining staker rewards (such as NEAR’s October 2025 halving) are a positive signal for stakers even though the nominal APY went down.