{"id":70767,"date":"2023-12-27T18:00:17","date_gmt":"2023-12-27T10:00:17","guid":{"rendered":"https:\/\/www.hongkiat.com\/blog\/?p=70767"},"modified":"2023-12-28T17:06:42","modified_gmt":"2023-12-28T09:06:42","slug":"staking-crypto","status":"publish","type":"post","link":"https:\/\/www.hongkiat.com\/blog\/staking-crypto\/","title":{"rendered":"Staking Crypto, Explained Like I’m Five"},"content":{"rendered":"

Imagine a piggy bank that doesn\u2019t just store your coins but also helps make more of them. That\u2019s similar to \u201ccrypto staking.\u201d<\/p>\n

\"Staking<\/figure>\n

When crypto holders place their digital assets into a special pot<\/em>, over time, they receive extra coins. So, if you have some crypto lying around sitting idle, you might want to consider staking them to help the network and earn some extra money along the way.<\/p>\n

But first, let\u2019s understand staking a little bit more\u2026<\/p>\n

What is Staking?<\/h2>\n

Staking, in simple terms, means committing to hold onto a certain type of crypto and earning in the process. When you stake a specific cryptocurrency, it will be \u201clocked\u201d for a certain period of time, during which you\u2019ll earn rewards based on the APY (Annual Percentage Yield).<\/p>\n

For example, if a cryptocurrency has an APY of 2%, and you stake $1000 worth of that crypto, you would earn $20 by just staking it and doing nothing. However, it\u2019s important to note that APYs are indicative and not guaranteed, and may vary over time.<\/p>\n

Why Would I Earn Rewards from Staking?<\/h2>\n

The reason your crypto earns rewards while staked is that the blockchain puts it to work. Cryptocurrencies that allow staking use a \u201cconsensus mechanism\u201d called Proof of Stake<\/a>.<\/p>\n

This mechanism is how they ensure that all transactions are verified and secured without needing a bank or payment processor in the middle.<\/p>\n

When you choose to stake your crypto, it becomes part of that verification process.<\/p>\n

What Crypto Can I Stake?<\/h2>\n

The currently commonly known cryptocurrencies that can be staked are Ethereum, Tezos, Cosmos, Solana, and Cardano. However, note that their APYs vary, and the cryptos that can be staked also differ according to the platform.<\/p>\n

Check out our post on cryptos with the best staking rewards<\/a> to find out more.<\/p>\n

Who\u2019s Eligible to Stake?<\/h2>\n

Eligibility largely depends on two factors: the platform<\/em> you are using and your region<\/em>.<\/p>\n

As long as you have the crypto that supports staking with the platform you are using and your account is verified, you are generally allowed to stake. However, it also depends on rules and regulations of specific regions.<\/p>\n

For example, in the United States, according to Coinbase, residents of Hawaii and New Jersey are unable to stake their coins.<\/p>\n

Click here<\/a> for more information.<\/p>\n

What Happens When My Crypto is Staked?<\/h2>\n

When you stake crypto, let\u2019s take ETH for example, you are committing your digital assets to support a blockchain network and confirm transactions. The ETH will be locked up and used to validate transactions on the network.<\/p>\n

While staked, you typically cannot use these assets for other purposes. As a reward for staking crypto, stakers receive rewards, usually in the form of additional coins or transaction fees. The reward is often proportional to the amount staked and the length of time it\u2019s staked.<\/p>\n

Are There Fees Involved?<\/h2>\n

There\u2019s generally no platform fee when you stake (or unstake) crypto, but you\u2019ll have to pay a network fee which is paid to the Ethereum network to process your transaction.<\/p>\n

Platforms, in general, also charge an earnings fee on the rewards earned from staking. For example, Binance charges 20%, and Coinbase charges around 25%.<\/p>\n

Here are some platforms and information about their staking fees:<\/p>\n