What Is Staking in Crypto? How Proof-of-Stake Rewards, Risks and Lock-Ups Work

Staking is committing a proof-of-stake network's coins to a validator to help secure the chain, in return for rewards paid in that coin and a risk of penalty.

Proof-of-stake networks such as Ethereum and Solana do not use miners. They rely on validators who put up the network's own coin as collateral, and staking is how coins are put to that use, either by running a validator or by handing coins to one. This page covers how proof of stake uses staked coins, where the rewards come from, the risks and lock-up rules, the main ways to stake, a worked example from a US fund's SEC filing, how US regulators have described staking, and what Kresmion does and does not show about it. It is descriptive throughout.

How proof of stake uses staked coins

A blockchain needs a way to decide who adds the next block and to make cheating expensive. Bitcoin does this with mining, where the cost is computing power and electricity (see what Bitcoin is). Proof of stake makes the cost the coins themselves: validators lock up coins, take turns proposing blocks, and vote on whether other validators' blocks follow the rules.

On Ethereum, time is cut into 12-second slots, and in each slot one validator is picked at random to propose a block while others attest to it. ethereum.org puts the security logic plainly: an attacker would need to control the majority of all staked ETH to threaten the network (the same site's proof-of-stake page adds that finalizing blocks, the step after which they cannot change without a large amount of ETH being burned, needs the agreement of two thirds of staked ETH, so a group holding more than a third could stop blocks being finalized). The more coins staked by independent validators, the more an attacker would have to acquire.

Where the rewards come from

Rewards are paid in the network's own coin, not in dollars. On Ethereum they come from two places, as ethereum.org describes them: new ETH the protocol issues to validators for proposing and attesting, and income from transactions, namely the tips users add to their fees and other income tied to the order of transactions in a block, which is ETH already in circulation rather than new issuance. How much a staker earns therefore moves with the number of validators sharing the rewards and with how busy the network is.

On 1 October 2026 the staking page of ethereum.org displayed about 43.7 million ETH staked, 35 percent of all ETH, and a current annual rate of 2.5 percent. That rate changes as its inputs change, and a staker's result in dollars also depends on the price of the coin, which staking does nothing to protect.

The risks and the lock-up

• Penalties and slashing on Ethereum. ethereum.org describes two levels. A validator that goes offline misses rewards and loses small amounts of ETH in normal conditions, more if the chain stops finalizing blocks. One that provably misbehaves, for example by signing two conflicting blocks, is slashed: part of its stake is destroyed and it is forcibly removed from the network. On Solana, the Solana website says, slashing is not automatic.
• Waiting to get out. Staked coins are not instantly spendable. On Ethereum, a validator that wants to stop staking submits an exit and waits for its place in a withdrawal queue that lengthens with demand; withdrawals of staked ETH only became possible with the Shanghai and Capella upgrade of 12 April 2023. On Solana, the Solana website explains, stake activates and deactivates only at the start of a new epoch, about two days long, so delegated coins spend time "activating" or "cooling down."
• The middleman. Staking through an exchange or a service adds that firm's risk on top of the network's. In February 2023 the SEC charged the Kraken exchange over its staking program, which it said advertised annual returns of as much as 21 percent; to settle, Kraken agreed to stop offering or selling securities through staking services or programs and to pay $30 million.
• Pool and token risk. Liquid staking (below) adds the risk of the smart contracts, governance and operators behind the pool, and ethereum.org notes the token can trade below the value of the ETH backing it, so selling at a discount may be the only fast exit.

Ways to stake

• Solo staking. Running one's own Ethereum validator needs at least 32 ETH, and since the Pectra upgrade of 7 May 2025 one validator set up for compounding can hold up to 2,048 ETH. The staker keeps full control and does all the work.
• Staking as a service. A company runs the validator for a fee while the staker supplies the ETH. ethereum.org notes that the withdrawal keys are often kept by the staker, and that since Pectra a staker can exit the validator without the operator's cooperation.
• Pooled and liquid staking. Smaller amounts can be pooled. Many pools hand back a receipt token, a liquid staking token, that represents the staked ETH and can be traded or used elsewhere. ethereum.org points out that the protocol does not know the token exists: the holder of the token is not a staker in the protocol's eyes but holds a claim on the pool that stakes for them.
• Delegation on Solana. Solana holders assign their tokens to a validator's stake, which the Solana website calls delegating, and it notes that delegating does not give the validator ownership or control of the tokens.
• Exchange staking. An exchange stakes customers' coins for them, with the custody risk described above.

A worked example: a US fund that stakes

The iShares Staked Ethereum Trust ETF (ticker ETHB) is a US exchange-traded fund that, according to its registration statement filed with the SEC, seeks to reflect the performance of the price of ETH and rewards from staking a portion of the ETH it holds. Its quarterly report for the period ended 30 June 2026 gives a dated look at how staking works in practice:

The fund's prospectus says it seeks to stake 70 to 95 percent of its ETH under normal market conditions and keeps a reserve of unstaked ETH, which it calls the Liquidity Sleeve, to meet expected redemptions while the rest is staked. The quarterly report states that the fund keeps control of its ETH throughout staking and that delegating it to a validator is not treated as a sale or transfer in its accounts, and that staking rewards after fees are intended to be distributed monthly but no less often than quarterly. Kresmion's free research page for ETHB lists the fund's SEC filings, including this quarterly report, and the Form 13F positions reported in it by the institutional managers Kresmion tracks.

How US regulators have described staking

On 29 May 2025 the SEC's Division of Corporation Finance published a statement giving its view that "Protocol Staking Activities," as it defined them, do not involve the offer and sale of securities. The statement says it represents the views of the staff, is not a rule or a statement of the Commission, and has no legal force or effect. The Kraken case above was settled more than two years before that statement. Rules in other countries differ, and this page does not cover them.

What Kresmion shows, and what it does not

Kresmion does not track staking rates, the amount staked, validator counts or withdrawal queues, and has no dedicated page or price history for liquid staking tokens. The closest things it does show:

• Fund filings. The research pages for spot Ethereum funds, such as ETHB and ETHA, list each fund's SEC filings and reported institutional holders.
• Liquid staking trading volume. The Ethereum DEX desk, which opens with a free account, splits 24-hour decentralized exchange volume into stablecoins, liquid staking tokens (stETH, rETH, cbETH and others) and the rest.
• Solana exchange flows. The free exchange flow page counts SOL, USDC and USDT moving into and out of the Solana wallets of tracked exchanges over seven days, in transfers of $100,000 or more. It does not count liquid staking tokens such as mSOL or jitoSOL.
• Funding rates, a different kind of payment. Kresmion's crypto derivatives pages, which open with a free account, show funding on perpetual futures. Funding is a payment between traders on the two sides of a contract, not a reward from the protocol (see what a perpetual futures contract is).

Honest limitations

The staking totals and the 2.5 percent rate are figures displayed by a third-party website on one date, and they change continuously. The fund example describes one fund on one reporting date; other funds, pools and exchanges stake different shares of their holdings on different terms. The descriptions of penalties, queues and epochs simplify protocol rules that change through network upgrades. The regulatory section covers US staff statements and one enforcement case, not the law in every country.

Key takeaways

Frequently asked questions

Is staking the same as earning interest?

No. Interest is paid by a borrower who uses the money. Staking rewards come from new coins the protocol issues plus a share of users' transaction fees, paid in the network's coin for helping validate the chain, and they come with risks a deposit does not have, such as slashing and waiting to withdraw. The dollar value of both the stake and the rewards moves with the coin's price.

Can you lose money staking?

Yes. On Ethereum a validator can lose part of its stake through penalties or slashing, a firm or pool that stakes on a holder's behalf can fail, and the price of the staked coin can fall while it waits in an exit queue. Rewards paid in a coin lose value along with it, so they offer no protection against a drop in that coin's price.

What is liquid staking?

It is staking through a pool that hands back a token representing the staked coins, so the holder can trade or use that token while the coins stay staked. The token is a claim on the pool rather than a stake recorded by the protocol, which adds the pool's own risks, and it can trade below the value of the coins it represents.

How long does it take to unstake?

It depends on the network and on demand. On Ethereum an exiting validator waits in a withdrawal queue whose length depends on how many others are leaving. On Solana stake usually finishes deactivating at the start of the next epoch, which lasts about two days, though a network-wide limit on how much stake can change per epoch can stretch that.

Is a staking reward the same as a perpetual funding rate?

No. A staking reward is paid in the network's coin, from new issuance and transaction fees, to validators and those who delegate to them. A funding rate is a payment between the long and short sides of a perpetual futures contract that keeps its price near the spot price. Neither one predicts where the coin's price goes next.

This page is information, not investment advice.

---

Source: ethereum.org, Staking (32 ETH minimum, 2,048 ETH maximum, penalties and slashing, and the staked total, share and rate displayed on 1 October 2026), https://ethereum.org/en/staking/ ; ethereum.org, Staking withdrawals (exit and withdrawal queue), https://ethereum.org/en/staking/withdrawals/ ; ethereum.org, Liquid and pooled staking, https://ethereum.org/en/staking/pools/ ; ethereum.org developer docs, introduction to ETH (issuance and tips), https://ethereum.org/en/developers/docs/intro-to-ether/ ; ethereum.org, Proof-of-stake (12-second slots), https://ethereum.org/en/developers/docs/consensus-mechanisms/pos/ ; ethereum.org, Timeline of all Ethereum forks (Shapella and Pectra dates), https://ethereum.org/ethereum-forks/ ; Solana, Staking on Solana (delegation, epochs of about two days), https://solana.com/staking ; iShares Staked Ethereum Trust ETF, Form S-1/A filed 17 February 2026 (investment objective), https://www.sec.gov/Archives/edgar/data/2099103/000143774926004276/iset20260214_s1a.htm ; iShares Staked Ethereum Trust ETF, Form 10-Q for the quarter ended 30 June 2026, filed 11 August 2026, https://www.sec.gov/Archives/edgar/data/2099103/000143774926027003/iset20260630c_10q.htm ; US Securities and Exchange Commission, Division of Corporation Finance, Statement on Certain Protocol Staking Activities, 29 May 2025, https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities-052925 ; SEC press release 2023-25, Kraken staking program, 9 February 2023, https://www.sec.gov/newsroom/press-releases/2023-25 ; Kresmion ETHB research page, https://kresmion.com/research/ETHB.

Kresmion Research.