The cryptocurrency market is characterized by the fact that it offers investors more and more opportunities to earn money beyond traditional trading. One of the most popular methods of generating passive income is staking – a mechanism that allows you to earn money on your cryptocurrencies without having to sell them. In 2025, staking has become even more accessible thanks to the development of platforms and tools that simplify the entire process even for novice users.
What is cryptocurrency staking?
Staking is the process by which you lock your cryptocurrencies on a blockchain network to support its operation and security. In exchange for this “service” you receive rewards in the form of additional tokens. You can compare it to a bank deposit – you freeze your funds for a specific period of time and in return you receive interest. The difference is that with staking you actively participate in the functioning of a decentralized network.
The reward mechanism works relatively simple: the blockchain network generates new tokens or collects transaction fees, which it then distributes to staking participants in proportion to their contribution. The more coins you lock and the longer you stake them, the more potential profit you can make. Modern platforms offer annual returns (APR) ranging from several to even several dozen percent, depending on the selected cryptocurrency and market conditions.
Staking plays a key role in networks based on the Proof of Stake consensus mechanism. Instead of energy-intensive mining like Bitcoin, these networks rely on validators to confirm transactions and create new blocks. And it’s your locked tokens that help these validators do their job, keeping the entire network secure and efficient.
How to start staking in practice – step by step
Starting your staking adventure doesn’t have to be complicated. For most people, the best option will be to use a cryptocurrency exchange that offers simple staking. Binance is one of the platforms that stands out for its intuitive interface and a wide selection of cryptocurrencies available for staking.
Binance it is the largest stock exchange in the world with a very good reputation. If you want to test it out, sign up using the link below and you’ll get an additional 20% discount on transaction fees for life. If you need help with registration, check out our guide.
The process is as follows: first, you create an account on the selected platform and undergo identity verification. You then buy the cryptocurrency you want to stake – popular choices include Ethereum, Cardano, Polkadot or Solana. After purchasing, you go to the staking section on the platform, select the option you are interested in (usually you can choose between flexible and locked staking) and decide how many tokens you want to lock.
Once your transaction is confirmed, your coins start generating rewards, which are typically accrued daily or every few days. It is worth remembering that locked staking offers higher rates but requires holding funds for a specific period, while flexible staking allows you to withdraw at any time, although with lower rates of return.
Proof of Stake as the foundation of staking
To fully understand staking, it is worth understanding the Proof of Stake (PoS) mechanism. It is a consensus algorithm that is an alternative to the energy-intensive Proof of Work known from Bitcoin. More details about consensus mechanisms in the blockchain network can be found in our separate article.
In the PoS system, validators act as network guards – they verify transactions, add new blocks to the blockchain network and ensure the security of the entire ecosystem. To become a validator, you must lock up a certain minimum amount of a given cryptocurrency as margin. For example, in the Ethereum network, the requirement is 32 ETH, which is a significant amount at current prices. Validators must maintain a functioning network node and be online most of the time, otherwise they may lose some of their funds.
The importance of validators for network security is crucial – the more honest validators and the greater the total value of blocked funds, the more difficult it is to launch an attack on the network. Therefore, blockchain networks encourage participation through attractive rewards.
You may also be interested in: Corporations are breaking the barrier: over USD 100 billion in Bitcoin
Types of staking
The modern market offers several forms of staking tailored to different needs:
Delegated staking is the most popular option for the average user – you transfer your coins to a professional validator who stakes them on your behalf, sharing the rewards with you.
Staking on the stock exchange provides the simplest access without any technical knowledge as the platform takes care of all the technical aspects and you simply see the rewards accumulating in your account.
Solo staking means running the validation node yourself, which requires significant financial resources, technical knowledge and responsibility, but allows you to retain 100% of the rewards.
Smooth staking is an innovative solution that allows you to earn money on staking without losing liquidity thanks to special tokens representing your blocked assets.
Liquid staking tokens (LST) and their use
Liquid staking tokens are a revolutionary tool in the DeFi world. They act as a digital receipt for your locked cryptocurrencies – when you stake ETH via a liquid staking protocol, you receive a token such as stETH (staked ETH) in return. This token can be freely sold, exchanged, or used in other DeFi applications while your original ETH continues to generate staking rewards.
The most popular examples are stETH from Lido Finance, rETH from Rocket Pool or cbETH from Coinbase. The value of these tokens typically increases as staking rewards accumulate, and their use in the broader DeFi ecosystem opens the door to additional monetization strategies.
Passive income from cryptocurrencies thanks to staking
The main attraction of staking is the ability to generate passive income without actively trading. While day traders spend hours in front of screens trying to spot the right moments, stakers simply hold their coins and watch the rewards accumulate. This is a particularly attractive option for people who believe in the long-term potential of a given cryptocurrency.
The calculation of potential profits is mainly based on the APR (Annual Percentage Rate), which shows the annual rate of return. If you stake 1,000 tokens at an APR of 10%, after a year you should have around 1,100 tokens. However, please note that actual profits may vary depending on reward accrual frequency, protocol changes and market conditions. Some platforms also use APY (Annual Percentage Yield), which takes into account the capitalization of interest.
Staking pool as a way to share rewards
Staking pools are a solution for people who do not have the minimum amount of cryptocurrency required to self-stake. In a pool, you pool your funds with other users to create a common deposit that meets the network’s requirements. The pool operator manages the validator, and rewards are divided in proportion to each participant’s contribution, minus a small commission to the operator.
The difference between pool and solo staking is significant – in a pool you can start with any amount, you don’t have to worry about the technical side or maintaining a node, but you give up full control over your funds and accept slightly lower profits due to pool fees.
Staking rewards: what you need to know
Staking rewards come from two main sources: newly issued tokens and transaction fees. Blockchain networks regularly issue new tokens as an incentive to validators, while network users pay fees to process their transactions. The frequency of reward payouts varies between networks – some pay out daily, others pay out every few days or weeks.
It’s key to understand that a high APR doesn’t always mean a better deal. Projects offering double-digit or even triple-digit rates of return often carry greater risk due to the token’s lower stability or a younger, untested protocol. It is also worth checking whether the rewards are paid in the same token you are staking or in a different one, which may affect the final profitability.
Risks associated with cryptocurrency staking
Despite the attractiveness of staking as a source of income, it is not without risks that every potential staker should consider before committing their funds.
Slashing risk, known as slashing, is a penalty imposed on validators for network malfunctions – this may be being offline for a long period of time, signing conflicting blocks or other security-threatening activities. The validator may lose some or all of its blocked funds. Although this is mainly a problem for people running their own nodes, because the use of reputable pools and exchanges significantly minimizes this risk.
Market volatility poses a serious challenge to the profitability of staking. You can earn 10% per year on staking, but if the value of the staked cryptocurrency drops by 30%, your real capital will decrease anyway. Therefore, staking works best as a long-term strategy for tokens where price growth seems likely or at least stable.
Technical risks include errors in smart contracts that can lead to loss of funds. Younger DeFi protocols offering smooth staking or high rewards do not always undergo thorough security audits, which can result in exploits. It is worth choosing projects with a good reputation, audits and a proven track record.
The risk of centralization arises when a few large players control a significant portion of the locked tokens on the network. This situation undermines the decentralization of the blockchain network and may lead to manipulation. Ethereum faced this challenge after switching to PoS when it turned out that several of the largest staking pools controlled a significant percentage of validators.
Finally, external risks when using staking platforms are something that cannot be ignored. DeFi exchanges and protocols can fall victim to hacks, regulatory problems or bankruptcy. The history of the cryptocurrency market knows cases where users lost access to their seized funds due to the collapse of the platform. Diversifying between different platforms and not blocking all funds is a sensible protective strategy.
Staking in 2025 is a mature tool for anyone who wants to benefit from their cryptocurrencies without engaging in complicated trading. The key to success is education, careful selection of projects and platforms, and a realistic view of potential profits and risks. With the right approach, staking can be a valuable element of a diversified cryptocurrency portfolio.
