Crypto staking means committing coins you already own to a proof-of-stake blockchain, which uses them as collateral for validators: the computers that propose and vote on new blocks. Validators that do the job correctly earn rewards. Validators that break the rules can lose part of their stake, and so can the people who delegated coins to them. Staking exists only on proof-of-stake networks such as Ethereum, Solana and the Cosmos Hub. Bitcoin uses proof-of-work, so it has no protocol staking. In the United States, staking rewards are taxed as income once you can sell or otherwise dispose of them.
The newest development: US rules on staking, March to October 2026
- 17 March 2026: the US Securities and Exchange Commission (SEC) issued an interpretive release, Release No. 33-11412, and the Commodity Futures Trading Commission (CFTC) joined it. The SEC's fact sheet says that "protocol staking" as described in the interpretation does "not involve the offer and sale of a security". The release also has a section on staking receipt tokens, the tokens that liquid staking pools issue. It is the Commission's interpretation, not a statute. Earlier, on 29 May 2025, a statement from the SEC staff in the Division of Corporation Finance reached the same view for three models: staking your own coins, delegating to a node operator while keeping your keys, and staking through a custodian. That earlier statement said it "has no legal force or effect".
- 6 October 2026: the Internal Revenue Service (IRS) issued Rev. Proc. 2026-20, printed in Internal Revenue Bulletin 2026-43 on 19 October 2026. It sets out a safe harbor that lets qualifying investment trusts, the structure used by many exchange-traded crypto products, stake their digital assets without losing their tax status. It supersedes Rev. Proc. 2025-31. It is aimed at trusts. The rule for individual stakers is still Rev. Rul. 2023-14, covered below.
How staking works on a proof-of-stake network
Ethereum moved to proof-of-stake in September 2022, and its official documentation shows the mechanics clearly:
- Collateral: to run your own validator you deposit at least 32 ETH. One validator can hold up to 2,048 ETH.
- Selection: time is split into 12-second slots, and 32 slots make an epoch. In each slot the protocol picks one validator at random to propose a block. A randomly selected committee of other validators votes on it. These votes are called attestations.
- Finality: once validators holding at least two-thirds of all staked ETH vote for a checkpoint, it becomes final. Reversing a finalised block would cost an attacker at least one-third of all staked ETH.
- Queues: new validators wait in an activation queue, which ethereum.org says can take hours to weeks depending on demand. Exits also go through a rate-limited queue.
Other networks use the same basic design with different settings. On Solana you delegate SOL to a validator from a separate "stake account". Validators that hold more stake write new transactions more often, so they and their delegators earn more.
Where the rewards come from
On Ethereum the protocol pays validators for proposing blocks and for attesting. A block proposer also receives the transaction fees and MEV (maximal extractable value) from that block, sent to an address the validator chooses. A validator that goes offline misses rewards and loses small amounts of ETH.
When you delegate, the validator usually takes a cut first. The Cosmos Hub documentation says a validator can apply a commission before rewards reach delegators. Delegators know the rate in advance, and it can change only within preset limits. Solana's documentation also describes validators charging a commission on rewards.
Which staking method matches what you can trust?
Answer up to five questions about your holding, your setup and who you will trust with your keys to see which of the four ETH staking methods fits.
Do you have at least 32 ETH to commit to staking?
- Yes, 32 ETH or more → next question
- No, less than 32 ETH → next question
Can you run your own validator and keep it online, knowing that downtime and your own mistakes cost you ETH?
- Yes, I can run a node → Solo (home) staking
- No, I would rather not run one → next question
Do you want to keep your withdrawal keys while an operator holds the signing keys and takes a fee on rewards?
- Yes, I keep withdrawal keys → Staking as a service
- No, or I want a different setup → next question
Will you rely on a pool's validators and smart contracts, and receive a token that represents your stake?
- Yes, I accept smart-contract and counterparty risk → Liquid or pooled staking
- No → next question
Will you let a centralised platform hold your keys and your coins?
- Yes, I accept the platform holding the keys → Custodial staking on a centralised platform
- No → None of the four methods fits your answers
You deposit at least 32 ETH, hold the keys yourself and carry the risk of your own downtime and mistakes. Slashing for proposing two blocks in one slot or casting contradictory votes ranges from under 0.1% for one validator to 100% in a mass slashing event, and exits wait in a rate-limited queue.
You still need 32 ETH. You usually keep the withdrawal keys and the operator holds the signing keys, so the operator could misuse them, and it charges a fee on rewards. Ask what commission comes off the rewards and how long the exit queue takes.
Any amount works, with some pools starting from 0.01 ETH. The pool's validators do the staking and you receive a token representing your stake, so you take on counterparty and smart-contract risk on top of slashing and price risk.
Any amount works, but the platform holds the keys. This is the highest-trust method, and large pools concentrate risk for the network. You depend on the custodian staying solvent and honest.
Every method requires trusting either yourself to run a node with 32 ETH, an operator, a pool's smart contracts or a platform. If none of these is acceptable, the article's checklist shows which question to revisit.
This sorts the four ETH staking methods by amount and trust only: it does not cover other networks' rules, reward rates, price risk, tax, or whether staking suits you.
Four ways to stake, and what each one trusts
Based on ethereum.org's breakdown for ETH:
| Method | Minimum | Who holds the keys | Added risk |
|---|---|---|---|
| Solo (home) staking | 32 ETH | You | Your own downtime and mistakes |
| Staking as a service | 32 ETH | You usually keep withdrawal keys; the operator holds signing keys | Operator can misuse signing keys; fee on rewards |
| Liquid or pooled staking | Any amount, some pools from 0.01 ETH | Pool's validators; you receive a token representing your stake | Counterparty and smart-contract risk |
| Custodial staking on a centralised platform | Any amount | The platform | Highest trust; large pools concentrate risk for the network |
Choosing a method mostly comes down to how much you hold, whether you can run a node, and who you are willing to trust with your keys.
What can go wrong
Slashing
Slashing means the protocol destroys part of a validator's stake for provable misbehaviour. On Ethereum this covers proposing two blocks in one slot or casting contradictory votes. The penalty depends on how many validators are slashed around the same time. It ranges from under 0.1% for one validator acting alone to 100% in a mass slashing event. A slashed validator is also forced off the network. On the Cosmos Hub the main slashing condition is double signing, and the documentation says slashing "includes the stake of their delegators". Solana's documentation says there is no in-protocol slashing at present.
Downtime
Downtime usually costs less than slashing, but it adds up. An Ethereum validator that stays online but fails to vote gets small attestation penalties. If the chain fails to finalise for more than four epochs, an "inactivity leak" drains stake from validators that are not voting with the majority.
Lock-ups and exit queues
Your coins are not instantly liquid. On the Cosmos Hub, unstaking takes a three-week unbonding period. On Ethereum, exits wait in a rate-limited queue. You may not be able to sell during a price drop.
Price risk
Rewards are paid in the same coin you staked. As an illustration: if 100 tokens earn 10% over a year, you hold 110. If the token's price halves over the same year, those 110 tokens are worth 55% of what your original 100 were worth. The reward rate does not protect the value of the stake.
Counterparty risk
With delegated, pooled or custodial staking you also depend on the operator, the pool's smart contracts or the custodian staying solvent and honest.
How US tax treats staking rewards
Rev. Rul. 2023-14 says a cash-method taxpayer who stakes cryptocurrency on a proof-of-stake network includes the fair market value of the rewards in gross income. This happens in the tax year the taxpayer gains "dominion and control", which in the ruling's example means when the rewards can be sold or otherwise disposed of. The value is fixed at that date and time. The same applies when you stake through a cryptocurrency exchange.
As a hypothetical example, suppose 0.05 tokens become available to you when one token trades at $3,000. You would report $150 of income, and $150 becomes your cost basis in those tokens. Rules in other countries differ.
Before you stake: a checklist
- Is the coin proof-of-stake, and does the network slash delegators?
- How long does unbonding or the exit queue take?
- What commission or fee comes off the rewards?
- Who holds the signing keys and the withdrawal keys?
- If you get a liquid staking token, what smart-contract risk comes with it?
- How will you record the value of each reward when it becomes available, for tax?
For why the coin's price matters as much as the reward rate, see how crypto tokens get their value.
Limitations: parameters such as queue times and penalties are set by each network and can change through upgrades or governance; the tax section covers US federal rules only and is not tax advice.
