Crypto staking means committing tokens to a proof-of-stake (PoS) blockchain so they can be used to validate transactions. In return, the network pays rewards in the same token. You can stake by running a validator, by delegating to one, or by going through a pooled or custodial service. Rewards are not fixed. On some networks your tokens are locked for days or weeks when you stop staking. On networks with slashing, a validator's misbehaviour can cost part of the stake. Staking only exists on proof-of-stake networks. Bitcoin uses proof of work, so native bitcoin cannot be staked.
What changed most recently
- US tax treatment of staking funds (October 2026). On 19 October 2026 the IRS published Revenue Procedure 2026-20 in Internal Revenue Bulletin 2026-43. It is a safe harbor that lets trusts which otherwise qualify as investment trusts and grantor trusts stake their digital assets "without jeopardizing their tax status". It "clarifies, modifies, and supersedes Rev. Proc. 2025-31". Existing trusts get a limited period to amend their trust agreements and procedures to meet its conditions. This matters mainly for exchange-traded crypto products that want to stake the coins they hold.
- US securities view (2025). On 29 May 2025 the SEC's Division of Corporation Finance said that "Protocol Staking Activities" do not involve the offer and sale of securities. This covered solo staking, self-custodial staking through a third-party node operator, and custodial staking where the custodian has no discretion over whether, when or how much to stake. On 5 August 2025 the same Division extended a similar view to certain liquid staking arrangements and their "Staking Receipt Tokens". Both are staff statements, not Commission rules. Commissioner Crenshaw objected that the conclusions depend on many factual assumptions.
How staking works
In proof of work, miners spend computing power to propose blocks. In proof of stake, validators put up tokens as collateral. The protocol picks validators to propose and check blocks, and the collateral gives them a reason to behave honestly.
Ethereum, the largest PoS network, shows how the process works:
- Deposit. A validator needs at least 32 ETH. Since the Pectra upgrade, it "can hold up to 2048 ETH" (ethereum.org).
- Duties. Validators propose blocks and "attest" to the state of the chain. Ethereum's documentation says stakers "earn ETH rewards for participating honestly in that process".
- Rewards scale with participation. Each validator's base reward falls as the total amount staked rises. In the protocol formula it is proportional to 1/√(total active balance). The more ETH is staked network-wide, the lower the reward per validator.
- Penalties. A validator that misses its votes loses roughly what it would have earned. Failing to propose a block carries no penalty.
- Slashing. Provable misbehaviour, such as "signing two conflicting blocks", gets a validator slashed. It loses part of its stake at once, is removed from the network after a 36-day period, and pays a further penalty that grows if many validators were slashed at around the same time. The maximum slash is the validator's full effective balance.
The Pectra change
Pectra went live on Ethereum mainnet on 7 May 2025 at 10:05 UTC (epoch 364032). EIP-7251 raised the maximum effective balance of one validator from 32 ETH to 2048 ETH, and ETH held above the 32 ETH minimum now also earns rewards. The main effect is for large operators, who can run fewer validators with larger balances. The 32 ETH minimum for solo staking did not change.
Ways to stake
| Method | What you do | What you give up |
|---|---|---|
| Solo staking | Run your own validator with your own keys | Hardware, uptime and technical skill. Ethereum needs 32 ETH and a machine online around the clock. |
| Staking as a service / delegation | A node operator runs the validator for your stake | You trust the operator. On Ethereum it could misuse signing keys. On delegation chains, its mistakes can get your stake slashed. |
| Pooled and liquid staking | Deposit into a pool and receive a token for your position | Smart contract and counterparty risk. Ethereum's documentation notes pooled staking "is not native to the Ethereum network". |
| Custodial staking | A custodian stakes deposited coins for you | You do not hold the keys. Ethereum's documentation calls this the route with the highest trust assumptions and a "large centralized target and point of failure". |
Liquid staking tokens
Liquid staking protocols give you a token that represents your staked deposit. Lido's documentation says its tokens "are freely transferable instead of locked as in the case of native staking". stETH is its token for staked ETH. Some pools on Ethereum accept as little as 0.01 ETH (ethereum.org). The token's value depends on the protocol's contracts and operators. The underlying ETH still sits in validators that can be penalised.
Lock-ups, cooldowns and slashing by network
Staking terms differ from network to network. Check these two things before you stake:
| Network | Getting your tokens back | Slashing |
|---|---|---|
| Ethereum | No fixed period. Exiting "takes variable amounts of time, depending on how many others are exiting at the same time". Exited funds are then swept automatically to your withdrawal address, at up to 16 withdrawals per block. | Yes, for provable misbehaviour. |
| Solana | Deactivation takes effect at epoch boundaries and is rate-limited. Stake still earns rewards while it cools down. | "There is no in protocol implementation of slashing currently" (Solana docs). |
| Cardano | No lock. "You can spend your ada normally at any time, regardless of how you delegated it." Registering a stake address requires a deposit. | No. Cardano's developer documentation says delegated ADA "is never at risk"; an underperforming pool only costs that epoch's rewards. |
| Cosmos Hub (ATOM) | 21-day unbonding period ("3 weeks"). The FAQ links unbonding to "forfeited staking rewards". | Yes. Delegators' ATOM "can be slashed if their validator misbehaves", for example for double signing. |
| Polkadot (DOT) | "The unbonding duration on Polkadot is set to 28 days." Tokens are locked and earn no rewards while unbonding. | Yes. The unbonding period exists partly so that misbehaviour found after the fact can still be slashed. |
How fast can you get your staked tokens back?
Pick the network you stake on and how you hold your stake to see what the article says about getting your tokens back and about slashing.
Which network are your tokens staked on?
- Ethereum → next question
- Solana → Solana: cooldown at epoch boundaries
- Cardano → Cardano: no lock
- Cosmos Hub (ATOM) → Cosmos Hub: 21-day unbonding
- Polkadot (DOT) → Polkadot: 28-day unbonding
On Ethereum, do you hold natively staked ETH or a liquid staking token for your position?
- Natively staked ETH (solo, operator or custodian) → Ethereum: no fixed exit period
- A liquid staking token from a pool → Ethereum liquid staking: a transferable token
Exiting takes a variable amount of time, depending on how many others are exiting at the same time. Exited funds are then swept automatically to your withdrawal address, at up to 16 withdrawals per block. Triggering an exit from your withdrawal address costs gas. Provable misbehaviour, such as signing two conflicting blocks, gets a validator slashed.
The token for your deposit is freely transferable instead of locked as in native staking. Its value depends on the protocol's contracts and operators, and the underlying ETH still sits in validators that can be penalised. This adds smart contract and counterparty risk.
Deactivation takes effect at epoch boundaries and is rate-limited. Stake still earns rewards while it cools down. Solana's documentation says there is currently no in-protocol slashing.
You can spend delegated ADA normally at any time. Registering a stake address requires a deposit. Cardano has no slashing: an underperforming pool only costs that epoch's rewards.
Unbonding takes 21 days (3 weeks), and you cannot sell during that period. Delegators' ATOM can be slashed if their validator misbehaves, for example for double signing.
Unbonding takes 28 days. Tokens are locked and earn no rewards while unbonding. Slashing applies, and the unbonding period exists partly so that misbehaviour found after the fact can still be slashed.
This covers only the five networks in the article and their stated unlock and slashing rules: it does not estimate exit-queue length, rewards, fees or tax, and it is not advice on whether or where to stake.
What rewards depend on
The networks do not publish one fixed yield, so treat any headline rate as a snapshot. What you actually earn depends on:
- Total amount staked. On Ethereum, rewards per validator fall as total stake rises.
- Validator performance. Missed duties mean missed rewards and, on Ethereum, small penalties.
- Operator or pool fees. Delegated, pooled and custodial services keep part of the rewards.
- Inflation. Rewards often come from new issuance. A high nominal rate on a network with high inflation can mean little real gain for holders.
- Price. Rewards are paid in the staked token. If the token falls further than the rewards add, your position is worth less in dollar terms.
- Transaction fees. Some actions, such as triggering an Ethereum exit from your withdrawal address, cost gas.
Risks
- Slashing and penalties on networks that use them, including for stake delegated to a validator that misbehaves.
- Liquidity risk. During unbonding, cooldown or an exit queue you cannot sell. On Polkadot that lasts 28 days and on Cosmos Hub 21 days.
- Smart contract risk in pooled and liquid staking.
- Counterparty risk with node operators and custodians.
- Centralisation. Ethereum's documentation warns that large custodial staking providers create a single point of failure for the network.
- Market risk. Staking does not protect against a fall in the token's price.
Tax: the US position
Under IRS Revenue Ruling 2023-14 (released 31 July 2023), a cash-method taxpayer who receives staking rewards includes their fair market value in gross income in the tax year in which they gain "dominion and control". In practice that means when the rewards can be sold, exchanged or otherwise disposed of. Value is measured at that date and time. The same treatment applies to staking through an exchange. Some practitioners dispute the timing. Other countries apply different rules.
Frequently asked questions
Can you stake Bitcoin?
Not natively. Bitcoin uses proof of work, and blocks are produced by miners, not stakers.
Is staking the same as earning interest?
No. Rewards are payment for helping validate the network. They vary with network conditions and can be reduced by penalties. Nobody guarantees the principal.
Can I unstake at any time?
It depends on the network. Cardano does not lock delegated ADA. Ethereum exits wait in a queue that depends on demand. Cosmos Hub has a 21-day unbonding period and Polkadot 28 days.
What is the difference between staking and liquid staking?
With native staking, your tokens sit in the protocol, and on many networks they are locked while you unstake. Liquid staking gives you a transferable token for your deposit, which adds smart contract and protocol risk.
This article is for information only and is not investment, tax or legal advice.
