What Is Staking? 

Last Modified:
March 1, 2024

Cryptocurrency staking can seem complex, but it's essentially a way to earn rewards while holding certain cryptocurrencies. 

Staking involves holding a cryptocurrency and earning rewards by participating in the network. It allows you to earn rewards and make your crypto assets work for you. Besides this, it contributes to the security and efficiency of the supported blockchain projects. Cryptocurrencies like Ethereum, Cardano, and Polkadot are some examples of the cryptocurrencies that offer staking options.

How does staking work?

Staking is enabled mainly by Proof-of-Stake (PoS), a consensus mechanism that ensures transaction security without intermediaries. PoS is a newer, energy-efficient consensus mechanism that replaces miners with stakers. Stakers validate transactions, add them to the blockchain, and earn crypto rewards

Note: There are other consensus mechanisms that also enable staking. Staking is not limited to PoS.

Why don’t all cryptocurrencies allow staking?

Bitcoin and other cryptocurrencies don't support staking due to their reliance on other consensus mechanisms like Proof-of-Work (PoW), which uses miners to validate transactions. PoW involves energy-intensive mining and uses a different method for validating transactions.

Staking is a popular method in the crypto world for earning passive income. Many people in the crypto community choose staking as their first option for making money without actively trading.