What Is Staking? Rewards, Slashing and Liquid Staking

In proof-of-stake, validators lock up tokens as collateral for the right to propose and verify blocks. Honest work earns newly issued tokens plus transaction tips; provable misbehavior destroys part of the stake — that penalty is called slashing.

Where the yield comes from

Staking rewards are not magic internet money. On Ethereum they come from new ETH issuance, priority fees and MEV. The more ETH is staked, the lower the rate per validator — yields compress as participation rises.

Three ways to stake ETH

• Solo validator: 32 ETH, your own hardware. Full rewards, full responsibility — downtime and misconfiguration cost you.
• Exchange staking: one click, but custodial — the exchange holds your keys and takes a cut.
• Liquid staking (e.g. stETH): any amount, token stays tradable — adds smart-contract and depeg risk on top.

Risks that actually matter

• Slashing: rare for honest operators, but correlated setups can be punished severely.
• Lockups and exit queues: you cannot always unstake instantly.
• Liquid staking tokens can trade below the underlying during stress.
• Regulatory treatment of staking varies by jurisdiction.

Staking yields compound if you restake rewards — see what a given APY does to your stack over years with our compound calculator.