Staking
CryptoGlossary term
Definition
The process of locking up cryptocurrency in a blockchain network to help validate transactions and secure the network, in exchange for earning rewards. Staking is a core mechanism of Proof of Stake blockchains and serves as an alternative to the energy-intensive mining process. The more tokens you stake, the greater your chances of being selected to validate transactions and earn rewards.
Related terms
- Proof of StakeA consensus mechanism where validators are chosen to create new blocks and confirm transactions based on the amount of cryptocurrency they have staked as collateral. It is considered a more energy-efficient alternative to Proof of Work because it does not require massive computational power. Ethereum adopted Proof of Stake in 2022, dramatically reducing its energy consumption.
- Yield FarmingA DeFi strategy where users provide their cryptocurrency to liquidity pools or lending protocols in exchange for earning interest, fees, or token rewards. Yield farmers often move their assets between different protocols to maximize returns, which can be lucrative but also carries significant risks. The rewards can come in the form of transaction fees, interest payments, or governance tokens.
- EthereumA decentralized blockchain platform that enables developers to build and deploy smart contracts and decentralized applications (dApps). Unlike Bitcoin, which primarily serves as a digital currency, Ethereum provides a programmable platform powered by its native cryptocurrency, Ether (ETH). It transitioned from Proof of Work to Proof of Stake in 2022 to improve energy efficiency and scalability.
Get advice that uses your real numbers
Warren reads your accounts and explains what terms like this mean for your plan. Free to start, no credit card required.