Staking & rewards

Crypto staking can be a great way to grow your holdings with minimal effort, as long as you understand the risks.

Staking: the average person's guide to earning with crypto

Staking is like a side hustle for crypto holders. You lock up certain cryptocurrencies to help run their network, and you earn rewards in return. It's one of the most common ways to earn passive income from crypto you already own.

You can also earn crypto rewards by spending with crypto debit and credit cards, or with bitcoin-back apps like Fold.

How does staking work?

Networks like Ethereum and Solana use a system called Proof of Stake. Instead of energy-hungry mining, validators lock up ("stake") coins as collateral to verify transactions. Honest validators earn rewards; dishonest ones can lose part of their stake.

When you stake, either on your own or through an exchange or staking pool, you become part of that process and earn more crypto as a reward. The more people stake, the more secure the network becomes.

Bitcoin can't be staked. It uses Proof of Work (mining). Any service offering "Bitcoin yield" is lending your coins out or using them in some other way, which carries extra risk.

Why staking is worth knowing about

Instead of letting your coins sit idle, staking puts them to work. It can grow your holdings over time, and it supports the networks you believe in.

The risks most people skip

• Rewards aren't guaranteed. Rates change with network conditions and are usually paid in the same volatile coin.
• Lock-up periods. Some networks or platforms make you wait days or weeks to unstake, so you can't sell during a crash.
• Platform risk. If you stake through a company, you're trusting that company. Lending platforms like Celsius froze customer funds in 2022.
• Slashing. Validators that misbehave or go offline can lose part of the stake.
• Taxes. In the US, staking rewards are generally taxed as income when you receive them. See the taxes chapter.

Stablecoin yields carry similar risks. Stablecoins aren't bank deposits and aren't FDIC-insured.

Done carefully, staking can be a win-win: you grow your stack, and the networks you support become stronger.