What is staking and why it is critical to the crypto economy?

Cryptocurrency staking is like putting your money in a savings account, but locking up your coins to help secure and validate transactions on a blockchain network, and you get rewards in return. It is mainly used in proof-of-stake systems (called POS), where staked coins act as collateral to keep the network running smoothly.

Ethereum (ETH) is often considered the best for staking due to its large network, liquidity, and average returns of 4-6%. Another interesting option is Solana (SOL) for its high efficiency (speed and low transaction costs), but you should always check the current APYs, as they fluctuate.

There are some cryptocurrencies that were created with mechanisms that place a strong emphasis on staking, such as Polkadot (DOT) and Cosmos (ATOM). BNB and Algorand also stand out for their user-friendly staking, with returns of up to 7%. However, the true returns on these high APYs must be adjusted for token inflation, as projects may decide to issue more tokens for various reasons. This is where the governance mechanisms of the different projects/currencies come into play.

Cryptocurrency staking involves holding and locking specific coins in a wallet to support blockchain operations, such as verifying transactions, in exchange for earning more coins as a reward. It is a way to earn passive income without selling your assets, but it requires coins that are compatible with proof-of-stake, such as ETH or ADA. Coins are usually held with certain mechanisms in place, such as validators, who are technical actors in this process. A common misconception is that it is risk-free, like a bank deposit; in reality, you face severe penalties if validators fail, in addition to market volatility.

Some of the most profitable and “serious” ones include newer projects such as ENA (Ethena), which can pay more than 20% at times. Others that are riskier offer APYs of up to 55% to 600%, but they are high risk due to potential price drops and low liquidity, so let’s say they are “less serious” (I wouldn’t put my money there). 
stablished currencies, such as Ethereum and Cardano, provide more stable returns, around 4-7%, taking into account actual reward rates after inflation. But profitability is not just about APY: you have to take into account the risks, the devaluation of tokens due to issuance or loss of confidence, or because the tokens fail to gather a large community to use them. In this last sense, rewards are used to entice users to use the tokens, which is one of the most important variables.

Bitcoin does not natively support staking, as it is based on proof of work (POW) rather than proof of stake, so “staking” usually means using BTC “wrapped” in other chains such as Ethereum to earn returns. BTC is deposited on a platform that converts it into a staking-eligible token, locking it to validate transactions and earn rewards, but it must be unwrapped later to recover the BTC. This carries additional risks, such as smart contract errors (problems in the code that runs a blockchain) or bridge hacking (sites that connect and transfer coins from one blockchain to another).

Staking can generate passive income, but it is unlikely to make you rich unless you start with a large amount, as average returns are 4-10% and are diluted by inflation or price drops. For retail investors, it’s more about steady growth than get-rich-quick schemes: many overestimate the rewards and overlook risks such as market crashes, which can wipe out gains. Success stories are rare and tend to be linked to early adopters; I believe it’s better to focus on long-term holding than to expect to become a millionaire from staking alone.

In 2025, cryptocurrency staking is generally legal around the world, and the U.S. SEC has clarified that certain protocol staking activities are not securities, reducing regulatory hurdles for proof-of-stake networks. It may be prohibited or restricted in countries with more “opaque” and less free legislation, such as China and others. Local laws may apply taxes on earnings, and misconceptions about its lack of regulation can lead to fines.

Staking is not entirely safe, as there are risks such as slashing (loss of coins due to validation errors), smart contract hacks, and liquidity issues during unstaking periods, which can last for weeks. Although it is safer than active trading for long-term holders, volatility can erode rewards, and centralized platforms add custody risks. It is recommended to always use audited protocols and diversify, but they warn that no staking is “risk-free”: you must always be prepared for possible losses.

The United States has recently confirmed that certain activities are not considered securities. It may be prohibited in countries where cryptocurrencies are illegal, such as China and Egypt, as they are considered financial risks and due to capital controls. In most other places, it is permitted but regulated.

For retail investors holding long-term positions, staking can be worthwhile for passive rewards of up to 7% on stable networks such as Ethereum, which match or exceed traditional savings while maintaining the position in cryptocurrency, which may be desirable for some investors. However, it is not ideal if you need quick access to funds, as lock-ups and risks such as price drops or slashing may outweigh the benefits. It is not a way to get rich, and there are extra risks from the cryptocurrency tech world itself, such as hacks, phishing, etc.