Staking

Staking means locking up tokens so they can't be moved or sold for a while, in exchange for rewards. The term covers two different things. On proof-of-stake chains like Ethereum, Solana, and BNB Chain, staked tokens act as collateral that backs the validators who propose and verify blocks. On smaller projects, staking usually means depositing the project's own token into a contract that pays you rewards.

On a chain level, you either run a validator yourself or delegate your tokens to one. Validators that stay online and follow the rules earn rewards, which come from newly issued tokens and transaction fees, and delegators receive a share minus the validator's commission. Some networks punish bad behavior or long downtime with slashing, which destroys part of the stake, and delegators can lose some of their tokens along with the validator. Most networks also have an unbonding period, ranging from a day to several weeks, during which your tokens earn nothing and can't be sold.

Project-level staking works differently. The contract pays rewards out of a pool the team funded or from tokens it keeps minting, and the reward is often the same token you staked. A high advertised APY paid in a token that drops as stakers sell is not much of a yield. The number only means something if the reward token holds its value, and that is exactly what you can't count on with a small-cap token.

Before staking, check the lock-up and unbonding terms, because tokens you can't withdraw can't be sold during a sharp drop. Find out where the rewards actually come from and how long the reward pool lasts. Look for an audit, and check whether the owner can change the reward rate, pause withdrawals, or upgrade the contract through a proxy. Also make sure you are on the real staking page, since fake staking sites that ask for wallet approvals are a common phishing method.