What is Staking in Crypto? Complete Guide for Beginners 2025

Why are you into cryptocurrencies? Well, most of us answer this question in quite an expected way. A majority of us would be in need of an additional source of income, and this search led us to invest in cryptocurrencies. However, do you know that you can do a lot more than just earn a passive income with the cryptocurrency tokens? If we are into just another source of income, our priority would be the liquidity of the coins. We can get it converted into a lot of other cryptocurrency tokens or fiat currencies.

But instead of this, we can also engage in staking, which has the potential to do a lot more than liquidating our assets. We will be learning about everything about staking in this article, with attention to every single detail. 

What is Staking in the World of Cryptocurrencies? 

To put it in simple terms, we deploy our cryptocurrency tokens in a blockchain network and let it do the work for us, instead of selling or exchanging them with other cryptos or fiat currencies. This will, in turn, earn us rewards, mostly in the form of crypto tokens.

That is, we will get a percentage of the crypto tokens that we have already staked in the blockchain network, which we can either use to stake again or liquidify according to our preference. If you are actively into staking using your cryptocurrency tokens, you will also be entitled to take part in PoS Blockchains.

Staking Example with Figures 

Now, let us look into a staking example, so that you will get a clear framework of its working mechanism, rather than pondering aimlessly over the theoretical concepts.

Imagine you have 100 coins of a particular cryptocurrency with you. And a blockchain network is promising you 10% rewards for staking with the same coins for 1 month. So you decide to stake those 100 coins and lock them in the Blockchain network for a predefined period of time, that is, 1 month.

By the end of the month, you will have a total of 110 crypto tokens with you, without necessarily buying the other 10. The additional 10 tokens are the benefits that you can have from staking, in the form of rewards that have been mentioned earlier. 

You may take a look at the figures below to understand it even better 

The total number of crypto tokens you have with you: 100 

Reward % offered by the Blockchain Network: 10% 

Locking period, as mentioned by the network: 1 month 

Rewards you get at the end of the locking period: 10 % of 100 tokens = 10 tokens 

Total number of tokens with you by the end of the locking period = 110  tokens (100+10)

Types of Staking 

We have already talked about the basic working mechanism of staking using your cryptocurrency tokens. However, there are different categories of staking that are currently active and being practiced in the world of cryptocurrencies. We will learn about two main classifications in this section. 

1. Active Crypto Staking 

In this type of staking, you are not just doing it with the goal of reaping token benefits. You genuinely wish to participate actively in the blockchain network and its transactions. Through this, you will be able to create new blocks in the network.

However, a sound technical maestro is required in this class of staking, and you must be willing to devote a greater proportion of your time and energy to it. But the most attractive thing about active crypto staking is the higher rewards that accompany it. This is because of the additional time that you invest in its transactions when compared to other stakers, who are doing it passively. 

2. Passive Crypto Staking 

Here, you are just locking up your cryptocurrency tokens in the blockchain network for the sake of the benefits you will get from it at the end of the stipulated time period.

If you are a beginner, it is better to go for passive crypto staking, since it does not require much technical skills or time. It is important to note that you will not be entitled to the same amount of benefits acquired by the active stakers. In this case, it would be a blockchain network that will be working for you, rather than requiring you to perform the tasks. 

How to Stake?

Risks Involved 

Now, you might be quite fascinated by the rewards that you may get from participating in staking without actually spending money on buying the cryptocurrency tokens. However, there are instances where you may end up losing the cryptocurrency tokens that you have locked up in the blockchain network entirely or partially. Let’s look into such instances one by one. 

Network failure 

As we have already mentioned, during the period of staking, all your cryptocurrencies will be locked into the network of the blockchain in which you have chosen. Failure or congestion with this network can become a cause for the loss of your cryptocurrency tokens. That is the reason why we have already warned you about the importance of choosing a reliable platform to stake with. 

Issues with Validator 

If your staking is carried out by a validator, and he ends up committing any sort of errors, the safety of your tokens within the network reduces significantly. Any malicious behavior from the side of the validator can also lead to the same issues. In the cryptocurrency staking terminology, this process is known as the slashing penalty. 

Changes in Blockchain Protocol

Changes in the Blockchain Protocol are again a valid reason why you do not earn the desired returns and rewards from staking in cryptocurrencies. These protocols are subject to change at any time, causing you partial or total loss at times. This is termed “Forks”. 

Is it worth Staking in Cryptocurrencies?

Staking in cryptocurrencies can be extremely powerful, especially if you know the knack of playing it safe and taking calculated risks. The crucial part of staking comes with the selection of the Staking platform. Reliable platforms are less likely to cause you trouble by causing frequent network congestion.

The frequency of slashing penalties can also be much lower. Such a reliable platform can also guard you from the attack of unexpected protocol changes or forks.

However, considering the returns you can earn from staking your cryptocurrency tokens properly, this is one of the wisest things to do in the marketspace. Make sure you are staking using smaller quantities of your investment capital so that you will not end up having a bigger setback. Moreover, this can also help you learnt the art of staking with peace.