Crypto Staking: What Is It And How Much Can You Earn In Rewards? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure

Advertiser Disclosure

We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional.

How We Make Money

The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.

Editorial disclosure

All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE: damircudic/Getty Images February 24, 2022 Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Bankrate logo

The Bankrate promise

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo

The Bankrate promise

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo

Editorial integrity

Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.

Key Principles

We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.

Editorial Independence

Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo

How we make money

You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. While many speculators buy and sell cryptocurrency for profit, another group of crypto owners enjoy the income created through staking rewards. Staking rewards are a kind of income paid to crypto owners who help regulate and validate a cryptocurrency’s transactions. In that sense, staking rewards are like a dividend or interest on a savings account but with much greater risk. Here’s how you can earn income through cryptocurrency staking and an explanation of the risks for doing so.

What is crypto staking

Staking is a key element of cryptocurrencies that operate using “proof-of-stake” validation. In a proof-of-stake system, investors who own the can help validate transactions in a given cryptocurrency’s blockchain database. Typically, they must own a minimum number of coins to verify transactions, and then they are permitted to become a validator. Validators participate in the decentralized computer network that confirms transactions and ensures that those recorded in a crypto’s are legitimate. For doing so, they are rewarded with some cryptocurrency. But it’s not a riskless process for those who stake their coins and become validators, since they could lose some of their investment by approving (potentially fraudulent) transactions that don’t conform to a cryptocurrency’s rules. Even those who don’t have enough to become a validator themselves can pledge their coins with a validator and earn rewards. So those with just a few coins can earn staking rewards if they work with a crypto exchange or another crypto platform to do so. Rewards can be deposited into your account as they are earned. Many of , such as , use proof-of-stake validation, but not all do, including the most valuable, .

How much can you earn through crypto staking

The amount of staking rewards that can be earned varies greatly, depending on the staking platform, the cryptocurrency and how many people are actually staking a given coin. “With the more popular coins such as Ethereum, and Polkadot, the rewards vary from 5 to 20 percent,” says Eddie Rajcevic, research team member at tastytrade, a financial media network. “With smaller cryptocurrencies, these rewards can even be above 100 percent.” If you’re working with a crypto exchange to stake your coins, you may receive different rewards from one to the next. Some might take a cut of any staking reward, while others may pass the whole reward on to you. Other trading platforms have different rules and rewards. “There are platforms that choose to have a fixed yield for a specific lock-up term with a maximum reward per user, while others adjust their yield daily based on the staking rewards left within a specific pool,” says Claudiu Minea, CEO and co-founder at SeedOn, a blockchain-based crowdfunding platform. Finally, it’s important to understand that these staking yields can change depending on how many people are participating and what the total reward pool is. “Yields change largely because the rewards are fixed over time but the amount of capital that participates in staking or lending changes,” says Ivan Zhang, CEO and co-founder of Pennyworks, a platform that offers rewards for decentralized finance (DeFi) lending. “The more people who are staking or lending, the lower the rewards, and vice versa.” Some of the highest staking rewards right now can be found on , , and , says Minea.

How to start staking your crypto

With many crypto exchanges offering staking rewards on at least a few coins, an exchange can be an easy path for those who are starting to stake, say experts. But there are other options for crypto owners, including staking-as-a-service platforms and DeFi lending platforms. “The simplest way to begin with crypto staking is through an exchange, such as Binance, Kraken, or Voyager,” says Rajcevic. If you’ve purchased your coins through an exchange, it can be simple to inform the exchange that you want to participate in its staking program. Then rewards are deposited directly into your account according to whichever schedule the exchange has established. Minea points out cryptocurrency exchange Binance as a potentially good starting point, because it’s “the world’s largest crypto exchange when it comes to trading volume and it is trusted by millions of users worldwide.” He says that Binance offers service for proof-of-stake coins as well as for DeFi lending, a similar kind of service that offers rewards on such as Tether. “In these situations, you are lending stablecoins such as Tether,” says Zhang. Working with a DeFi lending platform might be a more attractive option for many crypto owners, due to the lower volatility of the stablecoins used in them, though it presents new risks, too. Stablecoins are often backed by real assets such as U.S. dollars or even bonds, giving them a firmer valuation, unlike most cryptocurrencies such as Bitcoin and Ethereum. These coins are then lent to others, meaning that there’s always the potential they won’t be repaid. “Yields also vary a lot and could be similar to staking, but without all of the volatility,” Zhang says.

What are the risks of staking

While it may seem like you’re getting free money for participating in crypto staking, it’s important to understand that there are significant risks involved:

The underlying cryptocurrency is volatile

“The biggest risk is price movement in the crypto you are staking,” says Rajcevic. “So while a 20 percent yield might sound attractive, if the crypto drops 50 percent in price, then you will come out a loser.” The price for earning staking rewards is bearing the cryptocurrency’s potential downside. In this respect, the risks are much higher than with a savings account, where your principal is insured, or even a dividend stock or ETF, where the volatility is much less than with cryptocurrency.

Potential rewards may be too good to be true

If you’re working with a cryptocurrency or platform that promises huge rewards, you need to be careful. “Smaller cryptos will normally offer higher rewards, but please do your own research,” says Rajcevic. “Many of these projects end up being hyperinflationary or failing. So even though you may receive a 150 percent yield, the value of the crypto you receive may continue to decrease, leaving you with a worthless bag.”

You may have to lock up your cryptocurrency

Some staking partners may require you to lock up your cryptocurrency for a period of time to participate. Rajcevic points to some exchanges that could lock up your coins for as much as 180 days, meaning you’ll be unable to un-stake them and sell. “So if the value of the crypto drops substantially while you are in the lock-up period, you are forced to wait until the time ends and you can un-stake,” he says.

Hacking

Hacking could potentially hit either a platform or a given cryptocurrency, so you’re bearing those risks if you continue to hold individual cryptocurrencies. “Staking platforms that are trusted by millions of people and have been around for a long time now are still prone to hacking or cyber security threats,” says Minea. “This is the main reason for some crypto investors choosing to stake their tokens on .”

Fraudulent or insecure staking platforms

Some staking platforms may advertise very high returns in order to persuade clients to participate without fully considering what they’re getting into. So it’s important that crypto owners carefully vet any platform. “Depositing and staking your tokens on a platform that is not trustworthy may result in the loss of funds and rewards,” says Minea. “It’s important to conduct this type of research on platforms that are not that popular.”

Should you stake your cryptocurrency holdings

If you’re thinking about staking your cryptocurrency, you’ll want to consider a few things before getting started. The most important question to ask yourself is whether staking aligns with your investment thesis. Are you looking to trade crypto for profit or are you looking to hold it for a longer period? If you’re looking for a quick trade, staking might not be for you, especially if the platform requires a lock-up. If you think cryptocurrency has a long and prosperous future, then maybe agreeing to a lock-up where you can’t sell is worth it. The staking rewards may be just gravy to you then. Naturally, you’ll also want to consider the risks mentioned above and any other that might pertain to your specific cryptocurrency or staking platform. And when you stake crypto assets, you’ll want to understand the conditions of any agreement, says Minea. These conditions include: Whether you’re required to lock up your assets and for how long What rate of return you could potentially earn What minimum amount, if any, that’s required to lock up What the maximum reward per user is or the maximum amount that can be staked What the size of the total reward pool is, if any These elements all play into whether it makes sense for you to participate in staking and, ultimately, how much you can earn. You’ll have to make the decision as to whether the potential returns are worth the risks you’re running.

Bottom line

Cryptocurrency staking offers the owners of cryptocurrency a way to earn income that’s separate from just trading the coins. While the income may be a nice perk of holding a coin and seem to be risk-free, it’s important to remember the downsides of owning and trading crypto, ones that potentially vastly outweigh what in many cases are relatively small staking rewards.

Learn more

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. SHARE: Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money.

Related Articles