Staking Dictionary

Staking Basics

Staking

Staking means committing cryptocurrency to a Proof-of-Stake network to help it operate and remain secure, usually in exchange for rewards. Depending on the network, users can stake by running a validator themselves or by delegating their assets to an existing validator.

Proof-of-Stake (PoS)

Proof-of-Stake is a consensus mechanism used by blockchains to validate transactions and agree on the state of the network. PoS networks use validators that put cryptocurrency at stake as an economic incentive to behave correctly.

Native Staking

Native staking means staking through the blockchain's own Proof-of-Stake mechanism, either by running a validator or delegating to one. There is no separate staking protocol creating another set of conditions on top: staking follows the network's rules for delegation, rewards, unstaking, and penalties.

Custodial Staking

With custodial staking, a third party controls the assets or private keys while staking on the user's behalf. It can simplify the process, but users depend on the custodian to hold and eventually return their crypto.

Non-Custodial Staking

Non-custodial staking allows users to participate in staking without giving a third party control over their private keys. This is particularly relevant to users who want to retain direct control over their crypto while staking, along with the responsibility that comes with self-custody.

Stake

A stake is the cryptocurrency committed to a Proof-of-Stake network. You are still the owner of that crypto, although staked assets are generally unavailable for transfers or other transactions. Some networks use more liquid delegation models where the delegated assets remain spendable. The size of a stake can affect validator participation, voting power, or rewards depending on how the particular blockchain works. You can unstake your assets, but some networks have an unbonding period before they become available again.

Minimum Staking Amount

Some networks or staking services require a minimum amount before a user can participate. The requirement can differ substantially: running a validator may require a large stake, while delegation or pooled staking can have a much lower minimum. Every PoS blockchain has its own set of rules.

Delegation and Validators

Validator

A validator is a participant in a Proof-of-Stake network that validates transactions and takes part in the network's consensus process. The term can refer to the validator as a network entity or, in everyday crypto language, to the person, team, or organization operating it and its infrastructure. Users who don't run their own validator can often delegate crypto to one and receive staking rewards according to the network's rules.

Validator Node

A validator node is the actual infrastructure and software used by a validator to communicate with the blockchain and perform its network duties. So when Guarda asks you to choose a validator, you're essentially choosing the validator/operator to which you want to delegate. Regular users generally don't need to operate one because delegation allows them to participate in staking through existing validators.

Delegation

Delegation is a way to stake crypto without running a validator yourself. You choose a validator, and your coins are counted toward its stake while remaining yours. In return, you can receive a share of staking rewards according to the network's rules, usually after the validator takes its commission. A token holder who delegates their stake to a validator is called a delegator.

Validator Commission

Validator commission is the portion of staking rewards that a validator keeps for operating its service. A lower commission can leave more rewards for delegators, but commission alone isn't enough to determine whether a validator is a good choice.

Validator Uptime

Uptime describes how consistently a validator remains online and performs its network responsibilities. Poor uptime can result in missed rewards and, depending on the blockchain and circumstances, penalties.

Self-Stake

Self-stake is the validator operator's own crypto staked with their validator, rather than crypto delegated by other users. It can be useful when looking at validators because it shows how much of the operator's own capital is committed alongside delegators' funds. However, self-stake alone doesn't tell you whether a validator is reliable or a good choice.

Redelegation

Redelegation allows users to move already-staked crypto from one validator to another without unstaking it first. It is useful if you want to change validators because of commission, performance, or another reason while keeping your assets staked. Networks that support redelegation can impose restrictions on how often or when it can be done.

Starting and Stopping Staking

Activation Period

A staking transaction doesn't always start generating rewards immediately. Some networks have an activation or warm-up period before newly staked assets become fully active.

Bonding

Bonding is the process of committing assets to a blockchain's staking system. Once bonded and active, the assets can participate in staking under the rules of that particular network.

Unstaking

Unstaking means requesting to remove crypto from staking. Depending on the network, the assets often do not become transferable immediately after the request is submitted.

Unbonding Period

The unbonding period is the waiting time between requesting to unstake and receiving freely transferable assets again. During this period, users generally can't send or sell the affected crypto, and reward behavior varies by network. This delay is part of the network's staking and security rules rather than a wallet restriction.

Lock-Up Period

A lock-up period is a period during which staked assets cannot normally be withdrawn or transferred. It shouldn't automatically be treated as another name for unbonding: some staking products have predetermined lock-ups, while unbonding begins when a user decides to leave staking.

Withdrawal

Withdrawal is the process of moving available assets or rewards out of a staking position. The exact meaning depends on the network because withdrawing rewards, unstaking assets, and withdrawing previously unstaked assets can be separate actions.

Staking Rewards

Staking Rewards

Staking rewards are crypto earned for participating in a Proof-of-Stake consensus mechanism. Their size can depend on the network's rules, validator performance, total amount staked, commission, inflation, and other factors.

Reward Rate

The reward rate describes how quickly staking rewards are generated. It isn't necessarily fixed, so a rate shown when staking begins is more of an estimated one than a guaranteed future return.

APR

APR shows the estimated staking reward rate for one year without compounding rewards. It helps users compare staking options, but it doesn't guarantee that exact return: actual rewards can change depending on the network and staking conditions.

APY

APY, or Annual Percentage Yield, represents an annualized return while accounting for compounding. An advertised APY is normally an estimate based on assumptions rather than a promise that the user will receive exactly that percentage.

Compounding

Compounding means adding earned staking rewards back to your stake, so future rewards can be earned on a larger amount. Over time, this can increase your total rewards compared with collecting them without restaking.

Auto-Compounding

Auto-compounding automatically puts eligible staking rewards back into the staking position. It saves users from doing this manually, although whether it is available and how often it occurs depends on the network or staking service.

Claiming Rewards

Some networks require users to manually claim accumulated staking rewards before those rewards become available. Claiming can require an on-chain transaction and therefore may also involve a network fee.

Epoch

An epoch is a set period of time that some Proof-of-Stake networks use to organize staking activity. Depending on the network, staking, unstaking, validator changes, or reward calculations may take effect at the beginning or end of an epoch.

Reward Distribution

Reward distribution describes when and how staking rewards reach participants. Some networks distribute rewards continuously or by epoch, while others require users to claim them or follow a different schedule.

Inflation

Some blockchains create new tokens as part of their staking reward system. This issuance can help incentivize validators and delegators, but it also means a high nominal staking yield shouldn't be considered without looking at the token's broader economics.

Staking Ratio

The staking ratio is the proportion of an asset's eligible or circulating supply currently being staked. On some networks, this figure influences reward rates because rewards are being distributed among a changing amount of staked capital.

Different Ways to Stake

Solo Staking

Solo staking means operating your own validator node rather than delegating to someone else's. It provides greater control but usually requires more capital, technical knowledge, reliable infrastructure, and ongoing maintenance.

Staking Pool

A staking pool combines assets from multiple participants for staking. Pools can lower practical barriers to participation, although users should understand who operates the pool and what additional fees, custody arrangements, or smart contracts are involved.

Pooled Staking

Pooled staking is the act of participating through a staking pool instead of running a validator or, in some cases, delegating directly. It can make staking accessible with smaller amounts but introduces another layer between the user and the network's native staking mechanism.

Staking-as-a-Service

Staking-as-a-Service (SaaS) providers handle validator infrastructure or other technical staking operations for customers. It's useful for users or organizations that want to participate in staking without maintaining validator infrastructure themselves. In that case, provider and custody arrangements need to be researched separately.

Liquid Staking

Liquid staking allows users to stake assets and receive another token representing their staking position. That token can potentially be transferred or used in DeFi while the underlying crypto remains staked, improving liquidity but introducing additional risks that ordinary native staking may not have.

Liquid Staking Token (LST)

An LST is a token received in exchange for assets deposited through a liquid staking protocol. It represents a claim or economic exposure to the underlying staked assets and their rewards, but its market price can differ from the value of the asset it represents.

Restaking

Restaking uses already-staked assets, or certain tokens representing them, to provide economic security to additional protocols or services. The attraction is the possibility of additional rewards; the important part is that additional participation can also mean additional conditions and risks.

Staking Risks

Slashing

Slashing is a protocol-level penalty that can remove part of a validator's stake for certain violations, such as behavior that threatens network consensus. Depending on the network, delegators may also be affected, which is why validator selection matters beyond the advertised reward rate.

Validator Risk

Validator risk covers problems associated with the validator a user chooses, including downtime, poor performance, commission changes, and protocol penalties. Delegating doesn't mean giving the validator ownership of your assets, but the validator's behavior can still affect the staking outcome.

Smart Contract Risk

Staking products built on smart contracts can be exposed to bugs, exploits, or unexpected contract behavior. This is especially relevant to liquid staking, pooled staking, and restaking products that add additional protocol layers beyond native staking.

Liquidity

Liquidity describes how easily an asset can be used, transferred, or sold. Staked assets may have reduced liquidity because of lock-ups or unbonding periods, while liquid staking attempts to address this by issuing transferable representative tokens.

Depeg

A depeg occurs when a token designed to maintain a particular relationship with another asset moves away from that expected value. This matters in liquid staking because an LST may trade on the open market at a different price from the underlying asset it represents.

Network Fee

Staking isn't necessarily free just because it generates rewards. Delegating, claiming, redelegating, or unstaking can require blockchain transactions, and users may need enough of the network's native asset available to pay the corresponding fees.

Market Risk

Staking rewards are usually paid in cryptocurrency, so their fiat value depends on the market price of that asset. A user can earn more tokens through staking while the total value of their position still falls if the asset's price declines significantly. An unbonding or lock-up period can make this risk more important because the assets may not be immediately available to sell.

Governance and Network Participation

Governance

Governance is the process through which eligible participants influence decisions about a blockchain or protocol. Staking assets or delegating them can give users or validators voting rights on proposed changes. The conditions depend on the network.

Governance Proposal

A governance proposal is a formal suggestion submitted for a network or protocol vote. Proposals can cover anything from technical upgrades and parameter changes to how community-controlled funds should be used.

Voting Power

Voting power describes how much weight a participant has when votes are counted. Depending on the blockchain, it can apply to governance decisions, validator participation in consensus, or both, and is often connected to the amount of crypto staked or delegated. How voting power is calculated and used depends on the particular network.