What is Staking?

Staking is locking cryptocurrency to participate in blockchain operations (validating transactions, securing the network) in exchange for rewards. It's how Proof of Stake blockchains achieve consensus.Types of staking:Network staking: Lock tokens to become a validator or delegate to one (ETH, SOL, ADA)DeFi staking: Lock tokens in protocols for rewards (often called 'farming')Liquid staking: Stake while maintaining liquidity via derivative tokens (stETH, rETH)Typical rewards: 3-15% APY depending on the network and market conditions.Risks: Slashing (penalties for validator misbehavior), lock-up periods, token price volatility, smart contract bugs (for liquid staking).Proof-of-Stake consensus explained: In Proof of Stake networks, validators lock tokens as collateral to propose and verify new blocks. If they act honestly, they earn rewards; if they misbehave or go offline, a portion of their stake is slashed as punishment. This mechanism secures the network without the energy-intensive mining required by Proof of Work. Ethereum's transition to PoS in 2022 reduced its energy consumption by over 99%.Rewards and lock-up considerations: Staking APY typically ranges from 3% to 20% depending on the network and total amount staked. Some chains require lock-up periods where staked tokens cannot be withdrawn, ranging from days to weeks. Liquid staking derivatives like Lido's stETH and Rocket Pool's rETH solve this by issuing a tradable token representing your staked position, allowing you to earn staking rewards while still using your capital across DeFi protocols.