What is staking? A helpful FAQ on all things related to crypto staking

Learn the basics of staking

What does it mean to stake? Where do staking rewards come from? We hope this guide can help you answer the basic questions about staking. Let’s dive in.

What is staking, really?

In practical terms, staking means depositing your crypto on the blockchain, and in exchange, you receive rewards every so often in that same cryptocurrency. For example, if I stake ETH, I will earn my staking rewards in ETH.

But what’s the catch? Why does a cryptocurrency pay rewards for staking?

Security, security, security! The more crypto that is staked on the blockchain, the harder it is for that blockchain to be taken over by a bad person or group. Controlling over 50% of the total stake could allow someone to manipulate the blockchain. For example, they could choose to process certain transactions over others, give themselves more crypto, spend more than they have, etc. The public blockchain would effectively become a private blockchain, solely controlled and governed by that single person or group.

To use an example, suppose a blockchain only has $100 in value staked. If one person or group comes and purchases $101 worth of crypto and then stakes all of it, they would have a little over 50% of the entire stake ($101 / $201 total). That means they would have free reign over the entire blockchain. Ethereum, for context, has over $60 billion in ETH staked. Now, that’s secure!

Let’s put it together now in its simplest terms: Staking means earning rewards in crypto for securing the blockchain.

Where do rewards come from?

Rewards come from the blockchain. No single person or group decides when, how much or who to pay. Just like when crypto miners earn bitcoin for example, they earn it from the blockchain itself. Similarly, staking also pays you rewards from the blockchain.

How do I actually stake?

To stake, you need to follow the blockchain requirements for staking. At a minimum, this will require securing your seed phrase (i.e. the private key which controls your funds), running staking software, and also monitoring the software so that you can earn rewards.

With Lantern, you can stake your crypto seamlessly.

How much can I earn from staking?

Rewards fluctuate depending on how much has been staked across the blockchain (i.e. the more crypto that gets staked, the less rewards are earned from staking), the network fees, as well as randomness. In Ethereum, the rewards can change every block, which come every 12 seconds!

See Staking Rewards for the latest, estimated reward rates across different cryptocurrencies.

Should I stake my crypto?

It depends! If you’re holding your crypto for the long term, then staking is a great way to earn more of the crypto you already own and believe in.

However, if you need quick access to your crypto (for trading, spending, etc.), staking may not be right for you. Also, depending on your staking set up, you may take on unnecessary risks (e.g. technical) which puts your stake at risk.

How long does it take to stake or unstake?

You can stake your crypto at any time, however it may take some time to start earning rewards from the network. If there is a queue to start staking, you could be waiting awhile before you start earning rewards. For Ethereum, in most cases, you can expect to start earning rewards in 2-7 days.

Similarly, you can unstake your crypto at any time. There is no minimum amount of time you have to stay staked for and you can exit staking as soon as you start earning rewards if you wish. If there's a long queue to exit, your unstaking may be delayed. With Ethereum staking, it generally takes 3-8 days to exit fully if there is no exit queue. Other blockchains may require a longer unstaking period.

You can monitor the time it takes to enter and exit the queue from here.

How often are rewards paid?

Reward cycles vary depending on the crypto you are staking. For Ethereum, rewards are currently paid approximately every 8 days. If you are selected by the network to propose a block (which happens at random), you will earn the tips and fees associated with that block immediately.

Which cryptocurrencies have the option to stake?

Today, there are many cryptocurrencies which allow you to stake them. The biggest one is Ethereum (ETH), but there are others like Solana (SOL), Avalanche (AVAX), Polygon (MATIC), Cardano (ADA), Polkadot (DOT), and more! In addition, most of the newer cryptocurrencies being launched today allow you to stake them.

Currently Lantern only supports staking for Ethereum, but we hope to support staking for other cryptocurrencies in the near future.

Why should I stake with Lantern?

Lantern offers best-in-class security for your crypto, lower fees, a great UX where you can monitor your staking rewards, customer support and robust reporting. If these factors are important to you, then consider staking with Lantern.

Summary

The next time someone asks you “hey, do you know what crypto staking is all about,” hopefully this guide will help you answer them confidently!

Still have questions? Get in touch with us at support@lantern.finance and we would be happy to answer any questions for you.