Token staking glossary

• Attestation: A digital “yes” vote from a validator saying a block of transactions looks valid.
• Bonding and Unbonding: The times when your crypto is locked in (bonded) or waiting to unlock (unbonding) and can’t be moved.
• Liquid Staking Token (LST): A tradable token that shows you’ve staked your crypto in a liquid staking system.
• Restaking: Putting your already staked crypto (or LST) to work again to help secure other blockchain services.
• Slashing: A built-in penalty that takes away part of a stake if a validator breaks the rules, like approving bad data or going offline.

What token staking means

Staking is the act of committing your crypto to a Proof of Stake network so validators can propose and attest to new blocks in the blockchain. In exchange for strengthening the network, participants earn on-chain rewards that are set by the protocol. For a refresher on fundamentals, read the guide to Ethereum on OpenSea Learn.

Why staking exists in Proof of Stake (PoS)

Staking exists because newer blockchains, like Ethereum, use a system called Proof of Stake (PoS) instead of traditional mining to stay secure. In this system, participants lock up crypto as collateral to become validators, who help confirm transactions and keep the network running. Validators must follow the network’s rules, such as proposing valid blocks and acting honestly. If they fail to do so, they can lose some of the crypto they staked. You can learn more in the Ethereum Merge overview or at ethereum.org.

What you give and get from crypto staking

When you stake crypto, you’re helping the network stay secure and run smoothly by keeping your funds locked and online. In return, the blockchain may give you small rewards over time, which depend on things like how much crypto is staked overall, network rules, and how well the system is running. These rewards aren’t guaranteed and can change based on each network’s conditions.

How validator selection and rewards work

In PoS systems, the network picks certain participants, called validators, to help confirm new blocks of transactions. The selection is based on how much crypto they’ve staked and how reliably they perform. Once a validator is selected and verified, the network updates balances, giving small rewards for good behavior and penalties for errors. If you’re new to how this automation works, read our article on what a smart contract is for a simple overview.

Key roles in a staking system

Validators run the infrastructure

Validators are the people or teams who run the computers that keep a blockchain running. They must stay online, follow the network’s rules, and confirm transactions accurately. If they make mistakes or go offline, their rewards can shrink, and they may face penalties.

Delegators add economic weight

Delegators are regular users who don’t run computers themselves but choose a validator to support with their tokens. They share in that validator’s potential rewards and risks based on how well that validator performs.

Staking methods you can use

Solo or native staking

Think of solo or native staking like running your own mini-server for the blockchain. You download special software that helps verify transactions and keep the network secure, and that makes you a validator. It gives you full independence, but it also means you must keep your computer online, updated, and safe. If it goes offline or makes an error, the network can take a small portion of your staked crypto as a penalty. Before trying solo staking, it’s a good idea to review the web3 safety checklist.

Delegated staking with pools

If running your own setup sounds too technical, you can still take part in staking by delegating your crypto to someone who already runs a validator. You keep your crypto in your own wallet but let the validator use it to strengthen the network. In return, you share in their rewards and risks.

Staking with centralized platforms

Some people prefer to let a crypto exchange or app stake their crypto for them. This is the easiest option but also means the company controls your crypto while it’s staked. You’ll want to read their terms carefully and understand the fees and withdrawal rules.

Liquid staking

This option gives you flexibility. You stake your crypto through a protocol and receive a new token, fittingly called a “liquid staking token” (LST), that represents your staked amount. You can still use that token in other crypto apps while your original funds remain locked. This adds smart contract risk, so it makes sense to research the project’s safety record before trying it.

Restaking 

Restaking means using your staked crypto or LSTs to help secure extra blockchain services, such as data networks or oracles that share information between blockchains. It’s an advanced strategy that can add new ways to participate but also adds technical and penalty risks if something goes wrong. Always research restaking protocols, like EigenLayer, before getting involved.

Lockups and unbonding periods

When you stake crypto, many networks make you wait before you can take it back out. This is called an unbonding period, kind of like a cooldown timer. During that time, your tokens can’t be moved or traded, and they usually stop earning rewards.

The main benefits of staking

Staking helps keep blockchains secure and running smoothly. When you stake, you may earn network rewards, support decentralization by helping spread power across many users, and sometimes gain a voice in project decisions through governance votes. It’s also far more energy-efficient than older mining systems, using locked crypto instead of heavy computer power to confirm transactions. See Ethereum’s energy analysis to understand the environmental cost of staking.

The staking risks

Staking comes with several important risks to understand before getting involved. 

• Slashing can happen if a validator makes errors or goes offline, thereby reducing part of the staked funds. 
• Smart contract bugs or bridge failures can also cause losses in pooled or liquid staking systems, so it’s best to use audited platforms. 
• Lockups mean your tokens may be temporarily unavailable, and market volatility can change their value quickly. 
• Finally, if too much stake is concentrated with a few operators, it can reduce decentralization and increase network risk.

Disclaimer: This content is for informational purposes only and should not be construed as financial or trading advice. References to specific projects, products, services, strategies or tokens do not constitute an endorsement, sponsorship, or recommendation by OpenSea. OpenSea does not guarantee the accuracy or completeness of the information presented, and readers should independently verify any claims made herein before acting on them. Readers are solely responsible for conducting their own due diligence before making any decisions.