Staking is a method of keeping or investing bitcoins in order to receive rewards and interest. It makes use of the Proof of Stake (PoS) consensus mechanism, which is how some blockchains add new blocks, validate transactions, and safeguard the network. Depending on how much cryptocurrency they have staked and how long they have kept it, the validators chosen determine PoS.
CeFi (Centralized Finance) platform staking and DeFi (Decentralised Finance) platform staking are the two main categories of staking. Through CeFi staking, users stake their cryptocurrency and receive passive profits after depositing it in centralized exchanges. In contrast, DeFi staking allows users to stake directly in a smart contract or pool by connecting their wallet to a DeFi protocol. They can earn staking tokens, which are tokens that reflect the staked assets and can be used or traded further.