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Key Takeaways

Staking is when you lock cryptocurrency to support the security and functionality of a blockchain, earning rewards in return.

Popular among crypto holders, staking allows investors to support their favorite blockchains while growing their holdings over time.

Staking is only available in certain blockchains that use the Proof of Stake consensus mechanism. Examples include Ethereum, Solana, Cardano, Avalanche, Polkadot, Cosmos, and many others.

Although staking can increase your crypto holdings, it’s important to consider potential risks, including loss of funds due to volatility, slashing, or technical failures.

What Is Staking in Crypto?

Staking is the process of locking up a certain amount of cryptocurrency to help secure and support the operations of a blockchain network. By doing so, stakers are rewarded with additional cryptocurrency, making it a popular method for investors to earn passive income. Staking is an important part of Proof of Stake blockchains.

What Is Proof of Stake?

Proof of Stake (PoS) is a consensus mechanism used to verify and validate transactions. It was created in 2011 as an alternative to the Proof of Work (PoW) mechanism used by Bitcoin.

The main difference between PoW and PoS is that PoS does not rely on mining, which is a resource-intensive process. Instead of having miners use computational power to solve complex math problems, PoS networks rely on validators selected based on the number of coins they hold and are willing to stake.

How Does Crypto Staking Work?

In short, staking involves locking up your cryptocurrency to participate in the activities of a blockchain network. The process may differ depending on the blockchain, but here's how it typically works:

1. Selection of validators: In PoS blockchains, validators are chosen based on a combination of factors, including the number of coins staked, the length of time they’ve been staked, and sometimes random selection.

2. Validation of transactions: Once selected, the validator is responsible for checking and validating transactions, ensuring they are legitimate.

3. Block creation: The validated transactions are grouped into a block, which is then added to the blockchain, which is essentially a distributed ledger.

4. Rewards: As a reward for their work, validators earn a portion of the transaction fees and, in some cases, new cryptocurrency coins.

Types of Staking

Depending on your level of technical expertise and the amount of crypto you want to stake, there are different ways to do it. Some of the most common types of staking include:

Solo or self-staking: Involves running a validator node. This option gives you the most control but requires significant technical knowledge and responsibility. If not done properly, you may lose your assets due to slashing penalizations.

Exchange staking: Some cryptocurrency exchanges offer staking services, providing the easiest way to stake without handling the technicalities yourself. This method is also known as “staking as a service”. For example, you can earn daily rewards with Binance ETH Staking.

Delegated staking: You can delegate your coins to a trusted validator or staking service, allowing them to handle the technical aspects. Some altcoins offer this option directly from their native crypto wallets.

Staking pools: Pooled staking allows you to stake coins with other users, increasing your chances of earning rewards without the need to run your own node.

What Is a Staking Pool?

A staking pool is a group of cryptocurrency holders who combine their staking power to increase their chances of being selected as validators. By pooling resources, participants can earn staking rewards proportionally to their contribution to the pool.

This option is especially beneficial for smaller investors who may not have enough coins to meet the minimum staking requirements. However, it’s essential to research and choose a reputable staking pool, as fees and security can vary.

Staking vs. Liquid Staking

Liquid staking is a newer form of staking that allows users to stake their assets without losing liquidity. Unlike conventional staking, where assets are often locked and inaccessible during the staking period, liquid staking introduces mechanisms that enable users to maintain liquidity while still earning staking rewards.

One common approach involves issuing liquid staking tokens (LSTs), which are tokens that represent the staked assets. For instance, when you stake ETH on Binance, you will receive WBETH in return, which can be traded or used elsewhere without compromising the ETH staking rewards. Similarly, when you stake ETH on a platform like Lido, you will receive an LST called stETH in return.

There are also platforms that allow direct staking without issuing LSTs, known as native liquid staking, as seen with ADA on the Cardano blockchain. This innovation gives users the benefits of staking while retaining the ability to use their assets freely.

The Advantages of Staking Your Crypto

Staking is a way to make your idle assets work for you, meaning you can generate rewards while helping secure your favorite blockchain networks. Crypto staking is particularly common among long-term crypto holders who want to get the most out of their holdings.

Why stake?

Earn rewards: Staking allows you to earn additional cryptocurrency by holding your coins in a staking wallet, which can be a great way to generate passive income.

Support the network: By staking, you help secure the network and ensure its proper functioning, contributing to its overall health.

Governance participation: In some networks, staking grants you voting rights, allowing you to influence the network’s future direction.

Energy efficiency: Unlike PoW mining, staking requires significantly less energy, making it a more environmentally friendly option.

Is Staking Crypto Worth It?

Yes. It’s usually worth staking your idle crypto assets to generate passive income – especially if you are a long-term holder and want to support the project. However, the potential rewards and risks can vary depending on the cryptocurrency and platform of choice. 

For example, if a DeFi staking platform offers great returns but fails to provide security, your staked assets could be stolen or lost. Market volatility is another risk factor that may offset rewards or cause losses.

Risks of Staking

While crypto staking can generate rewards, it also involves risks. Some of the potential risks of staking include:

1. Market volatility: If the price of the crypto you are staking drops significantly, there is a good chance your staking rewards won’t be enough to cover your losses.

2. Slashing risk: If you become a PoS validator, you need to ensure your staking operations are working as intended. Validators who act maliciously or fail to maintain their node can be penalized, resulting in a loss of staked funds.

3. Centralization risk: If a small number of validators control most of the staked coins, it could lead to centralization, which may threaten the network’s security.

4. Technical risk: Some types of staking require locking up your coins for a specific period. Technical issues, like smart contract mistakes or software bugs, can result in loss of access or frozen funds.

5. Third-party risk: If you stake through a third-party service, you are trusting others with your funds. If the platform gets hacked, your funds may be at risk. DeFi platforms may also involve similar risks, especially when you are required to grant full access to your crypto wallet.

How to Stake Crypto in 2024

1. Choose a PoS cryptocurrency: Select a cryptocurrency that supports staking. Ensure you understand the staking requirements and rewards.

2. Set up a wallet: Use a wallet compatible with staking. It’s safer to use popular wallets, such as Binance Web3 Wallet, MetaMask, or TrustWallet.

3. Start staking: Follow the network’s instructions to stake your coins, either by running a validator node, delegating to a validator, or joining a staking pool.

Keep in mind that the Web3 wallets are just interfaces to staking services and do not control the underlying protocols. Give preference to well-established blockchains like Ethereum and Solana and do your own research before taking financial risks.

How Are Staking Rewards Calculated?

Staking rewards vary by network and are often determined by factors such as:

The amount of cryptocurrency you stake.

The length of time you've been staking.

The total number of staked coins in the network.

The network’s transaction fees and coin inflation rate.

In some blockchains, rewards are distributed as a fixed percentage, making it easier to predict your earnings. Staking rewards are often measured by their estimated annual returns, i.e., annual percentage rate (APR).

Can You Withdraw Staked Crypto?

Usually, yes. You should be able to withdraw your staked crypto at any time. However, the exact mechanisms and rules will vary from one staking platform to another. In some cases, withdrawing staked assets early may lead to partial or total loss of the staking rewards. Check the staking rules of the blockchain or platform you are using.

It’s worth noting that the Ethereum Shanghai upgrade of 2023 enabled staking withdrawals on the Ethereum network. The upgrade enables ETH stakers to opt in to automatically receive their staking rewards and withdraw their locked ETH at any time.

Why Can’t You Stake All Cryptocurrencies?

Staking is specific to PoS blockchains. Cryptocurrencies like Bitcoin, which operate on a PoW consensus mechanism, cannot be staked. Even within PoS networks, not all cryptocurrencies support staking, as they may use different mechanisms to incentivize participation.

Closing Thoughts

Staking cryptocurrency offers a way to participate in blockchain networks while earning rewards. Still, it’s crucial to understand the risks involved, including market volatility, third-party, slashing, and technical risks. By carefully choosing your staking method and thoroughly researching the network, you can effectively contribute to the blockchain ecosystem and potentially earn passive income.

Further Reading

What Is Liquid Staking?

What Is Proof of Stake (PoS)?

Liquid Staking Token (LST)

Proof of Work (PoW) vs. Proof of Stake (PoS)

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Picking the right crypto exchange is crucial for a smooth start in the crypto market! In 2025, with hundreds of exchanges vying for attention, beginners need to know how to prioritize security, low fees, and ease of use while avoiding pitfalls like hidden fees or poor security.
This guide explores the top exchanges, key features to focus on (like liquidity, fiat support, and staking options), and red flags to steer clear of. Start trading smarter with confidence!
Key Factors to Prioritize When Choosing an Exchange
To find the right exchange, focus on these critical factors:
Security: Opt for exchanges with robust security measures like two-factor authentication (2FA), cold storage for most assets, and insurance against hacks. For example, Kraken has never been hacked and conducts regular audits, making it a top choice for security.Low fees: Fees can eat into profits. Binance offers maker/taker fees starting at 0.1%, with a 25% discount for using BNB. In contrast, Coinbase may charge higher fees (0.4%-0.6% on Coinbase Pro), so compare fee structures carefully.Ease of use: Beginners need intuitive interfaces. Coinbase shines with its simple design and free educational resources, while Binance caters to both novices and pros with customizable interfaces.High liquidity: Liquidity ensures fast trades with minimal price slippage. Binance leads in trading volume, followed by Coinbase and Kraken, reducing volatility risks.Fiat support: If you want to deposit/withdraw in USD, EUR, or other currencies, choose exchanges with multiple payment methods like bank transfers or cards. Binance supports over 50 fiat currencies, while Coinbase integrates well with U.S. banks.Staking options: Staking lets you earn passive income. Kraken supports staking for 16 coins like ETH and ADA with up to 20% yields, while Binance offers staking for over 23 coins.

Top Exchanges for Beginners in 2025
Based on the above factors, here are the best exchanges for beginners in 2025
Binance:Pros: Low fees (0.1%), highest liquidity, supports over 500 coins and 50 fiat currencies. Offers staking and futures trading.Cons: Interface can feel complex for absolute beginners. Some restrictions in the U.S. (Binance.US).Best for: Beginners seeking portfolio diversification and low fees.Coinbase:Pros: User-friendly interface, free educational content, strong security (96% of assets in cold storage). Supports deposits via cards and bank transfers.Cons: Higher fees (0.4%-0.6% on Coinbase Pro). Limited selection of smaller coins.Best for: Beginners prioritizing simplicity and security.Kraken:Pros: Top-tier security (never hacked), low fees (0.16% maker, 0.26% taker), high-yield staking options.Cons: Unavailable in some U.S. states (e.g., New York). Customer support mainly via email.Best for: Beginners focused on security and staking.Gemini:Pros: Strong security (SOC 1, SOC 2 certifications), simple interface, supports 7 fiat currencies.Cons: Higher fees (0.2% maker, 0.4% taker) and fewer coins (80+).Best for: U.S.-based beginners seeking safety and ease of use.

Selection tip: Sign up for 2-3 exchanges to compare interfaces and fees. For example, use Coinbase for learning basics and Binance for low-cost trading.
Red Flags to Avoid
Watch out for these warning signs to protect your funds:
Hidden fees: Some exchanges charge high fees for fiat deposits/withdrawals (e.g., 2.5% PayPal fee on Gemini) or inactivity fees. Always review the fee policy.Poor security: Avoid exchanges without 2FA, cold storage, or a history of hacks (e.g., Binance and KuCoin faced breaches). Check if the exchange has insurance funds like Binance’s SAFU.Low liquidity: Exchanges with low trading volumes can cause significant price slippage. Verify trading volume on CoinMarketCap before committing.Weak customer support: Platforms with only chatbots or slow email responses (e.g., Coinbase in some cases) can be problematic during issues. Opt for exchanges with 24/7 live chat or phone support, like Kraken.Overhyped promotions: Be wary of exchanges promising high profits or large bonuses without transparency. Check reviews on X or Reddit for authenticity.

Safety tip: Move crypto to a cold wallet (e.g., Ledger) after buying to minimize exchange-related risks. Keep only what you need for trading on the platform.
How to Get Started with an Exchange
Follow these simple steps to begin:
Research and compare: Based on your needs (low fees, security, staking), pick 1-2 exchanges like Coinbase or Binance.Sign up and verify: Create an account and complete KYC (identity verification) to unlock fiat deposits/withdrawals.Deposit funds: Use bank transfers (often free) or cards to deposit USD, EUR, or other currencies.Buy crypto: Start with popular coins like Bitcoin (BTC) or Ethereum (ETH). Use limit orders to save on fees.Secure your account: Enable 2FA, use a strong password, and store recovery keys safely.Explore features: Try staking on Kraken or futures trading on Binance (once comfortable).
Conclusion
Choosing the best crypto exchange in 2025 requires balancing security, fees, ease of use, liquidity, and fiat support. Binance is ideal for beginners due to its simplicity, while Coinbase and Kraken suit those seeking low fees and advanced features like staking. Avoid exchanges with hidden fees, weak security, or low liquidity by researching thoroughly and checking reviews on X. With the right preparation, you can trade confidently and securely!
Disclaimer: Cryptocurrency investments carry high risk. Always conduct your own research and consult a financial advisor before making decisions. Markets can be highly volatile, and past performance does not guarantee future results.
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