Cryptocurrency staking has emerged as a cornerstone of modern blockchain networks, offering users a way to earn passive income while contributing to network security and decentralization. If you're familiar with crypto basics but new to staking, this guide breaks down everything you need to know—how it works, the different types, risks involved, and how to get started on major blockchains like Solana and Ethereum.
Whether you're holding SOL or ETH, staking allows your assets to work for you. But before diving in, it’s important to understand the mechanics, benefits, and potential pitfalls.
Understanding Proof of Stake and Crypto Staking
Most major blockchains today use a Proof of Stake (PoS) consensus mechanism instead of the energy-intensive Proof of Work used by older networks like Bitcoin. In PoS systems—such as Solana and Ethereum—validators are responsible for verifying transactions and maintaining network integrity.
To become a validator or support one, users can stake their tokens (like SOL or ETH) as collateral. This process locks up digital assets to help secure the network. In return, participants earn staking rewards, typically paid out in additional tokens.
👉 Discover how staking can grow your crypto portfolio over time.
This economic model incentivizes honest behavior: the more users stake, the higher the cost for malicious actors to attack the network. As a result, staking enhances both security and decentralization.
Native Staking: Direct Participation in Network Security
Native staking involves directly locking your tokens with a validator. On networks like Solana and Ethereum, this is the foundational method for earning yield through staking.
There are three primary ways to participate:
- Solo Staking: Run your own validator node. This requires technical expertise and a significant stake (32 ETH on Ethereum).
- Delegated Staking: Delegate your tokens to an established validator who handles operations. You share in the rewards while avoiding technical overhead.
- Staking-as-a-Service: Use third-party platforms that manage staking for you—for a fee.
Rewards depend on factors such as the amount staked, staking duration, and network conditions.
The upside? You’re directly supporting network decentralization and earning consistent passive income. The downside? Your funds may be locked, exposing you to market volatility and slashing risks.
Risks of Native Staking
While rewarding, native staking isn’t without risk:
- Market Volatility: Even if rewards accrue, falling token prices can erase gains.
- Lock-up Periods: Some networks impose mandatory unbonding periods (e.g., up to 10 days on Solana), limiting liquidity.
- Slashing Penalties: Validators who act dishonestly or go offline may be penalized, potentially reducing stakers’ balances.
- Custodial Risk: Using third-party services means trusting their security practices.
Liquid Staking: Unlocking Flexibility Without Sacrificing Rewards
One of the biggest drawbacks of native staking is illiquidity—your assets are locked and can’t be traded or used elsewhere. Enter liquid staking, a DeFi innovation that solves this problem.
Instead of staking directly with a validator, you deposit tokens into a smart contract or stake pool. In return, you receive a liquid staking token (LST) that represents your staked position. For example:
- Stake SOL → receive PSOL, JitoSOL, or mSOL
- Stake ETH → receive weETH, stETH, or cbETH
These LSTs are fully tradable and can be used across DeFi—swapped, lent, borrowed against, or even re-staked—while still earning underlying staking rewards.
This flexibility makes liquid staking ideal for active crypto investors who want yield without sacrificing access to their capital.
👉 Learn how liquid staking maximizes yield opportunities in DeFi.
Risks of Liquid Staking
Despite its advantages, liquid staking introduces new complexities:
- Smart Contract Risk: Platforms rely on code; bugs or exploits could lead to fund loss.
- Validator Risk: If the platform’s chosen validators are slashed, your returns may suffer.
- Market Volatility: LSTs can trade at a discount to their underlying value during market stress.
- Regulatory Uncertainty: Regulators may classify LSTs as securities, impacting availability.
Staking on Solana: Native vs. Liquid Options
Solana supports both native and liquid staking, giving users flexibility based on their goals.
Native Staking on Solana
When you stake SOL natively, you choose a validator to delegate your tokens to. Two key concepts help assess network health:
- Supermajority: The top validators controlling over 2/3 of staked SOL. They play a critical role in consensus.
- Nakamoto Coefficient: A measure of decentralization. A higher score means better resistance to centralization and censorship.
You can support decentralization by staking with smaller validators outside the supermajority—helping grow the network’s resilience.
Liquid Staking Providers on Solana
Solana’s liquid staking ecosystem is led by:
- Phantom (PSOL)
- Jito (JitoSOL)
- Marinade (mSOL)
- Sanctum (sSOL)
Each offers seamless integration with wallets and DeFi protocols, enabling users to compound yields across lending markets and DEXs.
Staking on Ethereum: Accessibility Through Liquid Solutions
Unlike Solana, Ethereum requires exactly 32 ETH to run a solo validator—making direct participation inaccessible for most. However, liquid staking has democratized access.
Top Ethereum liquid staking providers include:
- Lido (stETH) – ~37% market share
- Coinbase (cbETH) – ~22%
- Binance & Kraken – significant presence
These platforms allow users to stake any amount of ETH and receive LSTs that accrue rewards in real time.
By participating—even indirectly—users help strengthen Ethereum’s security post-Merge and contribute to its decentralized future.
How to Stake with Phantom Wallet
Phantom simplifies staking across chains:
Stake SOL Natively or with LSTs
- Open Phantom wallet
- Go to the SOL asset tab → click “Start earning SOL”
- Choose Native (pick a validator) or Liquid (get PSOL)
- Confirm transaction
- View staked balance and LST holdings in your wallet
Liquid Stake ETH via Third Parties
Using Ether.fi as an example:
- Visit app.ether.fi
- Connect Phantom wallet
- Enter amount and click “Stake”
- Receive weETH instantly
This interoperability makes Phantom a powerful tool for managing multi-chain staking strategies.
Frequently Asked Questions (FAQ)
Q: Can I lose money staking crypto?
A: Yes. While staking generates rewards, price drops, slashing penalties, or smart contract failures can result in losses.
Q: Is liquid staking safe?
A: It depends on the platform. Choose well-audited protocols with strong track records and transparent validator operations.
Q: How often are staking rewards distributed?
A: On Solana, rewards are typically distributed daily. On Ethereum and LST platforms, accrual is continuous but redeemable upon unstaking.
Q: Can I unstake anytime?
A: Native staking often has unbonding periods (e.g., 2–10 days). Liquid staking lets you trade LSTs immediately, though redeeming back to native tokens may have delays.
Q: Do I retain ownership when staking?
A: Yes—with non-custodial wallets like Phantom, you control your assets at all times.
👉 Start exploring secure staking options today and put your crypto to work.
Final Thoughts
Crypto staking—whether native or liquid—is more than just a way to earn passive income. It's a fundamental mechanism that powers decentralized networks, aligning user incentives with long-term blockchain sustainability.
As DeFi evolves, liquid staking continues to bridge the gap between yield generation and liquidity freedom. However, always conduct due diligence: assess risks, diversify providers, and never stake more than you’re willing to lose.
With tools like Phantom making staking accessible and intuitive, now is an excellent time to explore how your crypto can do more than just sit in your wallet.