How crypto staking works
The staking principle
Staking involves locking your cryptocurrency to help validate transactions on a Proof-of-Stake blockchain. In return, you earn rewards, typically expressed as APY (Annual Percentage Yield).
Simple vs compound staking
| Duration | Simple (5% APR) | Compound (5% APR) |
|---|---|---|
| 1 year | 10,500 € | 10,513 € |
| 3 years | 11,500 € | 11,614 € |
| 5 years | 12,500 € | 12,834 € |
Based on 10,000 € invested, daily compounding for compound column.
Risks to know
- Lock-up period: your funds may be locked for days or weeks.
- Slashing: penalty if the validator acts maliciously.
- Price risk: the token value may drop more than rewards earned.