Staking

Staking is a financial term unique to cryptocurrency markets. It consists of keeping one’s cryptocurrencies locked in a specific network in order to obtain rewards in return, in the form of cryptocurrency. Only certain cryptocurrencies which have a particular blockchain support staking.

By staking a number of cryptocurrencies, you can participate in the validation of transactions on the blockchain and in return receive rewards from the network. The stake, the amount of cryptocurrency staked, remains locked in place as long as the Validator continues to do its work and it cannot be sold or transferred. The stake guarantees the Validator’s goodwill, and if they were to misbehave, the stake would be removed. The algorithm of this consensus mechanism then selects block validators from all those who have staked tokens as collateral.

On some blockchains, staking also allows participation in the governance of the project.

For those who do not have the resources or expertise to open a node and become a validator, staking means owning the native tokens of a given blockchain and depositing them in a third-party service for staking. Staking can be done through centralised exchanges, in staking platforms or in decentralised protocols and dapps such as Yearn Finance or Compound. The rewards for staking are variable and are expressed in APY (Annual Percentage Yield).

Correlated words

Liquid Staking

Liquid Staking allows the staked assets to be simultaneously utilised in other protocols, maintaining liquidity while earning rewards.

TVL

TVL (Total Value Locked) represents the cumulative value of cryptocurrencies locked in a DeFi protocol or decentralised application (dApp).

Wrapped Token

A Wrapped Token represents the value of one crypto on a different blockchain standard, facilitating cross-chain transactions and usage.

Bonding

Bonding is the process of locking up cryptocurrencies as a commitment to participate in network activities and receive benefits.

Staking Derivative

Staking Derivatives are financial products derived from staking, with values dependent on the performance of staked tokens and network reward

Yield Farming

Yield Farming, an essential aspect of decentralised finance (DeFi), allows cryptocurrencies to be used to earn interest.

Swap

Swap is the exchange of one crypto token for another via a decentralised platform, enabling seamless asset conversion.

Smart Contract

A Smart Contract is a digital contract with terms automatically executed by the blockchain when predetermined conditions are met.

Crypto Lending

Crypto Lending involves providing loan services using cryptocurrencies on centralized or decentralised platforms.

ERC-20

ERC-20 is a token standard on Ethereum, allowing many projects to create and launch their own cryptocurrencies on its platform.

DEX

A Decentralized Exchange (DEX) facilitates cryptocurrency trading without intermediaries, directly utilising blockchain technology.

DeFi

Decentralised Finance (DeFi) comprises financial solutions based on blockchain technology, operating in a decentralised manner.

DApp

DApp, or Decentralised Application, allows users to interact with blockchain-based services in a distributed network environment.

DAO

A Decentralised Autonomous Organisation (DAO) operates on blockchain principles, automating governance and decision-making.

CeFi

CeFi, or Centralised Finance, is the centralised alternative to DeFi, offering traditional finance-like services on blockchain.

Arbitrage

Arbitrage is the simultaneous buying and selling of assets in different markets to profit from price disparities.

APY

APY (Annual Percentage Yield) in DeFi indicates the annual percentage return earned or paid on an investment or loan.

APR

The Annual Percentage Rate (APR) is the yearly interest rate earned on an investment or charged on a loan, expressed as a percentage.

AMM

Automated Market Makers (AMMs) are smart contracts in decentralized exchanges, facilitating liquidity and trade execution.

Aggregator

An Aggregator collects and presents similar content or services from various sources, exemplified by platforms like Yearn Finance.