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Understanding Staking
Understanding Staking

An explanation of staking, as well as rewards and risks

Katya Michaels avatar
Written by Katya Michaels
Updated over a week ago

Staking lets you earn additional rewards with your crypto by contributing to the Proof of Stake (PoS) network of a particular asset. When you stake your crypto, you make the underlying blockchain of that asset more secure and more efficient. In exchange, you are rewarded with more assets from that specific network. This return varies depending on the blockchain, what assets you are staking, and through which provider.

To generate staking rewards on a Proof of Stake blockchain, a node has to designate a certain amount of tokens on the network as a stake. This is similar to a safety deposit. The chance of that node being chosen to validate the next block is directly proportional to the number of tokens being staked, so the more tokens staked – the more rewards can be earned. A node can be maintained by a single user, or nodes can be run by staking providers, pooling stakes from multiple users.

If the node successfully validates a block, it is awarded the staking reward, and on some blockchains, also a part of the network transaction fees. This is similar to a miner being rewarded in Proof of Work chains. Validators lose part of their stake if they approve a fraudulent transaction — this incentivizes them to only approve valid transactions. Staking allows you to participate in this reward system.

Risks Involved

Staking of assets in MEW is provided by integrated partners. Our partners will be responsible for maintaining your stake and validator. If a validator is down for a prolonged period of time, there are risks of having your staked assets slashed. Therefore, do your own research on our staking providers, and decide for yourself whether you trust them with your stake.

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