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Staking is a way to put your cryptocurrency to work. Instead of just holding coins in a wallet, you commit them to a blockchain network to help verify transactions, and in return, you may earn rewards. It's sometimes compared to earning interest on a Savings Account, but the mechanics and risks are quite different. Understanding both is important before you start.

How staking works

Staking is used by blockchains that run on Proof of Stake, like Ethereum. In this system, validators are chosen to confirm transactions based partly on how much crypto they've committed to the network. The more you stake, the higher your chance of being selected. When a validator successfully adds a block to the chain, they receive rewards, extra tokens paid out by the protocol.

You don't need to run your own validator. Most people stake through an exchange or a staking pool, where a third party handles the technical side. This is called delegated staking: your coins are committed on your behalf, and you receive a share of any rewards generated.

Staking replaces the energy-heavy process used by Bitcoin's Proof of Work system. Proof of Stake networks consume far less electricity to operate, which makes them a more efficient alternative for securing a blockchain.

Benefits and risks of staking

The main appeal of staking is passive rewards: your coins generate returns simply by being committed to the network. You're also contributing to the security and operation of the blockchain, something that has value beyond the financial return.

That said, staking carries real risks you should understand before getting started:

Locked funds. Staked coins are typically locked for a set period. You can't sell them quickly if the market moves against you.

Price volatility. Even if your staking rewards are growing in number, the underlying value of your coins and rewards can drop significantly. Returns are not guaranteed.

Slashing. If the validator you're staking with misbehaves or goes offline, part of your stake can be penalized. This is called slashing, and it can reduce your balance.

No regulatory protection. Staking in the EU and EEA is currently unregulated. There's limited legal recourse if something goes wrong, unlike traditional savings or regulated investment products.

If you're looking for lower-risk ways to make your money grow, explore bunq's Savings Account or other investment options in the app first.

Frequently asked questions

Which cryptocurrencies can be staked?

Only cryptocurrencies that use Proof of Stake can be staked. Ethereum (ETH) and Solana (SOL) are among the most widely staked. Bitcoin uses Proof of Work and cannot be staked, validators in that system earn rewards through mining instead.

What is APR in staking?

APR stands for Annual Percentage Rate, the expected yearly return from staking, expressed as a percentage. It's variable, not fixed or guaranteed. The rate changes as more people join or leave the staking pool, and as the network's reward schedule shifts. Treat any APR figure as an estimate, not a promise.

What does slashing mean?

Slashing is a penalty applied to validators who break the rules of the network, for example, by going offline repeatedly or attempting to approve fraudulent transactions. A portion of the staked coins is forfeited as a result. If you're using delegated staking through a pool or exchange, slashing can affect your balance, not just the validator's.