What is Proof of Stake? A Full Beginner’s Guide in 2025

Proof of stake is the blockchain world’s clever way of earning rewards without firing up energy-guzzling mining rigs. Instead of solving complex math problems, participants “stake” their crypto—locking it up to help validate transactions and secure the network. The more you stake, the better your shot at being chosen to add the next block (and pocket some rewards).

But what exactly is staking? Can it help you earn passive income with your cryptocurrency? Is it risky? And what do you need to know before diving in? In this guide, we’ll explain how proof-of-stake works, how Ethereum’s system has evolved, and how you can stake your crypto in 2025—from DIY validators to effortless, beginner-friendly options.

What Is Proof of Stake: Summary

So, what is proof of stake exactly? It’s a consensus mechanism used by many modern blockchains that allows users to lock up (or “stake”) their crypto to help validate transactions and maintain network security. Instead of relying on expensive computing power like in proof of work, proof-of-stake systems select validators based on how much crypto they’ve staked—rewarding them for helping secure the network.

Through this process, a proof of stake blockchain can operate efficiently, remain decentralized, and significantly reduce energy usage. As crypto PoS networks like Ethereum continue to scale, staking has become one of the most popular ways to earn passive income in the crypto ecosystem.

If you’re new to cryptocurrencies, let us suggest that you start with our “What is Bitcoin?” and “What is Bitcoin mining?” posts before reading this one to gain a solid foundation for what we’ll be covering here.

What is Proof of Stake?

Proof of stake is a way for blockchains to agree on what’s true—without using tons of electricity. Instead of using supercomputers to “mine” coins like Bitcoin does, proof-of-stake blockchains ask users to lock up some of their crypto (called staking) to help verify transactions.

In simple terms, if you stake your coins, you get a chance to be picked to confirm a block of transactions. If you’re selected and you play fair, you earn a reward. The more you stake, the higher your chances—but it’s not just about money; the system also includes some random selection to stay fair and secure.

This method is called a consensus mechanism—the rules a blockchain uses to decide what gets added to the digital ledger. Unlike proof of work, which burns energy to stay secure, proof-of-stake blockchains are faster, cleaner, and easier to participate in.

Popular proof of stake cryptocurrencies like Ethereum, Cardano, and Solana use this system to let users help run the network.

What Is Staking?

Staking is how you take part in a proof-of-stake blockchain. Instead of mining with hardware, you lock up (or “stake”) your crypto to help keep the network running. In return, you earn rewards—kind of like earning interest on a fixed deposit, but in the world of crypto.

When you stake your coins, you’re showing the network that you’re invested in its security and stability. If you’re chosen to validate a block and you follow the rules, you earn staking rewards. If you cheat or go offline, you could lose part of your stake (a penalty known as slashing).

You don’t need to be a tech expert to start staking. But we will come to that later after we clear all of the basics.

What Problem Does Proof of Stake Solve?

Proof of stake was created to fix a big issue with earlier blockchains: wasteful energy use. In proof of work systems like Bitcoin, miners run powerful computers to solve puzzles and validate transactions—a process that burns a lot of electricity.

PoS offers a smarter alternative. Instead of using machines to prove effort, users lock up crypto to prove commitment. This shift helps blockchains stay secure and decentralized without the heavy environmental cost. It’s one of the main reasons networks like Ethereum made the switch.

Proof of Stake Vs Proof of Work

The Ethereum proof of stake transition marked a major milestone in blockchain evolution—replacing energy-hungry mining with a leaner, greener model where participants lock up ETH to help secure the network and earn rewards, no heavy machinery required.

How Does Proof of Stake Work?

In a proof-of-stake blockchain, users don’t compete with computing power—they stake coins instead. By locking up crypto as a show of trust and commitment, they get a chance to be randomly selected to validate the next block of transactions.

Here’s how it works: when you stake your coins, you become a validator. Your computer (called a node) stays connected to the network, and if chosen, you get to “forge” the next block. Stakers don’t mine blocks—they help create them in a way that’s faster and far more energy-efficient than proof of work.

The network picks validators based on a few key factors:

• How much crypto is being staked
• How long it’s been staked
• Randomization to avoid centralization or manipulation

If you’re selected and you follow the rules, you earn staking rewards. But if you try to cheat or go offline, you may be penalized—a process known as slashing.

This is the core of the proof of stake consensus: securing the blockchain by rewarding honesty, not horsepower.

Staking with PoS Chains Like Ethereum

When it comes to earning passive rewards in the world of proof of stake crypto, Ethereum leads the pack—but it’s not the only player. Since its transition in The Merge (2022), Ethereum has ditched mining and now runs as a full proof-of-stake blockchain, secured by validators who stake ETH instead of burning energy.

To become a validator, you’ll need to lock up 32 ETH and keep a node online. But don’t worry—most users skip the DIY setup and opt for easier options like staking pools or liquid staking. Platforms like Best Wallet let you stake less than 32 ETH and still earn rewards, often with added flexibility and fewer risks.

Other major PoS blockchains like Cardano, Solana, and Avalanche also offer staking, each with its own rules for delegation, lock-up periods, and reward rates. But the idea is the same: lock your crypto, help secure the network, and earn rewards for playing fair.

Proof-of-Stake Staking Rewards in 2025

In Ethereum,each validator that participates in the forging of a block gets a percentage of the newly minted Ether when it’s created. The more validators the network has, the smaller the proportion of the reward will be.

For example, if 1 million ETH is staked, the max annual reward for each staker could reach 18.10%, however if 3 million Ether are staked, that annual reward rate would drop to 10.45%. You can think of the total amount of new Ether awarded as a pie with a fixed size, and the more validators you have that want a piece of that pie – the smaller each slice will be.

To simplify things there are dedicated staking calculators you can use that will try and estimate how much Ether you’ll make when staking a certain amount of ETH in any certain way.

So where do I sign up?

There are a variety of ways to participate in ETH staking. The primary way is setting up your own validator, however this requires technical knowledge, a dedicated computer and 32 Ether – all of which provide barriers that may keep a lot of people from being able to take part.

To make matters even more complicated, if you don’t set up your validator correctly, or if it goes offline or it is harmful to the network in any way, you may be subject to penalties. These penalties may even include ‘slashing’ – a term referring to the destruction of portions of your stake and even removal from the network.

Staking Pools and Other Solutions

All of the risks I’ve just mentioned are why some additional staking solutions were created. These alternatives allow for the everyday person to stake ETH and earn staking rewards – without the considerable effort or risk of running your own node.

Exchanges

The easiest way to stake for a non tech savvy person would be to use staking services supplied by exchanges. Certain exchanges allow you to stake your coins through their validators even if you only have a small amount for a fee.

This completely eliminates the hassle of running your own validator but requires you to forfeit control over your coins to the exchange. Some exchanges will also allow you to claim your staking rewards immediately and not wait until Ethereum 2.0 reaches the docking phase.

For an elaborate list of staking platforms with the highest staking APY, visit our article on the Best Crypto Staking Platforms for 2025.

Staking Pools

Another option is to join a staking pool. Just like mining pools, staking pools are groups of people joined together in order to get a better chance at forging the next block. Staking pools also allow you to deposit less than the minimum staking amount since all of the funds are pooled together.

If you decide to go with a staking pool it’s important to research certain aspects of the pool:

• Reliability of its validators
• Pool fees
• Customer support
• Pool size
• User reviews
• Whether or not you have to give up your private keys to the pool

Preconfigured validator

Additionally, you can purchase a pre-configured validator. While the initial setup of these validators should be relatively easy you will still need to keep up the ongoing maintenance. This could be a hassle, depending on how tech-savvy you are.

Validator as a Service (Cloud Staking)

These are companies that will allow you to run your own validator on their computers without the need to set it up or maintain it. Since this is your own personal validator, you still have to to deposit 32 ETH and pay a certain fee for this service. The great thing about this option is that it’s relatively easy to set up and you don’t need to give control over your coins to another company.

Source: Staking Rewards

Liquid staking

Liquid staking is an additional feature that can apply to most, if not all of the above staking options. Currently, when staking ETH, the coins are “stuck” and unavailable for trading, lending, or other uses within the crypto ecosystem.

Liquid staking issues stakers with tokens that represent a claim on their staked tokens, which can be utilized and exchanged freely. Once staking withdrawals are enabled, you can redeem these liquid staking tokens for the original staked ETH.

You can learn more about this in our Lido Staked Ether review.

Conclusion

Proof of Stake is an exciting new concept that allows everyday users to participate in securing a certain blockchain while earning passive rewards. Since the transition of Ethereum to PoS via “The Merge”, this consensus mechanism has gained massive exposure.

If you want to read more about this topic you can browse this excellent overview by The Ethereum Foundation. And if you have any more questions feel free to leave them in the comment section below.

References

• Ethereum Foundation Report 2024. Ethereum Foundation, 2024, https://ethereum.foundation/report-2024.pdf.
• Ethereum.org. Ethereum: Build and Use Decentralized Applications. Ethereum.org, 2024, https://ethereum.org.
• “Crypto to USD Chart.” CoinMarketCap, https://coinmarketcap.com/currencies
• Buterin, Vitalik. “Ethereum Whitepaper.” Ethereum.org, 2014, https://ethereum.org/en/whitepaper/.

FAQs

What is proof-of-stake staking?

Proof-of-stake staking is when users lock up their crypto to help secure a blockchain network. In return, they earn rewards for validating transactions and supporting the system.

How does staking work on PoS blockchains like Ethereum?

Instead of mining, validators are chosen to create new blocks based on how much crypto they’ve staked. The process is energy-efficient and rewards honest participation.

Do I need technical skills to stake crypto?

Not necessarily. For instance, solo staking requires setup and 32 ETH, most users stake through wallets or platforms that handle the technical work—making it beginner-friendly.

 

Is staking the same across all blockchains?

No. Each proof-of-stake blockchain—like Ethereum, Cardano, or Solana—has different staking rules, minimum amounts, and reward models. Some even allow flexible staking or liquid staking.

 

Can I lose my crypto while staking?

Yes, but only in specific cases. If a validator misbehaves or goes offline, you may face penalties like slashing. Using trusted platforms or pools helps reduce these risks.

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