Ethereum staking paid out roughly 3-4% annually in 2024 — similar to a high-interest savings account, but denominated in ETH. Cosmos validators earned closer to 15%. Solana stakers got around 6-7%. These aren't promotional figures; they're baseline network rewards. Here's how staking actually works and whether it makes sense for your situation.
What Is Staking?
Staking is the process of locking up cryptocurrency to help validate transactions on a proof-of-stake blockchain. In return, you earn a portion of the network's transaction fees and newly issued coins.
Think of it as the crypto equivalent of earning interest. Instead of a bank paying you to hold your money, the blockchain protocol pays you to secure the network. The more you stake, the more you can earn.
Proof of Stake vs Proof of Work
Bitcoin uses proof of work — miners compete to solve computational puzzles to add new blocks. This requires specialized hardware and enormous amounts of electricity.
Proof of stake replaces that competition with collateral. Validators put up their own coins as a security deposit. If they behave honestly, they earn rewards. If they try to cheat the network, they lose their stake (called slashing). This makes proof of stake far more energy-efficient.
Ethereum moved from proof of work to proof of stake in September 2022 — an event called The Merge. Most newer blockchains launched with proof of stake from the start.
Two Ways to Stake
Direct Staking
You move your coins to a compatible wallet and delegate them to a validator or run your own validator node. This requires some technical setup and typically a minimum balance. Ethereum's native staking requires 32 ETH, which is out of reach for most individuals. Solana and Cosmos have much lower minimums — sometimes just a few dollars worth.
Liquid Staking
Liquid staking protocols like Lido (for ETH) let you stake any amount and receive a receipt token in return (stETH in Lido's case). That receipt token represents your staked position and continues earning rewards. The advantage: you can still use that token in DeFi applications, so your capital isn't completely locked up.
Exchange Staking
Most major exchanges offer staking programs. You hold your coins on the exchange, opt into staking, and receive periodic payouts. The yields are usually slightly lower than direct staking because the exchange takes a cut, but the process is extremely simple.
The downside: you're trusting the exchange to custody your coins. If the exchange fails, so does your staked position. For significant amounts, self-custody staking is safer.
Coins That Can Be Staked
Not all cryptocurrencies support staking. Here are common ones with approximate 2024 network yields:
- Ethereum (ETH): 3-4% annually
- Solana (SOL): 6-7% annually
- Cosmos (ATOM): 14-18% annually
- Cardano (ADA): 3-5% annually
- Polkadot (DOT): 14-16% annually
Higher yields often correlate with higher inflation rates — the network is creating more coins to pay stakers, which can dilute value if demand doesn't keep up. ATOM's high yield reflects higher token inflation, not necessarily better returns in fiat terms.
Risks to Understand Before Staking
Lock-up periods: Some networks require you to wait 7-28 days to unstake. During a sharp market downturn, you can't sell quickly.
Slashing: If you run your own validator and it behaves incorrectly (goes offline, double-signs), you can lose a portion of your stake. This risk doesn't apply when you delegate to a reputable validator.
Smart contract risk: Liquid staking protocols introduce smart contract code that could have bugs. This adds a layer of risk compared to direct staking.
Price risk: Staking rewards are paid in the native coin. If SOL drops 40% while you're earning 6% yield, you still lost in fiat terms.
Canadian Tax Treatment
In Canada, staking rewards are generally treated as income at the time of receipt, based on the fair market value of the tokens when you receive them. When you eventually sell those tokens, you'll also have a capital gain or loss. Keep records of the quantity and value of each reward received.
The CRA has not published definitive guidance on all forms of crypto staking, so consulting a tax professional familiar with crypto is worth considering for larger staking positions.
Getting Started
If you want to start with staking but haven't moved your crypto off exchanges yet, ChangeNOW makes it straightforward to swap into stakeable assets without creating an account. Affiliate link — we may earn a small commission at no extra cost to you.
For a fully automated crypto income strategy that goes beyond staking, Stoic AI manages your portfolio using quantitative strategies on Binance. It's not staking in the traditional sense, but it's another route to passive crypto exposure. Affiliate link — we may earn a small commission at no extra cost to you.
Start small. Stake one asset you already hold. Watch how the rewards accumulate over 30-60 days before making it a larger part of your strategy.