What is a Staking?
Quick Definition
Staking is the process of locking up tokens in a blockchain protocol to support its operation or earn rewards.
Full Definition
Staking originated as a way to secure proof-of-stake blockchains like Ethereum, Solana, and Cardano. Validators "stake" — or lock up — their tokens as collateral, and in exchange they're allowed to participate in validating transactions and earning rewards. If they behave honestly, they earn a return; if they attempt to cheat, their staked tokens can be slashed. Staking creates an economic incentive to keep the network secure and honest.
The term has since expanded to cover almost any situation in which users lock tokens in a protocol to earn returns, whether or not it involves actual blockchain validation. Many DeFi protocols use "staking" to describe deposits into yield-generating contracts, governance participation, or even simple lock-up mechanisms that gate access to rewards.
The trade-offs of staking
Staking offers returns, but it comes with trade-offs. The most obvious is reduced liquidity: staked tokens typically can't be transferred, sold, or used elsewhere during the lock-up period. There may also be unlock or "unbonding" periods that delay access to funds. In some cases, staked tokens are exposed to slashing risk if the validator or protocol misbehaves.
For users who want exposure to yield without these trade-offs, yield-bearing stablecoins and other passive-yield mechanisms have emerged as alternatives that don't require staking.
Does Steady require staking?
No. Steady doesn't require any staking, locking, or claiming to benefit from the performance of our underlying assets. Up to 95% of that performance is shared with holders automatically through the rebase mechanism, which grows each holder's position directly in their wallet. You hold Steady, and your position grows over time. That's it.
Related Terms
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Rebase
ReadA rebase is an automatic adjustment to the total supply of a token, where every holder's balance changes proportionally to reflect a new total supply.
Yield Farming
ReadYield farming is the practice of moving crypto assets between DeFi protocols to maximize returns from rewards, fees, and incentives.
Yield-bearing Stablecoin
ReadA yield-bearing stablecoin is a stablecoin that generates a return for its holders, typically derived from the performance of its underlying reserve assets.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
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