What Is Staking? How to Earn Rewards on Your Crypto
Staking is a way to earn rewards on certain cryptocurrencies by helping to secure their network. If you hold a coin that uses proof of stake — like Ethereum, Solana or Cardano — you can “stake” it to support the network’s operation and receive a yield in return. It’s often described as earning interest on your crypto, though the mechanics and risks are different.
How staking works
Proof-of-stake networks don’t use energy-hungry mining. Instead, participants lock up their coins to become validators (or delegate to one), and the network randomly selects them to confirm transactions and add blocks. Honest validators earn newly issued coins as a reward; the more that’s staked and the longer it’s staked, the more you earn. In practice, most people stake through their exchange or a wallet with a few clicks, rather than running validator hardware themselves.
What returns to expect
Staking yields vary by coin and change over time, and are usually quoted as an annual percentage. They’re typically modest — not the double-digit “guaranteed” returns that scams promise. Be very sceptical of any platform advertising unusually high fixed staking returns; that’s a classic red flag. You can model rewards and compounding with our staking calculator.
The risks
Staking is not risk-free “free money”:
- Price risk is the big one. If the coin’s price falls further than your rewards, you’re still down. Rewards are paid in the same volatile coin you staked.
- Lock-up periods. Some networks require your coins to be locked for a set time, or impose an “unbonding” delay of days before you can withdraw — during which you can’t sell if the market drops.
- Slashing. Validators that misbehave or go offline can be penalised, losing a portion of the stake. Delegating to a poor validator can cost you.
- Platform risk. Staking through an exchange means trusting that exchange — see what happens if an exchange collapses.
Staking and Australian tax
The ATO treats staking rewards as ordinary income. You’re taxed on the AUD value of the rewards at the time you receive them, and that value also becomes the cost base for later working out a capital gain or loss when you eventually sell them. In other words, staking can create a tax bill even before you cash anything out, so keep records of each reward. See our crypto tax guide.
Is it worth it?
Staking can be a reasonable way to earn a yield on coins you intend to hold long term anyway — but it shouldn’t be the reason you buy a volatile coin, and lock-ups reduce your flexibility. Understand the specific network’s rules before you commit, and never stake more than you’re comfortable holding through a downturn.
This is general information only, not financial advice. Staking rewards are not guaranteed and your capital is at risk.
General information only — not financial or tax advice. Verified 2026-08-13; details can change.