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Crypto staking: What it is, how it works, calculator

Crypto staking is a way to earn passive income on your crypto holdings.

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Lead Writer/Spokesperson

Andy Rosen is a former NerdWallet writer who covered taxes, cryptocurrency investing and alternative assets. He has more than 15 years of experience as a reporter and editor covering business, government, law enforcement and the intersection between money and ideas. In these roles, Andy has seen cryptocurrency develop from an experimental dark-web technology into an accepted part of the global financial system. He is based in Boston.

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Chris Davis is a Managing Editor on the Investing team. He has passed the Series 65 (Uniform Investment Adviser Law Exam) and covered the stock market, investing strategies, investment accounts and cryptocurrency. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet.

Published in

Managing Editor

Chris Davis is a Managing Editor on the Investing team. He has passed the Series 65 (Uniform Investment Adviser Law Exam) and covered the stock market, investing strategies, investment accounts and cryptocurrency. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet.

Table of Contents

Table of Contents

Crypto staking rewards are the digital equivalent of interest or dividends, and they can allow owners to earn passive income while holding onto their underlying assets.

Staking pays out cryptocurrency as compensation for using your existing holdings to vouch for the accuracy of transactions on an underlying blockchain network.

While this sounds complicated, everyday users can often do it directly from their digital wallets. Some crypto exchanges also offer staking programs in which they handle the technical details for a cut of the proceeds. Of the platforms on our list of the best crypto exchanges, Coinbase, Crypto.com, Gemini, Kraken, Robinhood and Uphold offer such staking services, although their staking offerings are not available in every state.

With so much uncertainty in the world of staking, it's especially important to understand what you're getting into and how it works.

Is crypto staking worth it?

Whether crypto staking is worthwhile depends on what kind of crypto owner you are.

Generally speaking, cryptocurrency staking offers returns that exceed those you can earn in a savings account. However, staking is not without risk. You'll earn rewards in crypto, a volatile asset that can decline in value.

Sometimes, you have to lock up your crypto for a set period of time. And there is a chance that you could lose some of the cryptocurrency you've staked as a penalty if the system doesn't work as expected.

That said, staking can also be a way to grow your crypto portfolio using assets you plan to hang onto for a while. Staking is also a more energy efficient way of running a crypto network than the mining process used by Bitcoin and some others.

What cryptocurrencies allow staking?

Crypto staking is an important part of the technology behind certain cryptocurrencies. However, it's important to note that not all crypto networks use staking.

Proof-of-stake cryptocurrencies, as they are called, are likely to support staking. Here are a few examples:

Ethereum (which shifted from previously using proof-of-work in 2022).

Solana.

Cardano.

Shiba Inu.

Proof-of-work cryptocurrencies use mining, which relies on expensive computers and can use a significant amount of electricity. They generally do not support staking. Proof-of-work cryptos include:

Bitcoin.

Litecoin.

» You can't stake Bitcoin, but: Check out some other ways to make money with Bitcoin.

How does staking work?

To understand staking, it helps to have a basic grasp of what blockchain networks do. Here are a few details you need to know.

Blockchains are “decentralized,” meaning there’s no middleman — such as a bank — to validate new activity and make sure it comports with a historic record maintained by computers across the network. Instead, users collate “blocks” of recent transactions and submit them for inclusion into an immutable historic record. Users whose blocks are accepted get a transaction fee paid in cryptocurrency.

Staking is a way of preventing fraud and errors in this process. Users proposing a new block — or voting to accept a proposed block — put some of their own cryptocurrency on the line, which incentivizes playing by the rules.

Generally, the more that is at stake, the better a user’s chance of earning transaction fee rewards. But when a user’s proposed block is found to have inaccurate information, they can lose some of their stake — in a process known as slashing.

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How do you stake cryptocurrency?

There are several ways to start staking cryptocurrency, depending on how much of a technical, financial and research commitment you’re willing to make.

Your first decision will be whether to actually validate transactions using your own computer or to “delegate” your cryptocurrency to someone who’s doing that legwork for you.

Networks that support crypto staking typically allow people who own tokens to provide them for other users to deploy in validating transactions, thereby earning a share of the rewards.

Using an exchange

One option is to use an online service to stake your tokens for you. Some popular cryptocurrency exchanges offer staking in exchange for a commission, and they allow you to use fiat currency to purchase crypto.

» Learn more: How to buy cryptocurrency

Of the crypto exchanges reviewed by NerdWallet, a handful offer staking or rewards for at least some crypto assets. But there are some potential tradeoffs at play with such programs. For one, they'll likely take a cut of your earnings — a cost you could avoid by staking on your own.

Perhaps more importantly, some products that have offered to stake assets on behalf of customers (or to offer similar rewards programs) have run into serious financial difficulties. Gemini froze its staking program in 2022 amid market instability related to the collapse of the FTX exchange, and took until May 2024 to return funds to users.

Joining a pool

If you don’t want to trust an exchange to make your staking decisions for you — or if you can’t find one that supports the token you want to stake — you can join what is known as a “staking pool” operated by another user.

To do this, you’ll likely have to know how to use a crypto wallet in order to connect your tokens with the validator’s pool.

The official websites of many proof-of-stake blockchains include information about how to research validators, including links to details about how they operate.

Omkar Bhat, an engineering manager at Coinbase, suggested looking carefully at a prospective validator’s track record.

Some information that is publicly available can help you see whether a pool operator has ever been penalized for mistakes or malfeasance, and some lay out their policies for protecting people who delegate tokens. Other details you can look at include the level of fees or commissions.

Bhat, who was the data engineering lead at Boston-based analytics firm Flipside Crypto at the time of our interview, said it’s good to pick an established pool, though you might not want to pick the absolute biggest. Blockchains are supposed to be decentralized, so there’s an argument for preventing any one group from accumulating too much influence.

“People often delegate to validators with lower voting power to increase the decentralization of an ecosystem,” Bhat said.

Becoming a validator

Setting up your own staking infrastructure can be complicated. It requires the proper computing equipment and software and downloading a copy of a blockchain’s entire transaction history. It can also have a high cost to entry.

On the Ethereum network, for example, you’d need to start with at least 32 ETH, which on August 28, 2025, would be worth more than $140,000. Staking through a pool or through an online service does not carry such requirements.

Which states restrict crypto staking?

Until recently, crypto-exchange-based staking platforms were under intense scrutiny by federal regulators, and many did not offer staking services in the U.S. The Trump administration has taken a much more liberal view toward crypto staking, and has dropped most federal enforcement actions against staking platforms in 2025, but some states are still regulating or restricting staking. Below is a list of states and territories that have some restrictions on staking, for certain cryptocurrencies or platforms:

American Samoa.

California.

Colorado.

Louisiana.

Maryland.

New Jersey.

New York.

South Carolina.

Texas.

U.S. Virgin Islands.

U.S. Minor Outlying Islands.

Washington State.

Wisconsin.

If you're interested in staking through a particular exchange or crypto platform, make sure you read the fine print to ensure that your state allows staking of the desired cryptocurrency on that platform.

Staking calculator: What kind of returns does staking offer?

The rewards for staking vary based on the cryptocurrency, conditions (such as demand on the blockchain network in question) and the method you use. But the rates offered by exchanges offer some insight into what you can expect.

Gemini, for instance, was estimating an annual yield of more than 4.5% in October of 2025 for its highest-yielding cryptocurrency. Coinbase, meanwhile, was offering rates higher than 15% for certain tokens.

For comparison, yields on savings accounts reviewed by NerdWallet are currently averaging 0.38% APY, according to the Federal Deposit Insurance Corp.

Is staking the right option?

Staking may not be for everyone. There are a few questions to ask before making a decision about whether to stake your crypto.

Will you need access to your staked crypto?

Crypto staking can involve committing your assets for a set period of time during which you might not be able to sell or trade them. If you think you might move your crypto on short notice, make sure you look at the terms carefully before staking it.

It’s important to remember that crypto is a volatile asset. While crypto staking can provide a measure of predictability in investment returns, if the market value for your cryptocurrency drops in value by 20% during the time you’re staking it, for instance, the rewards you’re getting may not look as attractive.

Do you believe in the project?

Ultimately, deciding to stake your cryptocurrency may come down to whether you feel confident that it’s a good investment over the long term.

If you believe in the value of the Ethereum network, for instance, the day-to-day swings in price may not affect your desire to sell. Staking is one thing you can do to get shorter-term value from a crypto investment you want to hold onto.

Have you explored other forms of passive income?

Crypto staking is one way of earning passive income, which does not require daily effort after an initial investment. And while staking may be a good choice for some cryptocurrency owners, there are many other ways of generating passive income. It may be worth looking into some of those options, as well.

Other common forms of passive income include dividends from stock holdings, interest on bonds, and real estate income. There are also non-staking options for earning on your crypto, including lending programs and decentralized finance (DeFi) applications.

How is crypto staking taxed?

According to the IRS, any proceeds from crypto staking are taxable as ordinary income, at their fair market value in dollars

Although staking is basically the crypto equivalent of dividend investing, there is no tax break for crypto staking like the qualified dividend tax rate.

State tax treatment of crypto earnings is evolving over time. For now, if you live in a state with income tax, it's probably best to assume that crypto staking proceeds are taxable as ordinary income at the state level, as well.

» Learn more: How to generate passive income

Disclosure: The author owned Bitcoin, Ethereum, Shiba Inu, Cardano and Solana at the time of publication. The editor owned Ethereum and Bitcoin at the time of publication. NerdWallet is not recommending or advising readers to buy or sell Bitcoin or any other cryptocurrency.

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