How Staking Works: Proof of Stake Explained

Proof of Stake, or PoS, is a consensus mechanism determining how transactions are validated on a blockchain. In PoS, validators replace miners, and each validator locks up the necessary amount of native token. For every new block, a batch of validators is chosen to propose and vote on incoming blocks. The consensus refers to the stake weight or the total number of tokens staked from each validator to determine the block vote outcome and elect new block proposers.

On networks that implement slashing, validators can be penalized for safety faults (e.g., double-signing) and, on some chains, for extended downtime. On others, downtime only forfeits rewards. This ensures that validators have a financial incentive to act in the best interest of the network.

Delegation and Validator Rewards

Not every token holder needs to run a validator node. Many blockchains allow delegation, where any token holder can assign their tokens to an existing validator. Delegators continue to own their tokens but will enable a validator to use them for consensus. In return, delegators share the staking rewards, minus the commission fee charged by the validator.

This system makes crypto staking accessible to a wider group of users while concentrating validation responsibilities in the hands of operators with the technical ability to run nodes reliably.

Benefits and Risks of Staking Crypto

Crypto staking provides several benefits. It allows holders to earn staking rewards on tokens they already own, helps secure the blockchain network, and often requires less technical expertise compared to mining.

However, staking is not risk-free. Some networks implement slashing for safety faults (e.g., double-signing) and, on certain chains, for extended downtime; others only forfeit rewards when a validator is offline.

Slashing can result in the loss of a portion of staked funds. In addition, staked tokens are often locked for a certain period, making them less liquid compared to tokens held in a regular wallet.

How Restaking Works

One of the main challenges of crypto staking is that staked tokens are often locked for a fixed period, which reduces liquidity and flexibility for token holders. Once delegated to a validator, these tokens cannot be freely traded or used elsewhere until the lock-up period ends.

Restaking is a new concept designed to make staked assets more productive. Instead of being idle once committed to the network, restaking allows those staked tokens to be pledged again for additional purposes, such as securing other protocols or earning yield from different layers of a blockchain ecosystem.

In practice, restaking reduces the opportunity cost of locking tokens. It extends the utility of staking by enabling the same collateral to participate in multiple networks or services.

Staking Examples on Different Blockchains

Different blockchains use Proof of Stake or variations of it. While Ethereum is the most well-known example, newer blockchains are also offering opportunities to stake and earn staking rewards. Two such examples are Hyperliquid and Sui, two networks that support delegation to validators.

Hyperliquid Staking: How to Earn HYPE Rewards

Hyperliquid maintains an active validator set. Each validator must self-delegate 10,000 HYPE to be active, and validators may charge commissions subject to protocol limits (commission increases are capped). Delegators can stake HYPE to validators.

As of October 21, 2025, the Hyperliquid staking reward rate shown on Imperator’s product page is 0%. Protocol parameters can change; always verify on the official docs or your validator.

What is Sui Staking?

Sui staking is another example of crypto staking on an emerging blockchain. Built with a focus on scalability and low latency, Sui allows for high throughput and fast confirmation times. Sui uses Delegated Proof of Stake with rewards accruing by epoch. Unstaking typically completes after the next epoch (about 24 hours); rewards only accrue for full epochs participated in.

Token holders on Sui can delegate their tokens to validators and earn staking rewards for participating in network security. Users can choose from a variety of wallets to stake SUI tokens and manage their assets. The network is supported by a growing ecosystem of developers and dApps, making it one of the more promising blockchain projects in development today.

How to Choose a Validator for Staking

When delegating tokens to a validator, choosing the right validator is critical. Delegators share both the rewards and the risks of the validator they select. Three factors stand out when choosing the best validator:

• Commission rates: Validators have an option to take a percentage of staking rewards as their fee. A lower rate means more rewards for the delegator, but extremely low rates can sometimes be unsustainable. The goal is to find a validator with competitive fees that also provides reliable service.

• Reliable uptime: Validators need to stay online consistently to process transactions and produce blocks. Frequent downtime can lead to missed rewards and even slashing penalties. Delegating to a validator with a strong track record of uptime is crucial.

• Validator background: Many delegators also consider a validator’s reputation, including their involvement in other blockchain projects or community contributions. A validator with a long-term vision and good standing within the ecosystem is often a safer choice.

Before delegating, review a validator’s uptime or jailing history and any commission change limits documented for the chain, since some protocols cap how quickly commissions can be increased.