Staking refers to the act of locking one’s cryptocurrencies on smart contracts in order to maintain the validation process of a proof of stake blockchain to receive compensation paid in transaction fees and block rewards. Staking is an alternative consensus mechanism to mining, where miners earn cryptocurrency rewards by solving a mathematical puzzle.
In a proof-of-stake (PoS) blockchain protocol, a consensus is achieved by periodically selecting a network validator among a network’s stakers, whose task is to ensure that the transactions to be included in the latest block are accurate. The chance to win rewards is set in place to incentivize users to become stakers since they are essential to a blockchain network’s security and validation.
Validators are chosen in proportion to the amount of tokens they stake in the system. However, other stakers have the option to delegate their stake to another user or a staking pool. In doing so, they also earn crypto rewards from their delegated stake.