DeFi / Staking
Crypto Staking Explained: Rewards, APY & Estimated Returns
Staking means committing tokens to help secure a proof-of-stake network or a staking service, in exchange for rewards paid in tokens. Reward rates are variable, and the dollar value of those tokens can rise or fall.
6 min read
All rates below are illustrative examples, not current staking rates.
What staking is
On proof-of-stake networks, validators lock tokens as collateral to propose and confirm blocks. Holders can stake directly, delegate to a validator, or use an exchange or liquid staking service. Rewards come from network issuance and fees, and are shared after any commission.
APR vs APY
APR is the simple annual reward rate. APY assumes rewards are restaked so they earn rewards too.
APY = (1 + APR ÷ n)^n − 1
- n
- Number of times rewards compound per year
At a 5% APR compounded daily, APY ≈ 5.13%. Many platforms quote APY; check which one you're seeing.
Fees and lock periods
- Validator or platform commission takes a share of rewards. A 10% commission on a 5% rate leaves 4.5%.
- Lock-up or unbonding periods can mean days or weeks before you can sell after unstaking.
- Minimums may apply to stake directly.
Example
Worked example
1,000 tokens at an illustrative 5% APR with a 10% commission
- Net APR = 5% × (1 − 0.10) = 4.5%
- Without compounding: 1,000 × 4.5% = 45 tokens after a year
- Compounded daily: 1,000 × [(1 + 0.045/365)^365 − 1] ≈ 46.0 tokens
That's an estimate in tokens. The dollar value depends on the token's price, which can change by far more than 4.5% in a year.
Risks and limitations
- Reward rates change with network conditions and participation.
- The token's price can fall more than the rewards earned.
- Some networks can penalize validators (slashing) for misbehavior or downtime.
- Platform or smart-contract risk with third-party staking services.
- Lock periods limit your ability to react to price moves.
- Rewards may be taxable when received, depending on your country.
Calculator walkthrough
- Open the Crypto Staking Calculator.
- Enter your token amount and the reward rate you want to test.
- Choose whether rewards compound and how often.
- Optionally enter a token price to see an estimated dollar value.
- Press Calculate to see estimated rewards over the period.
Run your own numbers
Estimate staking rewards with optional compounding.
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