Staking

In a proof-of-stake system, validators post the network's native asset as a bond, run software that proposes and attests to blocks, and receive newly issued units plus a share of transaction fees. The bond is what makes misbehavior expensive: provably invalid actions can trigger slashing, which destroys part of the stake, and downtime typically incurs smaller penalties. Holders who do not run infrastructure can delegate their stake to a validator and share the rewards net of commission. Exiting is rarely instant, since most designs impose an unbonding period or an exit queue, so staked supply is not immediately tradable. The word is also used loosely for depositing tokens into a rewards contract unrelated to consensus, which carries entirely different risks under the same label.

In practice

On Ethereum a validator deposits 32 ether and runs software that attests to blocks, with rewards accruing until the validator goes through the exit process.

The common misunderstanding

Staking rewards are not interest paid by a borrower: most of the reward is newly issued supply, so staking largely maintains a holder's share of supply rather than adding external income.