What is proof of stake?

A consensus mechanism in which validators are selected to propose blocks in proportion to the tokens they lock up, and forfeit part of that stake if they misbehave.

Ethereum moved from proof of work to proof of stake in September 2022 (source: ethereum.org, The Merge). Proof of stake is what makes staking rewards possible.

The design replaces an external cost, electricity, with an internal one, capital at risk. In proof of work the expense of attacking the chain is hardware and power. In proof of stake it is the stake itself, which the protocol can destroy. That substitution is what makes the energy comparison so stark and what changes the security question from "who has the most machines" to "who holds the most tokens".

How it works

1. Deposit. A validator locks a fixed amount of the native token into the protocol and runs software that follows the chain.
2. Selection. The protocol selects proposers and committees pseudorandomly, weighted by stake. More stake means more turns, not more power per turn.
3. Attestation. Selected validators vote on what they see as the head of the chain. Enough agreeing votes finalize a block, after which reverting it would require destroying a very large amount of stake. See finality.
4. Rewards. Validators earn newly issued tokens plus a share of transaction tips for proposing and attesting correctly.
5. Penalties. Being offline costs small amounts continuously. Provably contradictory behavior, such as signing two conflicting blocks, costs a portion of the stake outright. See slashing.

Withdrawing is not instant. Exiting the validator set means joining a queue, which is why unbonding period and exit queue matter to anyone staking a balance they may want back.

Example

Illustrative arithmetic on staking rewards. Suppose a network pays a 4% annual rate and you stake $10,000 worth. Gross rewards over a year are about $400. A staking service charging a 15% commission on rewards takes $60, leaving $340, an effective 3.4%.

Two things the headline rate does not include. The rewards are paid in the token, so their value in your currency depends on the token's price, and the position may be locked or queued when you want to exit. That is why a published rate is a rate on the token, not a return in dollars.

Why it matters when you buy

If you hold a proof of stake asset, staking is usually available and the terms differ sharply between exchanges: commission, lock length, and whether it is offered in your jurisdiction at all. The yield pages show which exchanges offer staking where, staking for beginners covers the mechanics, and the chain pages put throughput and fees side by side.

Related terms

validator — who proposes and attests; staking — locking tokens for rewards; slashing — the penalty that backs the system; unbonding period — the wait to exit; proof of work — the alternative it replaced; liquid staking token — a claim on staked tokens.

Questions

Does staking mean my tokens are locked forever?

No, but exit is not instant. Networks impose an unbonding period and often a queue, so plan on days rather than minutes. Exchange staking products have their own terms on top of the protocol's.

Is a higher advertised rate better?

Not necessarily. A high rate often reflects heavy token issuance, which dilutes holders, rather than real demand. Compare what the reward is paid in and where the money comes from before comparing percentages.

Can I lose my stake?

Yes, in two ways. Slashing penalizes provable faults such as double signing, and prolonged downtime accrues smaller penalties. Using a service transfers the operational risk but adds the service's own counterparty risk.