What is staking?

Staking is a way for people to lock up their cryptocurrencies or digital assets in order to earn rewards over time. Staking crypto is akin to depositing money in a bank. Banks need customer deposits to create loans for other people and businesses. To incentivize customer deposits, banks offer interest. Staking operates in a similar manner.

Staked cryptocurrencies are locked up in a project. The project then uses these staked coins to maintain its operations, such as validating transactions. And just like a bank pays interest on deposits, the crypto project gives rewards for staking cryptocurrencies. So, both banks and crypto networks use the assets they are given (money or crypto) to operate (create loans or validate transactions), and both offer incentives (interest or staking rewards) to encourage people to provide these assets.