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Crypto staking is a way to use crypto holdings to generate rewards while helping to validate transactions. While “staking” may be a relatively new addition to the financial lexicon, it’s important for those interested in crypto to understand what it is, how it works, and what cryptocurrencies it can be used to obtain.

Crypto staking may feel like it’s a step beyond simply learning how to buy cryptocurrencies or how a crypto exchange works, but learning about cryptocurrency staking can broaden your knowledge of the crypto ecosystem, making you more informed about your options.

What Is Crypto Staking?

Crypto staking is the process of “locking up” crypto holdings on a blockchain network in order to try and obtain rewards. There may be time limits or requirements depending on the specific blockchain network, and rewards can vary significantly, but are typically a percentage of the coins staked.

Cryptocurrencies are built with blockchain technology, in which crypto transactions are verified, and the resulting data is stored on the blockchain. Depending on the types of cryptocurrency you’re working with and its supporting technologies, these validation processes may involve staking, using a “proof-of-stake” consensus mechanism, or mining, using a “proof-of-work” consensus mechanism. Each of these processes help crypto networks achieve consensus, or confirmation that all of the transaction data adds up to what it should.

Staking vs Mining: What’s the Difference?

Staking crypto generates rewards and helps a crypto network validate information on the blockchain, using the cryptocurrency stakers locked up on the network. Crypto mining has the same goal, but the consensus needed to verify transactions is achieved in a different way.^[2]

Effectively, mining involves using computing power to solve mathematical problems and equations to open up new blocks on a blockchain, for which miners are then rewarded. Mining requires significantly more computing power and resources, but effectively, both staking and mining are trying to achieve the same ends of validating information and producing new “blocks.”

The Role of Proof of Stake (PoS)

Achieving consensus and validating information on a blockchain requires participants. That’s what staking is: individuals who actively hold onto, or lock up their crypto holdings in their crypto wallet, may participate in these networks’ consensus-taking processes. Stakers are, in essence, approving and verifying transactions on the blockchain.

For doing so, the networks reward those individuals. The specific rewards will depend on the network.

It may be helpful to think of crypto staking as similar to depositing cash in a savings account. The depositor earns interest on their money while it’s in the bank, as a reward from the bank, who uses the money for other purposes (lending, etc.). Staking coins is, from that perspective, similar to earning interest. Although cryptocurrency holdings could potentially lose value as the market ebbs and flows, too.

How Does Crypto Staking Work?

Crypto staking is typically a passive activity, unless you actively run a blockchain validator node. When someone stakes their holdings (typically by locking them in a wallet through a crypto staking platform), the network can use those holdings to forge new blocks on the blockchain.

The more crypto you’re staking, the better the odds are that your holdings will be selected to validate information and new blocks, and a lot of that depends on the specific blockchain network you’re staking on.

Essentially, during a transaction, information is “written” into the new block, and the staker’s holdings are used to validate it. Since coins already have “baked in” data from the blockchain, they can be used as validators. Then, for allowing those holdings to be used as validators, the network rewards the staker.

How to Start Crypto Staking

To start crypto staking, a person needs to decide where and what they want to stake. Here are four simple steps to get started.

1. Choosing a Proof-of-Stake Cryptocurrency

To begin staking cryptocurrency independently, a user would have to decide which coin they want to stake and buy their cryptocurrency of choice.

Ethereum (ETH), for example, requires a minimum of 32 ETH (worth about $123,000 at the time of writing) for users to begin staking.^[3]

2. Choosing a Staking Platform

You may be able to stake crypto through an exchange network, through a staking service, or directly through the cryptocurrency itself.

3. Choosing Your Wallet and Hardware

Typically, after choosing a platform, you would then download a crypto wallet in which to store your coins for staking. That may mean going directly to the specific crypto’s main website and downloading its corresponding wallet.

To stake crypto, users need a constant, uninterrupted internet connection. A standard dedicated desktop computer will likely do the job, although a Raspberry Pi might save on electrical costs.

4. Begin Staking

Once the hardware has been selected and the crypto wallet software downloaded, a user can begin staking cryptocurrency.

For those holding the appropriate crypto in an exchange-hosted crypto wallet, the exchange typically handles all the staking on the backend.

Depending on the specific crypto, wallet, or exchange network, that may be all the action a person needs to take. But it’s a good idea to double-check to see if additional steps need to be taken.

What Are the Different Ways to Stake Crypto?

There are also a few different ways to stake crypto.

Staking on an Exchange

Perhaps one of the simplest ways to stake crypto is to do so through your given exchange. Many crypto exchanges give people the option to stake, and in those cases, depending on the exchange, they may simply need to select the option to stake, lock up their holdings, and let the rewards generate.

Delegated Staking and Staking Pools

Aside from an exchange, stakers may be able to delegate their crypto holdings to pools, which will allow them to generate rewards, too. This can’t be done for every cryptocurrency, but for those that do have delegated staking and pooling built into their networks, it can be a way to stake directly to a validator or delegate.

Running Your Own Validator Node

If you’re really feeling up for it and want to get more deeply involved on a specific blockchain network, you could look at running your own validator node, also referred to as solo staking. Note, however, that doing so likely requires some significant background knowledge, and there’s the potential of making mistakes. It could also require some hardware that could cost hundreds or thousands of dollars.

The Pros and Cons of Crypto Staking

There are some pros and cons to staking crypto.

The Benefits of Staking

Here are a few of the potential benefits of staking:

•   Less energy-intensive. PoS networks use less energy than PoW platforms. Each mining machine requires a constant supply of electricity and consumes much more power than a regular computer. But it’s possible to run validator nodes on an average computer, eating up fewer resources, to power your staking activity

•   Easier to earn rewards. Crypto staking and mining rewards can be very different. Almost anyone can stake a small amount of crypto on a crypto exchange and earn some kind of yield. To become a miner, however, often requires a much bigger commitment. First, you’d need to acquire the proper computer, which can be costly; then you’d need to learn to use it, which can be time-consuming.

•   No special equipment required. Anyone can become a validator using a regular computer, assuming they have enough money and can keep the node running constantly. By contrast, mining requires specialized hardware.

The Risks of Staking

Conversely, there are some risks of staking that individuals should know about.

•   Different security measures. PoS is relatively new compared to PoW. It’s not necessarily unsafe, but it’s also not inherently more secure than PoW, either. There are different security measures in place, and a lot of that depends on the specific network as well.

•   Potential for takeover. Crypto blockchain networks may be controlled by those who hold the majority (or 51%) of tokens. While attacking a PoW network would involve acquiring large amounts of computing power, in many cases, attacking a PoS network could only require funding (again, depending on the specific network). Smaller blockchain networks are generally more vulnerable to a PoS “51% attack,” where attackers may try to manipulate transactions to their own advantage. However, PoS networks may also provide some inherent protection against these attacks. For example, attackers attempting such an attack risk losing the entire amount that’s staked.

•   Increased centralization. The creator(s) of blockchain technology intended for blockchains to be decentralized. But in some cases, PoS networks can wind up becoming more centralized because becoming a validator can be more expensive than becoming a miner. Ethereum (ETH), for example, plans to change from PoW to PoS. To become an ETH validator would require 32 ETH (or around $123,000 as of summer 2025). Many centralized exchanges have chosen to become validators of PoS coins to share staking rewards with their customers.

How to Choose the Best Coins for Staking in 2025

Just a few years ago, the entire concept of proof-of-stake consensus was still relatively new, and options for staking coins were few and far between. But a growing number of projects are utilizing PoS and some exchanges are making it easier than ever for users to passively earn crypto by staking their coins.

With that in mind, the list of potential cryptos to stake, and the ones offering the highest potential yields, is always changing. But here are some of the cryptos out there that are viewed as more established.

•   Ethereum (ETH): Ethereum (ETH) is one of the most popular cryptocurrencies on the market — although it is not exactly a cryptocurrency itself. Staking Ethereum on your own will require a minimum of 32 ETH. Rewards vary, too.

•   EOS (EOS): EOS is similar to Ethereum in that it’s used to support decentralized blockchain systems and projects. EOS tokens are native to the EOS blockchain, and like other cryptos, can be staked to earn rewards.

•   Tezos (XTZ): Like EOS and Ethereum, Tezos (XTZ) is an open-source blockchain network with its own native currency, with a symbol of XTZ. And it, too, can be staked on certain platforms and networks.

•   Polkadot (DOT): Polkadot is a newer cryptocurrency, created in August 2020. Polkadot is both a cryptocurrency and a protocol designed to support “parachains,” which allow different blockchains created by different developers to share information securely.

•   Avalanche (AVAX): Avalanche was created in 2020, and is one of the highest yield-producing cryptos out there for staking.

It’s important to research your options to understand whether staking a certain cryptocurrency would be right for you. Also be aware, as mentioned earlier, that SoFi does not currently offer staking services. While members will soon be able to buy, sell, and hold certain cryptocurrencies, such as Ethereum, other cryptocurrencies listed above may not be offered.

Factors to Consider

As with any financial transaction, it’s always important to consider the potential risks of crypto staking. As outlined, there are multiple risks to weigh, and when it comes to staking specifically, you’ll want to think about the potential staking rewards you could earn versus how your holdings could otherwise be used to generate returns.

There can be numerous things to take into account, but when it comes to staking, consider the reliability of a given crypto network, volatility, security, and opportunity costs.

Is Crypto Staking Worth It?

Anyone can earn crypto by staking cryptocurrency. But unless someone is sitting on a huge stash of proof-of-stake coins, they’re not likely to get rich from staking.

Staking rewards, as mentioned above, are in some ways similar to earning interest on funds held in a savings account. Both are a form of passive income (with the possible exception of solo staking). They don’t require a user to do anything other than holding the right assets in the right place for a given length of time. The longer a user stakes their coins, the greater potential for generating bigger rewards.

But unlike savings accounts, there are a few variables particular to proof-of-stake coins that influence how much of a staking reward users are likely to receive. Users would do well to research these factors and more when searching for the most profitable staking coins:

•   Potential reward size

•   The size of the staking pool

•   The size of holdings locked, or required to stake

Additionally, the fiat currency value of the coin being staked must also be taken into account. Assuming this value remains steady or rises, staking could potentially be profitable. But if the price of the coin falls, profits could diminish quickly.

The Takeaway

Staking is a way to use your crypto holdings or coins to earn additional rewards. It can be helpful to think of it as along the lines of funds generating interest in a savings account over time.

Essentially, coin holders allow their crypto to be used as a part of the blockchain validation process, and are rewarded by the network for the use of their assets. While there are risks to be aware of, such as the value of the cryptocurrency itself falling, staking may open up another potential avenue for generating returns.

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FAQ

How much can you earn from crypto staking?

How much you could potentially earn from crypto staking depends on the specific crypto and given return rates associated with it. Rewards can range wildly.

Is staking crypto safe?

Staking crypto comes with risk, including the risk that the cryptocurrency loses value while it’s locked, but some staking set ups may be riskier than others. As always, do some research to try and get a sense of how risky staking a specific crypto could be, as there can be some significant risks associated with certain assets.

Can you lose money by staking crypto?

It is possible to lose money by staking crypto since holdings are locked up and values can change, or there may be penalties and vulnerabilities on a given platform or within a specific blockchain network.

What is the difference between crypto staking and lending?

Staking involves earning rewards (typically in the form of cryptocurrency) by locking up your crypto holdings with a blockchain network to help it validate transactions. Lending involves lending cryptocurrency holdings to a borrower in order to earn interest. Note that crypto lending can come with the risk of the borrower not returning the borrowed holdings.

Do you have to pay taxes on staking rewards?

Yes, rewards earned from crypto staking (or crypto mining) are taxed as ordinary income. Taxpayers are required to report the fair market value of the cryptocurrency rewards in U.S. dollars at the date and time those rewards are made available to them.

The same cryptocurrency holdings may also be subject to capital gains taxes when they’re sold, exchanged for another cryptocurrency, or disposed of in another way. Capital gains and losses from those transactions must be reported to the IRS.

About the author

Samuel Becker

Sam Becker is a freelance writer and journalist based near New York City. He is a native of the Pacific Northwest, and a graduate of Washington State University, and his work has appeared in and on Fortune, CNBC, Time, and more. Read full bio.

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In options trading, a strike price represents the price at which an option purchaser can buy or sell an option’s underlying asset. An option strike price can also be referred to as an exercise price or a grant price, as it comes into play when a trader is exercising the option contract they’ve purchased.

A strike price can determine how much or how little an investor stands to gain by exercising an option contract, and can also inform the value of the option. Trading options can potentially generate higher rewards, though it can entail taking more risk than investing in individual stocks. Understanding strike prices is key to developing a successful options trading strategy.

What Is a Strike Price?

An option is a contract that gives the owner or buyer of the option the right, though not the obligation, to buy or sell a particular security on or before a specific date, at a predetermined price. In options trading terminology, this price is called the strike price or the exercise price.

Strike prices are commonly used in derivatives trading. A derivative draws its value from an underlying investment. In the case of options contracts, this can be a stock, bond, commodity, or other type of security or index.

Further, options contracts can trade European-style or American-style. With European-style options, investors can only exercise them on their expiration date. American-style options can be exercised any time up to and upon the expiration date. This in itself doesn’t affect strike price for options contracts.

In options trading, there are two basic types of options: calls and puts. With either type of option, the strike price is set at the time the options contract is written. This strike price determines the price at which the underlying asset would be bought or sold if the option is exercised.

Calls

A call option conveys the right (though not the obligation) to a purchaser to buy shares of an underlying stock or other security at a set strike price. Call option writers are obligated to sell the shares if the option is exercised.

Puts

A put option conveys the right (though not the obligation) to a purchaser to sell shares of an underlying stock or other security at a set strike price. This is one way that investors can short a stock. Put option writers are obligated to buy the shares if the option is exercised.

Examples of Strike Price in Options Trading

Having an example to follow can make it easier to understand the concept of strike prices and how they may affect the value of an option contract. When trading options, traders must select the strike price and length of time they’ll have before exercising an option.

The following examples illustrate how strike price works when trading call or put options.

Buying a Call

Call options, again, give a purchaser the right, but not the obligation, to purchase a security at a specific price. At the same time, the seller of the call option must sell shares to the investor exercising the option at the strike price.

Let’s say you hold a call option to purchase 100 shares of XYZ stock at $50 per share (the strike price). You believe the stock’s price, currently trading at $45, will increase over time. This belief eventually pans out as the stock rises to $70 per share thanks to a promising quarterly earnings call. At this point, you could exercise your option to buy shares of the stock at the $50 strike price. The call option seller would have to sell those shares to you at that price.

The upside here is that you’re purchasing the stock at a discount, relative to its actual market price. You could then turn around and sell the shares you purchased for $50 each at the new higher price point of $70 each. This allows you to collect a $20 per share profit, less the premium you paid to purchase the call contract and any trading fees owed to your brokerage (or online brokerage).

Keep in mind, however, that if the price of the underlying stock remains below the strike price, the option will expire worthless, and you will lose the premium you paid for the option.

Buying a Put

Put options give purchasers the right, but not the obligation, to sell a security at a specific strike price. The seller of a put option has an obligation to buy shares from a trader who exercises the option.

So, assume that you hold a put option to sell 100 shares of XYZ stock at $50 per share (the strike price). You believe that the stock’s price, currently at $55, is going to decline in the next few months. The stock’s price drops to $40 per share so you decide to exercise the option. This allows you to make a profit of $10 per share (minus the premium paid per share and any fees), since you’re selling the shares at the $50 strike price, rather than their current lower market price.

But again, if the price of the stock remains above the strike price the option will expire with no value and you would lose the premium you paid upfront.

Writing a Covered Call

A covered call is an options trading strategy that can be useful when an investor believes the price of stock they own may remain neutral or rise slightly. This strategy involves doing two things:

•  Writing a call option for a security

•  Owning an equivalent number of shares of that same security

Writing (or selling) covered calls is a way to potentially generate income from the premiums traders pay to purchase the call option. Premiums paid by a call option buyer are nonrefundable, even if they choose not to exercise the option later.

The premium from a covered call may also offer a degree of downside protection if the stock price falls slightly (though losses would still be substantial if the price dropped significantly)..

So, say you own 100 shares of XYZ stock, currently trading at $25 per share. You write a call option for 100 shares of that same stock with a strike price of $30. You then collect the premium from the investor who buys the option.

One of two things can happen at this point: If the stock’s price rises slightly, but remains below the $30 stock price, then the option will expire worthless. You still keep the premium for writing it and you still own your shares of stock.

On the other hand, assume the stock’s price shoots up to $35. The purchaser exercises the option, meaning you must sell them those 100 shares. You still collect the premium, but your profit from selling those shares is capped at $5 per share, given the $30 strike price.

Investors should always consider the potential tradeoffs of writing covered calls, since they could cap upside potential. Covered calls are generally suitable for investors who would be comfortable selling their shares, if needed.

Moneyness

Moneyness describes an option’s strike price relative to its market price. There are three ways to measure the moneyness of an option:

In the Money

Options are in the money when they have intrinsic value. A call option is in the money when the market price of the underlying security is above the strike price. A put option is in the money when the market price of the underlying security is below the strike price.

At the Money

An option is at the money when its market price and strike price are the same (or nearly the same).

Out of the Money

An out-of-the-money option has no intrinsic value. A call option is out of the money if the market price of the underlying security is below the strike price. A put option is out of the money when the market price of the underlying security is above the strike price.

Understanding moneyness is important for deciding when to exercise options and when they may be at risk of expiring worthless.

How Is Strike Price Determined?

The strike price of an option contract is set when the contract is written. Strike prices may be determined by the exchange they’re traded on (like the Chicago Board Options Exchange, or CBOE). For listed options, strike prices are set by the exchange at standardized intervals based on the underlying asset’s market price.

A writer may issue multiple strike prices for the same underlying security so traders can choose the level they want. For example, you might see five option contracts for the same stock with strike prices of $90, $92.50, $95, $97.50 and $100. This allows investors an opportunity to select varying strike prices when purchasing calls or put options for the same stock.

Note, however, that writing calls that aren’t covered entails significant risk and can result in substantial losses. Both individual and institutional investors can write options, but there is significant risk involved — particularly when the calls they write aren’t covered.

How Do You Choose a Strike Price?

When deciding which options contracts to buy, strike price is an important consideration. Stock volatility and the passage of time can affect an option’s moneyness and your potential losses or profits should you exercise the option.

As you compare strike prices for call or put options, consider:

•   Your personal risk tolerance

•   Where the underlying asset is trading, relative to the option’s strike price

•   How long you have to exercise the option

You may also consider using various options trading strategies to manage risk. That may include using covered calls as well as long calls, long puts, short puts, married puts, and others. Learning more about how to trade options can help you apply these strategies to pursue potential profits while potentially managing risk exposure, given the high risk of options trading.

What Happens When an Option Hits the Strike Price?

When the price of an option’s underlying asset is equal to or near the strike price it’s considered at the money. This means it has no intrinsic value as the strike price and market price are the same. There’s typically no incentive for an investor to exercise an option that’s at the money at expiration as there’s nothing to be gained from either a call or put option. In this scenario, the option may expire worthless.

If you’re the purchaser of an option that expires worthless, you would lose the money you paid for the premium to buy the contract. If you’re the writer of the option, you would profit from the premium charged to the contract buyer.

The Takeaway

Strike price is a critical concept for investors to know, especially if they’re trading or otherwise dealing with options as a part of their investing strategy. In an options contract, the strike price simply refers to the set price at which the purchaser can buy or sell the underlying security. Again, options can be high risk and fairly high-level, and may not be appropriate for all investors.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

FAQ

What is a strike price in options trading?

The strike price, also known as the exercise price or grant price, is the predetermined price at which an investor can buy or sell the underlying asset of an option contract. This price is set when the options contract is written. It’s a critical factor that helps determine the value of the option and an investor’s potential gain or loss upon exercising the contract.

How does the strike price work for call and put options?

For call options, the strike price is the price at which the purchaser has the right, but not the obligation, to buy the underlying security if the market price moves in their favor. For put options, the strike price is the price at which the purchaser has the right, but not the obligation, to sell the underlying security if the market price moves favorably.

Note that writers of options contracts are obligated to buy or sell the underlying security at the strike price if a purchaser chooses to buy or sell the underlying security.

What are the three measures of an option’s “moneyness”?

Moneyness describes an option’s strike price relative to its market price. An option that is in the money (ITM) has intrinsic value. A call is ITM if its market price is above the strike price; a put is ITM if its market price is below the strike price.

An option that is out of the money (OTM) has no intrinsic value. A call is OTM if the market price is below the strike price; a put is OTM if the market price is above the strike price.

An option is at the money (ATM) if the market price and strike price are the same.

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