Staking System Overview
system overview
Staking System Overview ÔÇö Yield Models & Delegation Mechanics
Staking is the foundation of many blockchain networks ÔÇö used to secure consensus, validate transactions, and reward token holders. But staking is no longer a single model. This overview breaks down the four primary forms of staking systems used across protocols today: traditional staking, delegated staking, liquid staking, and restaking.
Use Case: Provides a framework for understanding how staking earns rewards, how itÔÇÖs evolving, and which methods maintain liquidity, decentralization, or protocol control.
Key Concepts: Validator Sets, Lock-Up Periods, Delegation, Liquid Yield, Restaking Protocols, Security Guarantees
Core Staking Models:
- 1. Traditional Staking
- User locks their tokens directly into the network (e.g., $ETH, $ADA)
- Assets are illiquid during the staking period
- Rewards are distributed based on uptime and validator performance
- 2. Delegated Staking
- User assigns their stake to a third-party validator without giving up custody
- Popular in networks like $XRP (UNL model), $FLR (FTSO), and $ATOM
- Validators earn commission, and users earn passive yield
- 3. Liquid Staking
- User stakes tokens and receives a liquid “receipt” token (e.g., $sFLR, $stETH)
- Token can be used in DeFi (lending, farming, etc.) while earning staking rewards
- Popularized by Lido, Rocket Pool, and Sceptre Protocol
- 4. Restaking
- User takes already staked assets and reuses them to secure additional networks or services
- Enables multi-use security and layered yield (e.g., EigenLayer on Ethereum)
- Still experimental ÔÇö raises questions around slashing and composability risk
Why Staking Systems Matter:
- Defines how networks stay secure and decentralized
- Shapes user incentives, liquidity availability, and validator power dynamics
- Influences how DeFi protocols are built on top of underlying infrastructure