ALL0-9$ABCDEFGHIJKLMNOPQRSTUVWXYZ
« Index
 

Staking System Overview

Governance Layer • Validators • Protocol Control

Staking System Overview — Yield Models & Delegation Mechanics

Staking is the foundation of many blockchain networks — 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 it’s evolving, and which methods maintain liquidity, decentralization, or protocol control.

Key Concepts:

  • Validator Sets — Groups of authorized nodes that validate transactions and secure the network.
  • Lock-Up Periods — Time duration assets must remain staked before withdrawal is allowed.
  • Delegation — Process of assigning stake to a validator without transferring custody.
  • Liquid Yield — Earning rewards while maintaining asset liquidity through derivative tokens.
  • Restaking Protocols — Systems that allow already-staked assets to secure additional networks.
  • Security Guarantees — Assurances provided by stake-backed consensus mechanisms.

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 — 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
 
« Index