Staking
Staking means depositing coins in a proof-of-stake network as collateral and receiving a reward from network fees and newly created coins.
Explained simply
Anyone holding coins of a proof-of-stake network can "stake" them: they deposit them, thereby help secure the network, and receive a reward, usually stated as a percentage per year.
Important for context: the reward is paid in the same cryptocurrency. If its price falls, the total value can decline despite the reward. Staked coins are also often locked for a period.
Staking can be done directly (own validator), through a provider, or as "liquid staking", where you receive a tradable substitute token.
From the familiar world
A term deposit in a foreign currency: you receive interest in that currency, but the exchange rate determines what is left in euros at the end. And during the term you cannot access the money.
An example
An investor deposits ether through a regulated provider. She receives a few percent additional ether per year. Whether that pays off in euros depends on the ether price.
Why it matters
Staking is often advertised as "interest on crypto". Advisers should be able to name the two differences from a term deposit: reward in a fluctuating currency and lock-up periods. Tax treatment of staking requires separate consideration.
To pass on
„Staking is like a term deposit in foreign currency: there is a reward, but the currency's price decides what is left in the end.“
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