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In any mature asset class, total return is driven by two components: capital appreciation and income. In the early days of crypto, new tokens were primarily earned through mining - the original mechanism of network participation before exchanges existed. Over time, the market’s focus shifted almost entirely toward price appreciation. Today, as the crypto ecosystem matures, investors are rediscovering the income side of the equation through staking. Even if the price of a crypto asset remained flat for a year, investors could still earn a 5% or higher return, a reality that’s attracting growing interest from sophisticated participants seeking consistent, network-native yields.

Staking provides a powerful additional source of return, one that is driven by the fundamental security and operation of the blockchain itself. This article will explore the mechanics of staking yields, the risks involved and provide a clear comparison of the methods available for investors to add this compelling income stream to their portfolios.
 

What drives staking yields? A look under the hood

Staking refers to the process of participating in the validation of transactions and block production on a Proof of Stake (PoS) blockchain by committing a certain amount of the crypto asset. By staking their assets, these users get the right to be chosen to validate transactions, with their staked amount acting as a guarantee that they will act honestly. In simpler terms, you are providing a crucial security service to the network and the staking yield is your reward or compensation for that service, but it’s important to understand that this yield is not “free money” or a “dividend”- it is a dynamic reward driven by the network’s own economic policy.

Staking yield primarily comes from three distinct sources:

1. Block Rewards (Base Rewards): The blockchain’s protocol is programmed to issue new tokens at a predictable rate, a process similar to how a central bank prints money. A large portion of these newly created tokens is distributed directly to stakers as a reward for their work in securing the network. This inflationary reward forms the base yield that stakers can expect to earn. 

2. Transaction Fees (Real Yield): Every time a user sends a transaction on the network, they pay a small fee (often referred to as gas fee). A portion of these fees is collected and distributed to the stakers who validated that block of transactions. This component of the yield is more variable, as it is directly tied to the activity and demand for the network; on a busy day with high transaction volume, the rewards from fees will be higher. 

3. Maximal Extractable Value (MEV) Rewards: Validators can also earn additional income through Maximal Extractable Value (MEV). By strategically ordering, including, or excluding transactions within a block, validators can capture part of the profit generated by arbitrage or other on-chain opportunities. While MEV rewards can significantly boost yields, they are highly variable and depend on both network conditions and validator participation in MEV markets.

The final yield percentage an investor receives is determined by the interplay of these rewards with the overall staking participation rate. Staking yields are typically higher when only a small percentage of a crypto asset’s total supply is staked and gradually decrease as more supply is locked in. This dynamic creates a built-in economic incentive: When fewer validators participate, higher yields encourage additional staking, while lower yields at high participation levels help maintain balance. Over time, this mechanism fosters a natural equilibrium that supports the network’s security and stability.
 

Ways to access staking: A practical guide

The yields generated by PoS networks are compelling, but accessing them involves a trade-off between control, convenience and security. The method you choose will depend on your technical expertise, the amount of capital and time you have and your risk tolerance. 

First, let’s look at some current examples of staking yields to understand the potential returns. These figures fluctuate based on network conditions, as highlighted above, but as of end of October 2025, they provide a good benchmark: 

Now, let’s explore the four primary ways an investor can access these yields: 
 

1. Direct Staking 

This is the most crypto-native method with the highest yield, where you participate directly in the network’s consensus mechanism. You set up your own validator node, which is a computer that is connected to the network 24/7 and is responsible for processing transactions and creating new blocks. This usually requires a higher amount of the native crypto asset as a security deposit (e.g. 32 ETH for Ethereum) and exposes you to slashing risk, as described later. Alternatively, you can delegate your stake to another validator in exchange for a commission. The staked assets are locked and illiquid for a specific period. 
 

2. Staking via a Centralized Exchange (CEX)

For users already using major crypto exchanges, such as Coinbase, Binance or Kraken, this is a user-friendly option. You select the asset you want to stake from your exchange wallet and the exchange  handles all the technical complexity behind the scenes. BNB staking, for example, is primarily done through Binance, where rewards are often linked to participation in new project launches (“Launchpool”). While this is a convenient option, investors expose themselves to counterparty risk and should therefore only engage with institutional, reputable exchanges.
 

3. Liquid Staking 

This method offers a solution to the illiquidity problem of direct staking. You deposit your crypto into a “liquid staking” protocol (like Lido or Jito). The protocol stakes the assets on your behalf and in return gives you a new token (a Liquid Staking Token, or LST) that represents your staked position. For example, if you deposit Solana (SOL) on Jito, you will receive jitoSOL. This LST can be freely traded or used in other Decentralized Finance (DeFi) applications while your original assets continue to earn staking rewards. However, you are exposed to the risk of bugs or exploits in the smart contract that converts your native, staked token into the LST.
 

4. Staking via an ETP (Exchange-Traded Product)

This method brings staking into the traditional finance world, making it accessible through a standard bank or brokerage account. You buy an ETP on a traditional stock exchange and the issuer of that ETP manages an institutional-grade staking process. The staking rewards are typically automatically reinvested, compounding directly into the Net Asset Value (NAV) of the product. The ETP itself is a regulated financial instrument that is subject to stringent regulations (e.g. on the custodians used). 
 

Understanding the risks 

While staking offers a compelling way to earn yield, it is not risk-free. The most prominent technical risk is slashing. Slashing is a penalty mechanism built into PoS protocols to enforce network rules and discourage validator misbehavior. If a validator gets “slashed”, a certain percentage of their staked tokens is permanently destroyed. The two key misbehaviours that incur slashing are validator downtime (when a validator goes offline and fails to process transactions) and double signing (when a validator signs two different blocks at the same height, which is a serious security violation). 

Beyond slashing, there are other key risks associated with staking, such as market risk (to the underlying price volatility), liquidity risk (due to lock-up periods) and counterparty and smart contract risk. The extent to which staking is exposed to these risks depends on the method of staking engaged. For example, ETPs mitigate slashing risk by selecting professional validators only and having insurances with them in place. Further, the ETP itself trades on a traditional stock exchange with daily liquidity available, therefore bypassing the underlying lock-up period. 
 

Beyond the basics: Advanced strategies for staking yield

While staking offers a compelling return, the investor is always exposed to the price volatility of the underlying crypto asset. For those looking to manage this risk or enhance their returns, sophisticated strategies borrowed from traditional finance could be applied such as delta-neutral staking or a covered call on staked assets. 

The primary goal of a delta-neutral strategy is to isolate the staking yield from the price volatility of the asset. It is built on two perfectly offsetting positions: A long, staked position in the crypto asset to generate yield, and a short derivative position to hedge the price risk. With price movements neutralized, the performance is driven by a simple equation: the yield earned minus the costs of the hedge. 

In contrast, the covered call strategy does not aim to eliminate price risk. Instead, its goal is to generate an additional income stream on top of the staking yield by selling out-of-the-money call options against the unstaked assets. This enhances total returns and can provide a small buffer against price declines, but it also caps the potential upside in a strong bull market. 

It is important to note that these advanced strategies are not off-the-shelf solutions and require active daily management and monitoring of positions. The exact construction and viability depend on a variety of factors unique to each crypto asset. These include the specific staking method engaged (and by extension, the lock-up period and liquidity of the underlying crypto asset), the availability and depth of suitable derivative markets for hedging or premium generation and a careful analysis of the cost-versus-reward for each component of the trade. Therefore, the feasibility of isolating or enhancing staking yield must be explored individually for each asset, as what works for one may not be viable for another. 
 

Conclusion: Choosing the right strategy for you

Staking allows investors to move beyond simply speculating on price and to participate directly in the underlying economy of a blockchain network while also securing the underlying infrastructure of their investments. 

As we’ve explored, the methods for accessing these yields vary widely, creating a clear spectrum of choice for investors. The path you choose will depend on your own goals and expertise, representing a fundamental trade-off between convenience, control and security.

• For the technical purist seeking maximum control: Direct Staking 
• For the DeFi native who values on-chain liquidity: Liquid Staking
• For the active trader who prioritizes ease of use on their existing platform: CEX Staking 
• For the institutional investor who wants simple and secure access through a traditional portfolio: Staking ETPs

As this landscape continues to mature, understanding these different methods for generating yield will be a crucial component of any serious digital asset investment strategy. 

About the Contributors

Jasmin Muelhaupt is a Director of Financial Product Development at 21Shares, where she directs the creation of cryptocurrency-based financial products across key international markets. Her career in finance began at Credit Suisse, where she held roles in institutional product strategy and equity trading. Prior to entering finance, Jasmin applied her scientific training in technical and regulatory roles within the pharmaceutical and chemical industries. Jasmin holds a Master of Science in Chemistry from ETH Zurich and is a CAIA Charterholder. 

Darius Moukhtarzadeh is a Research Strategist at 21Shares, where he is part of the global research team analyzing emerging developments in the digital asset ecosystem. Before joining 21Shares, Darius worked at Sygnum Bank, the world’s first regulated crypto bank, as well as Ernst & Young Blockchain and several startups in Switzerland’s Crypto Valley. He has been active in the blockchain sector since 2016 as an investor, advisor, founder, and author. Darius holds a Master’s degree in Business Innovation from the University of St. Gallen (HSG) and the University of California, Berkeley.

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