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Analysis · Exchanges

What does it mean to stake crypto? Proof of stake, lockups, slashing, exchange terms and tax

Published 2026-10-14By the CryptoGuardz Register Desk6 min read11 sources

Photo: Towfiqu barbhuiya / Unsplash

In short, from the documents

What does it mean to stake crypto?

Staking crypto means locking coins in a proof-of-stake network so they back a validator, in return for rewards and at the risk of slashing. Solo Ethereum staking needs 32 ETH. Coinbase takes a 35% commission and Kraken 30% on flexible staking. The IRS taxes rewards as income when you gain control of them.

Piece published 2026-10-14Reviewed by CryptoGuardz Register Desk, editorial desk

Staking crypto means locking coins in a proof-of-stake network so they back a validator that checks transactions, in return for new coins as rewards. The stake can be cut, or "slashed", if the validator breaks the rules. Solo staking on Ethereum needs 32 ETH. Through an exchange, any amount works, but Coinbase keeps 35% of the rewards as commission and Kraken 30% on flexible staking.

Ethereum.org, the Coinbase and Kraken help centres, the SEC staff statement on protocol staking and IRS Revenue Ruling 2023-14 were read on 14 October

None of this is investment or tax advice.

What does staking crypto mean on a proof-of-stake chain?

It is the security deposit that replaces mining. Ethereum.org's definition:

Proof-of-stake is a way to prove that validators have put something of value into the network that can be destroyed if they act dishonestly.

Ethereum.org, proof-of-stake, retrieved 2026-10-14

What is stakingVideo by Coinbase on YouTube. Watch on YouTubeCoinbase's own short explainer of staking, from one of the two exchanges whose staking terms this post compares.

On Ethereum, "a user must deposit 32 ETH into the deposit contract and run three separate pieces of software: an execution client, a consensus client, and a validator client." One validator per slot is chosen at random to propose a block, and a committee votes on it. Honest work earns rewards. If a validator tries to "defraud the network (for example by proposing multiple blocks when they ought to send one or sending conflicting attestations), some or all of their staked ETH can be destroyed."

People without 32 ETH, or without the hardware, stake through a pool or a custodian. Ethereum.org says "staking pools accept almost any amount, some as little as 0.01 ETH." Custodial staking at an exchange is a third route, covered below.

How long is staked crypto locked up?

Getting in and getting out both queue. Ethereum.org says new validators "wait in an activation queue before they start attesting; how long depends entirely on how many others are trying to enter, and can range from hours to weeks." On the way out, exited balances are "automatically and continuously swept by block proposers" to the withdrawal address. Since the Pectra upgrade in May 2025, a single validator can hold up to 2,048 ETH and exits can be triggered from the withdrawal address.

An open monthly planner on a wooden desk — Illustration: a planner. Entry and exit both queue, and the wait can run from hours to weeks. Photo: Eric Rothermel / Unsplash

At an exchange the lock is the protocol's unbonding period plus the platform's process. Coinbase's estimated unstaking times, read on 14 October 2026, are about 10 days for ETH, 5 days for SOL, 25 days for ATOM, 4 days for DOT and 2 days for ADA, and its page says "Staked assets can not be traded or transferred until unstaking completes." Kraken says the wait "(known as the onchain unbonding period) can last 3 or more days, depending on the asset." A price fall during that window lands on the holder.

Coinbase and Kraken staking terms compared

Term	Coinbase	Kraken
Commission on rewards	35% standard	30% flexible and Auto Earn
Reduced commission	31.75%, 28.5%, 25.25% by Coinbase One tier	Bonded tiers from 25% down to 0% over $100M
Fee to stake or unstake	None if you wait out unbonding; instant unstake fee shown at request	"no transaction fees for staking or unstaking"
ETH unstaking estimate	About 10 days	Not stated per asset
Slashing	Reimburses penalties from Coinbase's mistakes, with exceptions	Compensates, except listed causes
Rewards guaranteed	No	No

The Coinbase One rates apply to ADA, ATOM, DOT, ETH, SOL and XTZ. The commission comes out of the network reward, so the rate a customer sees is the protocol's reward less that share. The comparison of the two exchanges' wider terms is on Coinbase vs Kraken.

What is slashing, and who pays for it?

Slashing is the protocol destroying part of a stake for rule-breaking. In custodial staking the customer's coins sit behind the exchange's validators, so the exchange's conduct decides the risk. Coinbase's risk page says it "commits to reimbursing slashing penalties resulting from mistakes made by Coinbase or any of its third-party validators", with exceptions it lists, and that "Coinbase cannot guarantee that you will earn any reward." Kraken's page says:

We will compensate you for any slashing penalty or nonpayment of staking rewards, unless this nonpayment results from your actions

Kraken support, overview of staking, retrieved 2026-10-14

Pieces of a broken blue and white plate on concrete — Illustration: a broken plate. Slashing destroys part of a stake when a validator breaks the rules. Photo: CHUTTERSNAP / Unsplash

Kraken excludes network maintenance, bugs, hacks and "certain other rare situations". A protocol bug, Coinbase warns, could mean losing "some or all of the crypto you have chosen to stake." Each exchange's account terms are on the exchange register, including the Kraken safety page.

Is staking a security under SEC rules?

Not for protocol staking, in the SEC staff's view. The Division of Corporation Finance's statement of 29 May 2025 says "Protocol Staking Activities" in connection with protocol staking "do not involve the offer and sale of securities". The statement covers self (or solo) staking, delegation to a third-party node operator, and "custodial" staking, where a custodian stakes on the owner's behalf "for an agreed-upon portion of any rewards". It also says:

This statement, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.

SEC Division of Corporation Finance, retrieved 2026-10-14

A separate staff statement on liquid staking followed on 5 August 2025. Neither binds a court.

How are staking rewards taxed in the US?

As income when you gain control of them. IRS Revenue Ruling 2023-14 holds that a cash-method taxpayer who stakes a proof-of-stake coin and receives rewards includes "the fair market value of the validation rewards received" in gross income "in the taxable year in which the taxpayer gains dominion and control over the validation rewards." The ruling says the same applies when staking "through a cryptocurrency exchange". Fair market value is fixed at the date and time control is gained. Selling the reward coins later is a separate taxable event. This is not tax advice; a tax professional applies it to a given return.

Quick answers

What does it mean to stake crypto?

Locking coins in a proof-of-stake network to back a validator for rewards. Solo Ethereum staking needs 32 ETH, per ethereum.org.

Can you lose money staking crypto?

Yes. Slashing can destroy staked coins, rewards are not guaranteed, and coins are locked during unbonding, about 10 days for ETH at Coinbase.

How much do Coinbase and Kraken take from staking rewards?

Coinbase 35% standard, down to 25.25% for the Coinbase One Premium tier. Kraken 30% on flexible staking. See what USDC on Coinbase pays for a reward that is not staking.

Are staking rewards taxable?

Yes in the US, per Rev. Rul. 2023-14: income at fair market value when you gain control of them. Not tax advice.

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Sources

About this piece

Compiled by the CryptoGuardz register team from the sources listed above. Research and drafting are AI-assisted and reviewed by a named editor before publication. Nothing here is a recommendation to gamble. If a figure or a reading is wrong, tell us and the correction is logged in public.