Staking and liquid staking explained
How proof-of-stake rewards, slashing, unbonding and liquid staking tokens work, with ETH and SOL data and US policy as of October 2026.
Key takeaways
- Staking means locking a proof-of-stake network’s native token to help validate transactions, in return for protocol rewards paid mostly in newly issued tokens and transaction fees.
- As of October 6, 2026, about 43.7 million ETH (roughly 36% of supply) was staked at an APR near 2.6%, while about 70% of SOL was staked at a reward rate near 5.0%.
- Liquid staking tokens such as Lido’s stETH represent staked assets that can still be traded or used as collateral, adding smart contract and peg risk on top of staking risk.
- US policy has shifted: SEC staff said in 2025 that protocol and liquid staking generally are not securities transactions, a March 17, 2026 SEC and CFTC interpretive release reached similar conclusions, and staking is now offered inside some US exchange-traded products.
What staking is
Proof of stake (PoS) is the method many blockchains, including Ethereum and Solana, use to agree on the order of transactions. Instead of spending electricity as in Bitcoin mining, participants called validators post tokens as collateral, or “stake.” Validators propose and attest to new blocks, and the protocol pays them for doing so honestly and penalizes them for misbehavior or downtime.
Rewards come from two places: new token issuance set by the protocol, and fees (including priority tips and, on Ethereum, value captured from transaction ordering). Because issuance dilutes holders who do not stake, staking yield is partly compensation for avoiding dilution rather than pure income. The “real” return depends on the network’s inflation rate and on the token’s price, which staking does nothing to protect.
How it works in practice
- Validators and delegation. Running a validator requires infrastructure and, on Ethereum, a minimum of 32 ETH. Most holders instead delegate to a professional operator, stake through an exchange or custodian, or use a staking pool. On Solana, holders delegate to validators directly from a wallet without giving up custody.
- Slashing. Slashing is the protocol confiscating part of a validator’s stake for provably malicious behavior, such as signing two conflicting blocks. On Ethereum it is rare and mostly caused by operator configuration errors; smaller penalties apply for being offline. Solana has historically relied on other incentives rather than automatic slashing. Delegators share the outcome of their operator’s mistakes.
- Lockups and unbonding. Staked tokens cannot be sold instantly. Ethereum uses entry and exit queues that limit how much stake can join or leave per epoch (a 6.4-minute period). On October 6, 2026, validatorqueue.com showed about 1.43 million ETH waiting to enter (around 25 days) and about 857,000 ETH waiting to exit (around 15 days), plus a withdrawal sweep delay of several days. Solana unstaking completes at the next epoch boundary, typically within about two to three days.
| Measure | Ethereum (ETH) | Solana (SOL) |
|---|---|---|
| Amount staked | About 43.7 million ETH | About 441.7 million SOL |
| Share of supply staked | About 35.8% | About 69.5% |
| Headline reward rate | About 2.61% APR | About 5.00% |
| Exit timing | Queue-based; about 15 days plus sweep delay | Next epoch boundary, about 2 to 3 days |
Ethereum figures are from validatorqueue.com (sourcing Beaconcha.in) and Solana figures from Staking Rewards, both viewed October 6, 2026. Rates are gross of operator commissions and change daily; Staking Rewards lists Solana’s inflation rate at about 3.65%, so its real yield is much lower than the headline.
Liquid staking and restaking
Liquid staking protocols pool user deposits, stake them through a set of operators, and issue a receipt token that tracks the staked position. Lido’s stETH is the largest example on Ethereum; Solana has equivalents such as JitoSOL. The receipt can be traded, lent or posted as collateral while the underlying stake keeps earning rewards. As of October 6, 2026, DefiLlama showed Lido with about $26.7 billion in total value locked, about 43% of the liquid staking category.
The convenience has costs: the token can trade below the value of the underlying stake in stressed markets, the protocol’s smart contracts can fail, and concentration in one provider raises questions about the network’s decentralization. Restaking, popularized by EigenLayer, lets staked ETH or liquid staking tokens be pledged again to secure other services in exchange for extra rewards. It adds new slashing conditions and layered dependencies, and regulators have treated it separately from ordinary staking.
Regulation, ETFs and tax
- SEC staff statements. On May 29, 2025, the SEC’s Division of Corporation Finance said protocol staking (self, delegated and custodial) generally does not involve the offer or sale of securities. An August 5, 2025 statement extended that view to certain liquid staking arrangements, while excluding restaking and arrangements with guaranteed or provider-set returns. Staff statements carry no legal force.
- Interpretive release. A joint SEC and CFTC interpretive release on March 17, 2026 concluded that protocol staking, including liquid staking, does not by itself constitute a securities offering when stated conditions are met. It is interpretation, not a binding rule.
- Staking in ETFs. Grayscale began staking in its Ethereum and Solana exchange-traded products on October 6, 2025. BlackRock’s iShares Staked Ethereum Trust (ETHB), launched in 2026, reported net assets of about $1.18 billion as of October 2, 2026 and pays staking rewards to shareholders monthly. The IRS issued Revenue Procedure 2025-31 in late 2025, giving qualifying grantor trusts a safe harbor to stake without losing pass-through tax treatment.
- Tax basics. Under Revenue Ruling 2023-14, the IRS treats staking rewards as ordinary income at fair market value when the taxpayer gains control of them, with a new cost basis for later capital gains. Treatment differs by country, and this is not tax advice.
Risks to understand
- Price risk. Rewards are paid in the same token; a 3% to 5% yield does not offset a large price fall.
- Liquidity risk. Exit queues can stretch for weeks when many holders unstake at once, and liquid staking tokens can trade at a discount in the meantime.
- Operator and slashing risk. Downtime or misconfiguration by a chosen validator reduces or confiscates rewards and principal.
- Smart contract and custody risk. Liquid staking and restaking add code risk; custodial staking adds counterparty risk with the provider.
- Concentration and policy risk. Large shares held by a few providers draw governance and regulatory scrutiny, and current US guidance could be revised.
Sources and further reading
- Validator Queue: Ethereum staking and queue dashboard (figures as of October 6, 2026)
- Staking Rewards: Solana staking metrics (figures as of October 6, 2026)
- DefiLlama: Lido protocol data
- Fenwick: SEC staff statements on protocol and liquid staking
- Willkie: review of the March 2026 SEC and CFTC joint interpretive release
- BlackRock: iShares Staked Ethereum Trust ETF (ETHB)
Frequently asked questions
Where do staking rewards come from?
From newly issued tokens set by the protocol and from transaction fees. Because issuance dilutes non-stakers, part of the yield offsets inflation rather than adding new value.
How long does it take to unstake?
It depends on the network. On October 6, 2026, Ethereum's exit queue was about 15 days plus a withdrawal sweep delay, while Solana unstaking completes at the next epoch boundary, typically two to three days.
Is staking a securities offering in the US?
SEC staff said in May and August 2025 that protocol staking and certain liquid staking generally are not, and a March 17, 2026 SEC and CFTC interpretive release reached similar conclusions. Restaking and arrangements with guaranteed returns were treated separately.
How are staking rewards taxed in the US?
Under IRS Revenue Ruling 2023-14, rewards are ordinary income at fair market value when you gain control of them, and that value becomes the cost basis for any later sale. Consult a tax adviser for specifics.
This explainer is reviewed and updated as the rules and the market change. Last reviewed October 6, 2026. It is educational content and not financial, legal or tax advice.