If you add money to your savings account, the bank pays you interest.

They do this by taking your deposits, lending them to other customers, then sharing back with you a portion of the interest they collect.

You get paid for letting the bank use your money.

Stake cryptocurrency and you receive protocol-based rewards. But there's no bank lending your tokens and no interest from borrowers. So where do the rewards actually come from?

The answer reveals something fundamental about how proof-of-stake blockchains work.

Why Networks Need Staking

Traditional payment networks like Visa rely on centralized infrastructure. A company runs the servers, processes transactions and maintains security. They charge fees to cover costs and generate profit.

Blockchains eliminate that central operator. No single company processes transactions. Instead, thousands of independent validators run nodes, verify transactions and secure the network.

Validators are essentially specialized computers that verify blockchain transactions and create new blocks. Think of them as the network's bookkeepers and security guards combined. They check that transactions are legitimate, add them to the blockchain and maintain consensus about the network's current state.

But validators need incentive to do this work. Running validator infrastructure costs money, with costs including servers, bandwidth and maintenance.

Staking is how the network pays for its own security

How Staking Works

When you stake, you're locking digital assets in a smart contract or delegating it to a validator. This locked amount becomes collateral.

You don't need technical expertise to stake. Most people delegate their tokens to professional validators who run the infrastructure. Your assets remain yours, but they're committed to network security for the staking period.

The network then uses your staked tokens as proof you have skin in the game and you benefit when the network runs smoothly. 

Where the Rewards Come From

Staking rewards aren't interest, but rather come from two main sources.

New token creation makes up the largest portion. Proof-of-stake networks mint new tokens according to predetermined schedules and distribute them to validators and delegators. This is inflation. The network creates new supply to pay for security.

Transaction fees then add to rewards. Every blockchain transaction includes a fee. Validators who process those transactions collect the fees and share them with stakers.

The total typically ranges from 3-20% annually depending on the blockchain, current participation and transaction volume.

The Trade-offs You're Making

This comes with important trade-offs.

Inflation means dilution. Yes, you earn 8% staking rewards. But if the network inflates supply by 8%, you're just maintaining your proportional ownership. Real value depends on whether token demand outpaces inflation.

Also, lock-up periods exist. Ethereum requires 1-3 days to unstake while Cosmos enforces 21-day unbonding, and your tokens are committed during this period.

Validators who stay online and run correctly receive rewards that get shared with you. If your validator goes offline, makes technical errors that trigger penalties, or the operator runs unreliable infrastructure, your returns suffer.

Rates vary constantly. What pays 12% today might pay 6% next month as network participation changes and transaction volume fluctuates.

For some, these trade-offs make sense. You're contributing to network security and participating in blockchain infrastructure.

For others, the complexity and lock-up constraints outweigh the variable returns.

How Orokai Helps

Orokai can't change how staking works, but we can make it more accessible.

We handle protocol selection, show realistic yield expectations accounting for fees and inflation, and present terms before you commit.

You still make the decision. We just organize the information so you understand what you're actually participating in. Join our waitlist.