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Illustration: Shoshana Gordon/Axios

Crypto staking is a way of maintaining consensus over bookkeeping systems with thousands of simultaneously updated copies that is, a blockchain.

Why it matters: A massive amount of value is tied up in staking. On Ethereum alone, 17.6 million ethers (about $30 billion in value, or 14% of ether's total market cap) is staked on the network, guaranteeing its transactions are provably fair.

Big picture: Stakers are like the bookkeepers on the blockchains.

Zoom in: With billions of dollars in value at stake, such bookkeepers might be tempted to cheat and put funds in their own pockets or those of their friends.

In short, Ethereum has $30 billion in crypto ensuring that everyone plays fair.

The upshot: These bookkeepers are willing to take this risk because they get paid to do so. They get fresh new emissions of cryptocurrency for every block they take responsibility for validating.

Between the lines: It actually isn't just that they play fair. It's also that they do the job well. A staker can lose some stake if it goes offline or screws up (though it won't be as bad as if they steal).

The intrigue: A person or company doesn't have to do the validation in order to participate though. It's also possible to delegate.

Another really big network is Coinbase, which enables its users to stake their assets seamlessly in the app. So far, $1.8 billion in ether has been staked on the largest U.S. exchange.

Be smart: Both Lido and Coinbase tokenize people's stakes. That means they get a sort of cryptocurrency coupon for their deposits, one that tracks their staking earnings and that can be traded on chain, without unstaking.

What we're watching: Ethereum's staking program has been unique. What has gone into Ethereum as a stake has not come out again, by design. But when the Ethereum protocol undergoes its next big upgrade this month, stakers can start withdrawing ether.

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Original post:

The promise and perils of staking cryptocurrency - Axios