What is Staking?#

Staking is the process of locking your cryptocurrency for a certain period of time. In return, you earn rewards for locking your funds.

By staking, you also get the chance to participate in the governance decisions of the blockchain network — like voting on proposals that affect how the network runs.

What’s the benefit of locking my cryptocurrency?#

When you lock your cryptocurrency through staking, you’re helping to secure the blockchain network. You’re supporting the system by making it more stable and resistant to attacks.

What does securing the network implies?#

In Proof of Stake:

Validators are chosen based on how much stake they have (including delegated stake).

If someone controls 51% of the total stake, they’re likely to get picked more than 50% of the time to validate blocks.

They can do this in two ways:

Option 1 - Become a Validator and Stake a Lot: The hacker becomes a validator and stakes a huge amount of tokens — enough to make sure they’re chosen more often than anyone else.
Option 2 Convince Other Validators or Control Delegations: The hacker doesn’t have to be a validator — they can delegate to many validators and bribe, hack, or manipulate others.

That means they can:

Approve bad or fake transactions,
Reverse past transactions (double-spending),
Block or censor others,
Pass governance votes alone (in some chains).

So the more you stake, the safer the network. Imagine this:

A hacker wants to control the network.
But they need more than half of all the staked tokens to do that.

If millions of people are staking their tokens, the hacker would have to:

Spend billions of dollars to buy more than half.
Risk getting caught and slashed.

So the attack becomes almost impossible and extremely expensive.

How does it work?#

As a staker, you delegate your assets to a validator — someone who runs the software that checks and confirms transactions. Here’s what happens:

The validator uses your funds (along with others) to help validate blocks of transactions.
When the validator earns a reward (a transaction fee), you get a portion of it.
But if the validator breaks the rules (cheats or makes mistakes), you can lose part of your staked funds — this is called slashing.

So, staking is both an opportunity and a responsibility!

What Does Delegation Mean?#

You (as a staker or delegator) choose a validator and delegate your tokens to them.
You keep ownership of your tokens — they don’t go into the validator’s wallet.
But your staked tokens are used to boost the validator’s power, increasing their chance of being selected to propose and validate new blocks.
The more stake a validator has (including tokens from delegators like you), the more trust the network places in them.

Is Staking Halal?#

For a transaction to be Shariah compliant, it must comply with:

No Riba (Interest): You cannot earn fixed or guaranteed returns just by lending money. Money should not generate money without real effort, risk, or work. This is riba and is strictly prohibited.

In Proof of Stake (PoS) blockchains (like Cosmos, Ethereum 2.0), staking is not lending your tokens — you are delegating them to help secure the network.

No Gharar (Uncertainty) – Contracts must be clear and not speculative. If the staking process is clear, the role of validators is known, and the risks and rewards are understood — there is no Gharar.

However, if staking involves complex or vague mechanisms, or if the rewards and slashing risks are not disclosed properly, it may involve Gharar.

The staking system is transparent if you know how your funds are used and what risks exist.

No Haram activities – The business must not involve alcohol, gambling, etc. If the blockchain supports general-purpose smart contracts (like Ethereum or Cosmos), some projects built on it may be haram, while others may be halal.

If your staking helps support the validation of transactions related to haram industries, your income could be tainted.

Profit through risk-sharing – You can earn profit if you’re also exposed to risk. In staking, you risk your capital by delegating to a validator. If the validator acts dishonestly or goes offline, your stake can be slashed (you lose some tokens).

So, you earn a reward only if your validator performs well, and you share the risk of loss if they fail. This aligns with Islamic principles: you’re earning profit while also facing risk.