Unit 1 · Level 5 · Staking & restaking
Where staking yield comes from
In September 2022, Ethereum switched from miners to stakers (the Merge). Validators now lock up ETH, take turns proposing blocks, and earn roughly 3-4% a year for it. The yield is freshly issued ETH plus a slice of the transaction fees users pay. Golden rule of this whole league: before chasing any yield, ask 'who is paying this, and why?'
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What you get asked
A validator on a proof-of-stake chain earns rewards. What are the two real sources of that yield?
Staking yield = the protocol printing new coins to pay validators, plus fees (and tips) from people using the chain. No mystery counterparty, no guarantee. Just issuance and usage.
Why does a validator have to LOCK UP coins at all? What is the stake actually for?
The stake is skin in the game. Sign two conflicting blocks or attack the chain, and the protocol slashes part of your stake, destroying it for good. Honesty becomes the profitable strategy.
When a validator misbehaves and the protocol destroys part of its stake, that penalty is called ___.
Slashing is the stick that makes proof of stake work, and it's reserved for provable cheating like double-signing. Mere downtime isn't slashed; it just leaks a small inactivity penalty.
Match each staking concept to what it really means
Four levers, one system: rewards pull validators in, slashing keeps them honest, and the unbonding period stops everyone fleeing at once.
ETH staking pays ~3% while a random new chain advertises 20% staking yield. What's the FIRST question a graduate asks?
If a chain pays 20% by printing 20% more coins, stakers just tread water while holders drown. That's dilution wearing a yield costume. Remember the tokenomics lessons: check issuance before applauding the number. 🐜
The rest of this unit
Where staking yield really comes from, and what happens when you stack risk on top of it.