What is staking?

If you're new to DeFi, terms like staking, liquid staking, and lending can sound similar - but they work very differently. Here’s a simple breakdown of what each means, what it doesn’t mean.

What is Staking?

Staking is when you lock up your tokens to help secure a blockchain network (like Sui). You delegate your tokens to a validator, who helps process transactions. In return, you earn staking rewards.

• You earn rewards from the network (not from other users).

• Tokens are usually locked for a period. On Sui, there’s a fixed unbonding period of 1 day before you can access your tokens again, but you can instantly unstake if you use an LST like sSUI from SpringSui.

• ⚠️ Risks:

  • Slashing: Some networks reduce your staked amount if a validator misbehaves (not common on Sui).

  • Lock-up: You can’t move or use staked tokens until they’re unstaked.

  • Validator performance: Poorly performing validators may give you lower rewards.

What isn't Staking?

Many people confuse other yield-generating activities with staking. Here’s what staking is not:

Lending (eg. on Suilend)

You deposit your tokens so others can borrow them. Borrowers pay interest, and you earn a share.

• ❌ This is not staking as you’re not helping secure the blockchain.

• 🔓 No lock-up, but withdrawing depends on protocol liquidity.

• ⚠️ Risks:

  • Smart contract risk: Bugs or exploits could lead to losses.

  • Utilization risk: If most tokens are borrowed, you might not be able to withdraw right away.

  • Borrower risk: If liquidation systems fail, you could lose funds.

Providing Liquidity to AMMs (eg. on STEAMM)

You supply tokens to a trading pool (like SUI-USDC) and earn a share of trading fees.

• ❌ This is not staking as you’re not helping secure the blockchain.

• 🔓 No lock-up, but prices can shift rapidly.

• ⚠️ Risks:

  • Impermanent loss: If token prices move, your share of the pool might be worth less than if you held the tokens.

  • Smart contract risk: Bugs or exploits could lead to losses.

What are LSTs (Liquid Staking Tokens)?

LSTs are tokens you receive when you stake through a liquid staking protocol (like SpringSui). You still earn staking rewards, but your tokens stay liquid - you can trade or use them in DeFi while they earn.

• ✅ Backed by real staking under the hood.

• 🔓 No lock-up for the LST, but if you want to convert it back to SUI, there might be a delay or a fee depending on which LST you've staked with. There is no delay with sSUI, the largest LST on Sui, which has instant unstaking.

Learn more about SpringSui.