The Basics of Bitcoin Staking: How to Stake and Earn Rewards

Bitcoin is the best-known cryptocurrency in the world. It’s the original, the largest by market cap, and often the first stop for anyone stepping into the crypto space.

But for all its fame and value, Bitcoin’s native use case is famously limited: you own it, you hold it, maybe you spend it — that’s about it. Unlike many newer blockchains that offer native staking, on-chain governance, or smart contract layers, Bitcoin was designed to do one thing well: secure peer-to-peer transactions through Proof of Work.

Yet crypto never stands still. Developers continue to find ways to build new layers of utility on top of older protocols, and Bitcoin has been no exception. Over the years, innovators have created ways for holders to lend out their BTC, borrow against it, or use wrapped versions on other chains — all to put an otherwise static asset to work.

One of the more interesting offshoots of this trend is the idea of “Bitcoin staking.” While the Bitcoin network itself doesn’t support staking like Proof of Stake blockchains do, new platforms and protocols now offer staking-like yields and incentives to Bitcoin holders.

This article breaks down how Bitcoin’s core protocol works, why native staking isn’t possible, and how creative solutions — from centralized exchanges to decentralized BTCfi — make “staking” Bitcoin a reality today.

Is It Possible to Stake Bitcoin?

This brings us to the big question: if Bitcoin’s protocol doesn’t support staking, how can people “stake” Bitcoin?

The term “staking” gets used pretty loosely in the crypto world, but in its authentic sense, it has a clear technical meaning. In a Proof of Stake system, staking means putting your assets at risk — literally accepting the chance that your stake could be slashed if you act maliciously or break the network’s consensus rules. It’s an economic deterrent against bad behavior, and it works because participants stand to lose money if they cheat.

When people talk about Bitcoin staking today, they’re usually not talking about that original meaning. Instead, “staking” has become shorthand for any process where you lock up an asset to earn yield. The real staking mechanism — slashing and validator penalties — doesn’t exist for Bitcoin, but people still want yield opportunities for an asset that would otherwise just sit idle in a wallet.

This demand has driven platforms and protocols to expand the concept of staking into new forms. Some let you lend out your Bitcoin, earning passive yield from borrowers. Others use Bitcoin liquidity to help secure other chains or provide liquidity for wrapped BTC versions on other blockchains. There are also Bitcoin-based protocols that mimic DeFi savings accounts or let you earn funding rates from perpetual futures markets.

Each of these setups creates a “staking-like” experience for Bitcoin holders — you deposit your BTC, it gets put to work in various ways, and you earn returns in exchange. Of course, how safe or risky this is depends on where you stake, how the protocol works, and what you’re actually funding under the hood.

In the following sections, we’ll break down the centralized and decentralized options for earning staking-like yields on Bitcoin and examine some of the most interesting projects advancing this concept.

Understanding Bitcoin Staking

In the previous section, we clarified that when people talk about “staking” Bitcoin, what they mean is depositing BTC to earn some form of yield. It’s not staking in the strict consensus sense — it’s a way to put otherwise idle Bitcoin to work.

Centralized exchanges make this simple: you deposit your Bitcoin, the exchange lends it out to borrowers, and you earn a share of the interest they pay, minus the platform’s cut. It’s a straightforward setup that feels familiar to anyone who’s used savings accounts or lending products in traditional finance.

On the other side, decentralized platforms have taken the idea much further. The rise of BTCfi — a decentralized finance platform explicitly built around Bitcoin — has brought about more creative ways to generate yield. From securing other networks to unlocking liquidity or earning on-chain funding rates, these projects are expanding what “staking” Bitcoin can look like.

Centralized Staking Platforms

For most Bitcoin holders looking for simple, hands-off yield, centralized exchanges are the easiest place to start. The model is straightforward: you deposit your BTC with a centralized platform — usually a major crypto exchange — and they lend it out to institutional or retail borrowers. The borrowers pay interest, the platform takes its cut, and you receive a share of the yield in return.

Unlike Proof of Stake blockchains, where staking secures the network, here the “staking” label is really about passive income. Platforms package it this way because the user experience feels similar: you lock up your BTC and watch it earn rewards over time.

So what can you expect to earn? Yields on centralized platforms vary widely, depending on market demand, the platform’s risk appetite, and the aggressiveness of their lending desk. At the conservative end, Coinbase’s Bitcoin yield products offer little to no return — their current programs show near 0% APY for BTC deposits.

Other exchanges take it further: Kraken partners with Babylon to offer around 1% yield on BTC, paid not in BTC but in Babylon’s native $BABY token. Platforms like Crypto.com or Binance typically offer tiered yield products that can reach 2%–6% APY for BTC, often depending on whether you lock your funds for a fixed term or hold the exchange’s native token for bonus rates.

The norm is that most centralized Bitcoin “staking” yields are paid out in the same asset — BTC — or sometimes in the platform’s native token or another crypto like stablecoins. This can make a big difference: yields paid in BTC preserve your Bitcoin exposure, while yields paid in tokens can add extra layers of risk if the token price fluctuates.

Centralized Bitcoin staking isn’t risk-free. You’re trusting the platform with custody of your Bitcoin, exposing yourself to counterparty risk and the possibility of policy changes or withdrawal freezes — issues that have hit users hard in past bear markets. But for many holders who want simple returns without navigating DeFi, CEX-based staking remains the easiest way to earn passive yield on idle BTC.

Decentralized Bitcoin Staking Platforms

While centralized exchanges offer the simplest way to earn yield on Bitcoin, decentralized platforms have pushed the idea much further. By design, decentralized platforms have more autonomy in how they deploy your Bitcoin — and they’ve used that freedom to create a wide range of yield strategies that wouldn’t be possible in a traditional exchange setup.

Some decentralized protocols mimic centralized lending desks by pooling user deposits and lending them out to generate interest. However, the innovation extends far beyond that. One of the more interesting trends is using Bitcoin as a stake to help secure consensus layers on other blockchains. In these setups, your Bitcoin might be wrapped or bridged to another chain and then used as collateral to secure block validation or to underwrite new blockchains entirely.

These decentralized Bitcoin staking solutions can take various forms. Some run as dedicated layer 1 or layer 2 networks designed to bring smart contracts and DeFi features to Bitcoin’s ecosystem. Others operate as standalone applications built on top of other blockchains, such as Ethereum or Cosmos, tapping into wrapped Bitcoin liquidity.

This broader movement is starting to be called BTCfi — short for “Bitcoin Finance.” BTCfi aims to bring the same kind of DeFi opportunities that Ethereum users have enjoyed for years to Bitcoin holders: lending, borrowing, yield farming, synthetic assets, perpetual swaps, and more. By creating new ways to generate yield, BTCfi gives Bitcoin more utility than just being digital gold locked away in cold storage.

This approach naturally comes with added complexity and risk, but it also expands what’s possible for Bitcoin as an on-chain productive asset. In the next section, we’ll look at some of the top platforms driving this new wave of decentralized Bitcoin staking.

Top Bitcoin Staking (BTCfi) Platforms

Babylon

Babylon is a pioneering non-custodial protocol that lets you stake BTC on Bitcoin itself, with no wrapping or bridges involved. You lock your Bitcoin via Extractable One-Time Signatures (EOTS) and contribute to the economic security of PoS-supported networks (“Bitcoin-Secured Networks”). Rewards come from those chains, paid in their native tokens (e.g., $BABY, or other network tokens you choose to support).

• Yield mechanism: Rewards from securing other PoS networks, split 50/50 for stake and BABY token stakers on Babylon’s Genesis chain.
• Network: Runs on Babylon Chain (a Cosmos-SDK Layer‑1).
• Technical notes: Self-custodial, BTC remains on-chain; optional multi-network staking; slashing via EOTS in the event of misbehavior.
• Lock-in period: Roughly 300 Bitcoin blocks (~2 days) per staking round.
• TVL: Approximately 57,000 BTC (~$4.6 billion) staked on Babylon Genesis.

Core

Core is an EVM-compatible Layer‑1 chain secured by Bitcoin through a novel consensus model named Satoshi Plus. Users non-custodially time-lock BTC using CLTV, which grants voting power for Core validator elections. In return, stakers earn CORE tokens.

• Yield mechanism: Rewards in CORE tokens from block rewards and fees, plus miners can delegate hash power for extra yield.
• Network: Core blockchain, fully EVM‑compatible with its own DeFi ecosystem (~$375M TVL).
• Technical notes: No BTC leaves your wallet; uses Bitcoin CLTV; dual staking option boosts yields if you also stake CORE alongside BTC.
• Lock-in period: Based on timelock duration; unspecified default but tied to BTC block confirmations.
• Yield tiers: Base through Satoshi tier — higher CORE stake increases BTC yield.
• Notable TVL: Thousands of BTC staked; institutional products (e.g. Valour’s ETP) offer ~5.65% yield using Core’s infrastructure.

Lorenzo Protocol

Lorenzo Protocol is a liquid-staking and CeDeFi platform built atop a Cosmos-based appchain (Ethermint), providing a bridge between Bitcoin and DeFi. Users deposit BTC into a multi-signature vault managed by trusted staking agents and receive two liquid tokens: stBTC representing principal, and YAT, which tracks yield accrual.

• Yield mechanism: Deposited BTC is deployed into Babylon-style staking plans (BLSPs), and users earn yield from those strategies.
• Network: Cosmos-Ethermint-based layer‑1, interoperable with 20+ chains and 30+ DeFi protocols.
• Technical specifics: Dual-token model enables users to trade principal and yield separately. Custody is CeDeFi—vault partners hold keys, while Lorenzo facilitates staking.
• Lock-in & liquidity: No fixed lock‑up; liquid staking tokens can be traded or redeemed. Redemptions follow vault withdrawal rules.
• TVL & scale: Boasts ~$600 million in BTC liquidity (staked and wrapped assets).
• Fees/minimums: Protocol fees apply; the wallet typically requires entire BTC units (~0.01 BTC or more), although specifics depend on the vault plan.

Ethena Protocol

Ethena is a synthetic-stablecoin platform built on Ethereum that mints a dollar-pegged token called USDe using a delta-neutral strategy — long spot ETH (and BTC) while simultaneously shorting perpetual futures. When you stake USDe, you receive sUSDe, a yield-bearing variant that accrues its yield directly into the token’s value rather than paying rewards separately.

• Yield generation: Comes from perpetual futures funding fees (typically bearish) and yield earned by deploying crypto collateral.
• Network: Ethereum-based, with a 7‑day unstaking cooldown.
• Technical details: sUSDe remains pegged 1:1 with USDe, and the increase in value is automatically compounded.
• Lock‑up: 7-day exit period required to unstake.
• Fees/minimums: None explicitly mentioned; staking is permissionless on Ethereum.
• Vault TVL: Ethena manages over $5 billion in TVL across its synthetic dollar and staking pools.

By offering yield on a synthetic dollar that uses BTC and ETH as collateral, Ethena enables BTCfi users to earn returns without giving up decentralization, though users should be mindful of derivatives exposure and unwinding delays.

Solv Protocol

Solv Protocol pioneers a unified “Staking Abstraction Layer” (SAL), offering SolvBTC, a 1:1 Bitcoin reserve token backed by BTC and wrapped BTC across chains.

• Yield mechanisms:
  • Liquid staking tokens (LSTs) — e.g., SolvBTC.BBN or CORE — which earns staking or restaking yields from chains like Babylon or Core.
  • Perpetuals liquidity — pools earn funding and trading fees.
  • RWA yield tokens — e.g., SolvBTC.AVAX routes BTC liquidity into real-world asset strategies like US Treasuries.
• Networks supported: Multi-chain — Ethereum, Avalanche, BNB, Arbitrum, and more.
• Technical specifics: Fully non-custodial, proof-of-reserves audited, minting via SAL, supported by staking guardians and yield distributors.
• Liquidity & lock-up: Funds remain liquid through LSTs; there is no rigid lock-up.
• TVL: Holds over $2 billion in BTC yield strategies, with ~25k BTC in reserve and 597k users.
• Yields: Vary by strategy – e.g., SolvBTC.CORE offers 2–4% in CORE tokens on LSTs; RWA strategies pay in BTC format.

Solv exemplifies BTCfi’s versatility — combining liquid staking, cross-chain utility, and RWA loops into one protocol, enabling Bitcoin holders to generate yield in multiple on-chain and real-world markets simultaneously.

Advantages and Risks of Bitcoin Staking

Staking Bitcoin through centralized or decentralized methods opens up new opportunities — but also introduces new trade-offs that every BTC holder should weigh carefully.

Advantages of Bitcoin Staking

• Unlocks financial opportunities for an otherwise static asset that traditionally just sits in cold storage.
• Protocols like Babylon and Core help secure other blockchains by tapping into Bitcoin’s robust capital base, extending its influence beyond simple payments.
• Potential to boost demand for Bitcoin as more use cases emerge that rely on Bitcoin liquidity as economic backing.
• Long-term holders can earn passive yield, putting their BTC to work without selling it.
• Flexible strategies to match risk appetite, from simple centralized lending to advanced BTCfi models with wrapped BTC or synthetic structures.
• Supports BTC liquidity across chains, enabling Bitcoin to play a larger role in the broader DeFi and multi-chain ecosystems.

Risks of Bitcoin Staking

• Operates outside Bitcoin’s native security model, exposing your BTC to risks not present if held in cold storage.
• Centralized platforms carry counterparty risk, including potential insolvency, withdrawal freezes, or mismanagement.
• Decentralized platforms introduce smart contract risks, which could lead to exploits or bugs draining funds.
• Wrapped or synthetic Bitcoin adds layers of custodial and bridge risk — your yield may depend on third-party collateral or peg stability.
• Market and liquidity risks — yield rates can fluctuate, and some protocols require minimum lock-up periods that limit access to your BTC.
• Regulatory uncertainty, particularly for platforms offering yield products that may be considered unregistered securities in certain regions.

Bitcoin staking isn’t a “set and forget” choice — it’s a trade-off between putting idle BTC to work and accepting new risks that come with doing so. Always weigh potential rewards against what you’re prepared to lose.

Final Thoughts

Bitcoin staking isn’t traditional staking, but the innovation surrounding it demonstrates just how far the crypto industry is willing to go to unlock new value from existing assets. From simple lending desks on major exchanges to decentralized protocols like Babylon and Core securing other chains with Bitcoin’s economic weight, BTCfi has created fresh reasons to hold and use Bitcoin beyond just storing it in a wallet.

That said, putting Bitcoin to work always means moving outside its native security guarantees. Whether it’s counterparty risk on a centralized exchange, smart contract exploits on a DeFi platform, or the added complexity of wrapped or synthetic BTC, the trade-offs are real.

If you’re a long-term holder, Bitcoin staking can be a smart way to squeeze extra yield from your coins, as long as you understand where your BTC is going, how your yield is generated, and what risks you’re taking on in return. Do your homework, manage your exposure, and never forget that with Bitcoin, self-custody is still king.