The Evolution of Staking from 2012 to 2025

Though the concept of staking became a mainstream term in the blockchain space in 2022 following the Ethereum transition to the Proof-of-Stake consensus mechanism, staking has been a part of the blockchain validation process since its introduction in 2012 by Peercoin. However, while Ethereum moved fully to PoS, Peercoin maintained a hybrid framework using both Proof-of-Work (PoW) and Proof-of-Stake (PoS) mechanisms.

Also, though cryptocurrency staking initially employed the traditional fixed saving model, staking has outgrown the structure. Of course, this has not restricted the impacts of cryptocurrency staking in the blockchain ecosystem, but it has allowed staking to evolve beyond keeping the proof-of-stake ecosystem running. Innovative projects have redefined how users stake and earn rewards, and with a little bit of research, you might uncover the best tools for crypto staking in 2025 and how to make the most out of the cryptocurrencies you are holding.

How Crypto Staking Has Evolved

With the number of exchanges and projects offering at least one form of crypto staking today, you will want to agree that staking is probably one of the most lucrative investment decisions for crypto traders.
The narrative is straightforward: instead of holding those tokens aimlessly in your wallet, why not keep them with us? In return, we pay incentives in the form of newly minted coins using the calculated APY percentage. For anyone holding cryptocurrencies, that definitely sounds like a cool idea, but then what if there is more to do with your token than legacy staking?

The Genesis of Crypto Staking – Peercoin Introduced PoS in 2012

Staking was first introduced in 2012 by Peercoin. Developed by Sunny King and Scott Nada, the Peercoin ecosystem adopted a hybrid model using both the Proof-of-Work and Proof-of-Stake mechanisms. Hence, while mining of new coins was retained, transaction validation and security were achieved through staking.

Under this framework, holders of the PPC tokens are required to stake their coins to validate blocks and earn rewards. Validator selection was pseudo-randomly determined by how long participants had been holding the PPC tokens in their wallets. Hence, the genesis crypto staking was aimed at achieving two things:

  • Long-term token holding, and
  • Energy efficiency by reducing computational power.

However, staking then was susceptible to a series of attacks primarily due to the fact that validators had nothing at stake.

Ethereum Transition to PoS in 2022 (and other Developments)

In 2022, the long-awaited Ethereum transition to the Proof-of-Stake consensus mechanism took place, introducing a robust and secure PoS with two main features:

  • Staking requirement: High financial commitment; and
  • Slashing: The ultimate security to keep validators in check

The Ethereum staking protocol requires validators to lock 32 ETH to validate transactions and earn block rewards. This approach is very similar to the traditional fixed saving, where you cannot access the asset locked until the pre-determined date.

Pos under Ethereum is secured, however, the high financial commitment created a barrier preventing interested participants from participating in the ecosystem.

Aside from the Ethereum transition, the adoption of Staking by Tezos and other protocols also contributes to the development of cryptocurrency staking. In 2018, Tezos introduced the Liquid Proof-of-Stake (LPoS), where validators (usually referred to as Bakers) do not need to lock up tokens. However, they are required to hold a minimum amount to validate blocks in the ecosystem. Holding the Tezos (XTZ) tokens also grants governance power to holders, allowing users to vote for system upgrades.

Introduction of Delegated Proof-of-Stake (DPoS)

Another variation of Proof-of-Stake with staking as a prominent feature is the Delegated Proof-of-Stake (DPoS). First, it was implemented by Bitshares and further adopted by EOS, TRON, and BSC. Delegated Proof-of-Stake (DPoS) is an approach that allows token holders to select a fixed number of delegates (validators) to produce blocks.

This approach ensures fund security since token holders who could not act as validators themselves are allowed to carefully consider a pool of validators to select those who should act on their behalf. While this enhances scalability and governance, it has been condemned for its tendency to become largely centralized.

Innovative Staking Options: Liquid Staking and Restaking

Liquid staking redefines the concept of staking by designing a framework that allows users to access alternative tokens while still earning rewards on the staked tokens. With liquid staking platforms like Chainnodes and Lido Finance, users are given tradeable tokens that represent the tokens staked.

The alternative token allows users to retain access and control over their tokens. This eliminates the rigid lock-up requirement while rendering staking accessible to long-term and short-term token holders.

Restaking, on the other hand, multiplies the utility of already-staked tokens by using them to secure another ecosystem. With restaking, stakers basically lock their tokens on the base blockchain like Ethereum, then opt in for restaking protocols like Eigenlayer to use the same staked token to run validation on other protocols that use the same PoS.

In return, stakers earn rewards from all the blockchains or protocols where their tokens are being used to validate.

1. Integration with DeFi

As more projects and blockchains continue to adopt the PoS mechanism, staking will also continue to witness more integration. The decentralized finance space was once condemned for its carbon footprint, causing many to consider it a significant threat to global ecosystem sustainability. PoS as a greener alternative to PoW, combined with lightweight validation, makes an ideal option for future protocols that intend to prioritize energy efficiency.

The introduction of composable staking products like bundled yield strategies using LSDs, options and insurance is also on the rise. With this and the interest in passive earning as core features of crypto investment, staking is bound to witness deep integration with DeFi in the coming years.

2. Staking adoption by Layer-2 protocols and Rollups

We’ve seen layer-2 blockchains enhance Ethereum scalability. While this has improved users’ interaction with blockchain, it is also going to drive up the need for a staking approach like restaking. L2 chains relying on Ethereum security will benefit primarily from staking and restaking, while stakers will record increased rewards from the connection that exists between these blockchains.

3. Governance

One of the ways the blockchain space has been able to maintain orderliness despite the apparent diversity is through on-chain governance. This ensures that everyone contributes effectively to decision-making.
Future protocols must prioritize decentralized governance, which is already attainable through DAO and powered by staking. Token lock-up will continue to determine voting power. Hence, protocols that intend to retain decentralization as their core feature will have to adopt staking.

Conclusion

From 2012 to the present, it is apparent that staking has transformed beyond the novel experiment in Peercoin to a fundamental architecture for blockchain security and sustainability. As cryptocurrency and blockchain adoption grow into different forms, we are set to see staking transform extensively into a more robust earning mechanism. Cross-chain interoperability will facilitate inter-chain staking, allowing users to earn across multiple blockchains, and more projects will continue to eliminate the entry and access barrier introduced by Ethereum and the original staking framework.