Pillar guide
How staking rewards actually work
A staking reward is not one number handed down by the protocol. It is the sum of three income streams minus three subtractions, averaged over a window that whoever quotes it gets to choose — which is why the headline APR on Lido Finance, an exchange, or any other staking provider needs unpacking before you compare it to anything.
Issuance
Newly minted currency paid for correct attestation and block proposal. Steady, and inversely related to total network stake.
Priority fees
Tips from users who want faster inclusion. Highly variable — a single congested day can outweigh a quiet month.
MEV
Value captured from transaction ordering inside a block. Lumpy, occasionally large, and increasingly shared with stakers.
Commission
The cut taken by node operators and the protocol treasury. Charged on rewards, not on principal.
Penalties
Small deductions for missed duties, and rare but severe slashing for provably harmful behaviour.
Gas costs
Deposits, wrapping, bridging and withdrawals all cost network fees, which matter disproportionately on small positions.
APR is not APY
APR is a simple annualised rate with no compounding. APY assumes rewards are reinvested and therefore earn further rewards. At single-digit rates the gap is small but real, and it only exists if compounding actually happens. A rebasing liquid staking token compounds automatically because rewards join the staked balance; a network that pays to a separate address does not compound until you restake manually.
When comparing two providers, make sure both figures answer the same four questions: over what window, including which income sources, before or after commission, and with or without compounding. The step-by-step version lives in how staking rewards are calculated.
Denomination matters more than rate
Staking rewards are paid in the staked asset. A 4% return in a token that fell 30% is not a gain in purchasing power. Reward rate and price exposure are separate decisions, and conflating them is the most common analytical mistake in this space.
Why unusually high rates deserve suspicion
Base staking yield is set by protocol issuance and network activity, so it is roughly the same for everyone on a given chain. A materially higher advertised figure is therefore coming from somewhere else: temporary token incentives, leverage, or uncompensated risk. Understanding which one applies is the difference between a strategy and a surprise. See using liquid staking tokens in DeFi and liquid staking risks explained.