what is staking in stocks — meaning & differences

This article answers “what is staking in stocks” by clarifying that staking is primarily a cryptocurrency concept (locking tokens to support Proof‑of‑Stake networks) and by explaining the two equit...

2025-11-14 16:00:00

By Cipher Trio

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Staking in Stocks — meaning, analogues and differences

what is staking in stocks — short answer: “staking” is primarily a cryptocurrency term for locking tokens to support a proof‑of‑stake blockchain and earn rewards. There is no single, widely accepted practice called “staking” in traditional stocks. When people ask "what is staking in stocks" they most often mean one of two equity concepts: (1) an equity stake — holding ownership in a company — or (2) securities (stock) lending programs run by brokers where shareholders temporarily allow their shares to be loaned to institutional borrowers and may receive fees in return.

This article explains: what crypto staking is; the equity concepts people mistakenly call "staking in stocks"; how each works; the differences in purpose, risks, liquidity and tax treatment; and practical steps to participate safely. If you want to explore exchange-based staking or wallet options, Bitget and Bitget Wallet are mentioned as widely used platform and custody choices later in the guide.

Definitions

Staking (cryptocurrency)

Staking is a process tied to proof‑of‑stake (PoS) blockchains. Token holders commit (lock) tokens to help secure the network and participate in block validation or consensus. Validators run network nodes and are selected to propose or attest blocks in proportion to the stake they control. Token holders can often delegate tokens to validators or join staking pools instead of running their own node. Rewards—commonly paid in the chain’s native token—compensate participants for securing the network and processing transactions.

Equity stake (stocks)

An equity stake means ownership of shares in a company. Holding shares gives you economic exposure to the company’s profits and losses and—depending on share class—may give you voting rights and dividend entitlements. The size of your equity stake determines your percentage ownership and potential influence over corporate decisions; equity holders do not “stake” shares to secure a market protocol in the blockchain sense.

Stock / Securities lending (equities analogue)

Securities lending (often called stock lending or share lending) is a broker‑facilitated market practice in which a broker arranges for a shareholder’s securities to be temporarily loaned to institutional borrowers (for example, hedge funds that need shares to short). Lenders typically receive fees or cash‑equivalent payments while retaining economic exposure to price changes, though legal title may transfer to the borrower for the loan period. Securities lending programs are sometimes what people refer to when asking "what is staking in stocks" because they can look like “earning yield” on idle shares.

How crypto staking works (PoS mechanics)

Validators, delegators and staking pools

Validators are full‑node operators that run the software to validate and propagate blocks. Running a validator usually requires technical expertise, continuous uptime, and a minimum amount of tokens (protocol‑dependent). Delegators are token holders who assign (delegate) their tokens to a validator without transferring custody of the underlying asset on some platforms or by using pooled staking products on exchanges. Staking pools aggregate many holders’ tokens to increase validation chances and simplify participation.

Reward generation and distribution

Staking rewards typically come from protocol issuance (inflation) and transaction fees. The rules for reward calculation vary by chain: some networks distribute block issuance among validators proportionally to stake; others use more complex formulas that include validator performance. Rewards are usually paid in the network’s native token and distributed to validators and their delegators after the validator’s share and any operator fees are applied.

Lock‑up, unbonding and slashing

Most PoS chains impose a lock‑up or unbonding period when staking or unstaking tokens; unbonding delays (for example, several days to weeks) exist to protect the network against sudden stake withdrawal. Slashing is a penalty applied when validators act maliciously or fail to meet availability/consensus requirements; slashing can reduce a validator’s and delegators’ staked tokens and thus creates counterparty/operational risk.

Securities lending / broker "stock lending" programs (how they work)

Mechanics of lending shares through brokers

When shareholders opt into a broker’s stock lending program, the broker arranges loans of those shares to institutional borrowers. The borrower provides collateral—commonly cash or other securities—generally exceeding the loan value by a margin (margining) to protect against default. The loan is typically arranged by the broker or an agent and may be callable (recallable) by the lender subject to program rules and market conditions.

Payments to lenders and fee sharing

Lenders receive lending fees or cash payments. Brokers often keep a share of the lending revenue as a program fee; payout methods and rates vary by broker and by the demand for borrowing a specific security. For hard‑to‑borrow stocks (high short interest), lending fees can be materially higher.

Rights and restrictions while shares are lent

Economic exposure (price appreciation/depreciation) remains with the lender—but legal title typically moves to the borrower for the loan period. This transfer can affect voting rights: lenders frequently lose direct voting rights while shares are on loan. For dividends, lenders sometimes receive a cash‑in‑lieu payment rather than a qualified dividend, which can alter tax treatment.

Collateral, protections and counterparty risk

Securities lending relies on collateral and margining but introduces counterparty risk if the borrower or broker fails. Custodial arrangements and third‑party collateral agents can offer protections, and some programs include insurance or default management procedures. However, the safety of lent assets depends on the broker’s operational practices, legal netting arrangements and the sufficiency of collateral.

Comparison — Crypto staking vs equity staking / stock lending

Purpose and economic function

Crypto staking: secures a blockchain and supports consensus. Rewards compensate for security and uptime.
Equity stake: long‑term ownership and claim on corporate earnings. No network security function.
Securities lending: facilitates market liquidity, shorting and settlement; lenders earn fees for temporarily providing supply.

Risk profile

Crypto staking risks: slashing, smart‑contract bugs, validator misbehavior, protocol governance risk, token price volatility and custody risk (if staking via third parties).
Stock lending risks: counterparty default, collateral shortfall, loss of voting rights and possible change in dividend tax treatment; broker solvency risk also matters.

Liquidity and lock‑up differences

Crypto staking: may involve unbonding periods; unstake delay depends on protocol and provider.
Stock lending: loans are often recallable, but recall timing is uncertain and practical constraints may delay settlement. Opting out of a lending program or recalling shares can be subject to broker rules.

Yield origin and volatility

Crypto staking yields come from issuance and fees and vary with network economics and token inflation.
Lending fees depend on market demand to borrow a stock and can spike for scarce securities; yields are not tied to company cash flows.

Tax and regulatory considerations

Crypto staking taxation overview

Tax treatment of staking rewards differs by jurisdiction. Many tax authorities treat staking rewards as ordinary income at receipt, with subsequent disposals triggering capital gains events. As of June 2024, major personal‑finance and custody providers (for example, Fidelity and NerdWallet guides) described staking rewards generally being taxed as income on receipt, but rules vary and taxpayers should consult local guidance. Tax reporting and basis calculation can be complex, especially for auto‑compounded or pooled staking rewards.

Tax treatment for securities lending / cash‑in‑lieu of dividends

When shares are lent, dividends may be replaced by cash‑in‑lieu payments that could be classified differently for tax purposes and may not qualify for preferential dividend rates. Brokers typically report payments on tax forms, but investors should confirm how their jurisdiction treats cash‑in‑lieu and lending income for withholding and tax credits. As of June 2024, CNBC and broker disclosures emphasized checking broker tax reporting and local tax rules before participating in lending programs.

Regulatory and custody issues

Securities held at regulated broker‑dealers generally benefit from custody rules and, in some jurisdictions, limited investor protection schemes. Crypto staking via exchanges or custodians operates in a different regulatory landscape: custodial safeguards, insurance and oversight vary significantly. If you use an exchange or wallet, prefer regulated custodians and, when available, choose Bitget Wallet or Bitget’s regulated custody options for staking and managed services.

How to participate — practical steps

Participating in crypto staking

Options include:

Running your own validator: highest control but requires technical skill, uptime and staking minimums.
Using staking‑as‑a‑service: a third‑party runs validators on your behalf—evaluate operator reputation and slashing policies.
Staking via exchanges or pooled products: easiest for beginners; check fees, lock‑up/unbonding rules and custody arrangements.

When choosing a provider, review fees, historical uptime, slashing history, decentralization goals and whether you retain custody of private keys. Bitget and Bitget Wallet offer exchange‑based staking and custody features and are positioned as options for users seeking integrated staking products.

Participating in stock lending programs

To join a stock lending program you typically:

Opt in through your broker’s account settings.
Review the lending agreement, fee split, collateral practices and recall rules.
Understand tax reporting and how dividends are handled while shares are lent.

If you need to preserve voting rights for an upcoming shareholder meeting or want to ensure dividend qualified status, consider disabling lending for specific holdings or selecting brokers that allow granular control.

Due diligence checklist

Before staking tokens or lending shares, check:

Provider reputation and regulatory status.
Custody and insurance arrangements (who holds private keys or securities?).
Fees and revenue sharing.
Lock‑up, unbonding or recall terms.
Historical security incidents and responses.
Tax reporting practices and local tax guidance.

Risks and mitigations

Crypto‑specific risks

Slashing and validator penalties: mitigate by delegating to reputable validators with low slashing history.
Smart‑contract vulnerabilities: prefer audited staking contracts and reputable custodians.
Custodial risk: choose platforms with clear custody segregation and insurance where available.
Market volatility: staking rewards do not eliminate token price risk.

Equities‑specific risks

Counterparty and broker risk: use brokers with robust custody and capital standards.
Collateral shortfalls: review broker collateral policies and default procedures.
Loss of voting rights: opt out if voting is important.
Dividend tax differences: consult tax professionals if dividend treatment matters for your planning.

Practical mitigations

Diversify across validators and brokers, read provider terms carefully, and maintain some assets in non‑staked or non‑lent form to meet liquidity or voting needs. For crypto, consider using hardware or self‑custody solutions (e.g., Bitget Wallet for custody) where you require stronger control.

Common misconceptions

Staking is not the same as owning an equity stake. Cryptocurrency staking secures blockchains; equity ownership confers corporate claims.
Stock lending is not blockchain staking. Lending shares is a market‑making and financing mechanism, not a consensus mechanism.
Lending shares does not guarantee steady yield; fees fluctuate with borrow demand and market conditions.

Frequently asked questions (FAQ)

Q: Can I lose my shares if they are lent?
A: You retain economic exposure but legal title often moves to the borrower during the loan. If a borrower or broker defaults, protections depend on collateral sufficiency and broker default procedures.

Q: Can I stake stocks like crypto?
A: No. Stocks are not staked for network security. What people call “staking in stocks” usually refers to securities lending programs that let you earn lending fees.

Q: How are payments taxed?
A: Tax treatment varies. Staking rewards often are taxed as income at receipt; lending payments and cash‑in‑lieu may be taxed differently than qualified dividends. Consult a tax advisor.

Q: How long are funds locked when staking or lending?
A: Crypto staking often has an unbonding period set by the protocol. Stock loans are generally recallable, but practical settlement timing can vary by broker and market conditions.

Examples and provider practices

Broker stock‑lending programs commonly offer opt‑in/opt‑out choices, collateral margins and revenue sharing. As of June 2024, major coverage in business press and broker disclosures (e.g., CNBC reporting on securities lending practices) highlighted that lenders should confirm how dividends and votes are handled.

For crypto staking, providers range from self‑run validators and institutional custodians to exchange staking products. As of June 2024, consumer guides (for example from NerdWallet and Fidelity) described common participation paths: running a validator, delegating, or staking on exchanges that offer pooled products and simplified UX.

Bitget’s staking and custody services are examples of exchange‑based staking where users can stake tokens via the platform or use Bitget Wallet for self‑custody and staking integrations. When using exchange staking, review Bitget’s published terms, fee schedule and custody safeguards.

References and timeliness notes

As of June 2024, according to CNBC, securities lending remains a core market practice that can affect voting and dividend treatment; readers should review broker disclosures before participating.
As of June 2024, NerdWallet’s staking explainers outlined practical staking options (solo validator, delegation, and exchange staking) and highlighted tax and lock‑up considerations.
As of June 2024, Fidelity’s public guidance described staking mechanics, validator roles, and typical tax treatments for staking rewards.
As of June 2024, The Motley Fool and Galaxy Asset Management provided primer material on staking purpose, reward mechanics and slashing risks.
Capital.com’s glossary provides concise definitions for “equity stake” and related equity market vocabulary.

(Readers: check the publication date on each provider’s guide for the most recent rules and numbers; tax law and platform terms change frequently.)