Track 4 · Markets and DeFi · Module 21

Staking and yield

Where yield comes from, and the risks hiding behind a big number.

Lessons: 7
Reading: 56 min
Quiz: 15 questions
Pass mark: 80%

1Where yield comes fromWhere does crypto yield come from?7 min
2Rewards, penalties and exitsHow do Ethereum staking rewards, penalties and withdrawals work?8 min
3Ways to stakeWhat are the different ways to stake crypto?7 min
4Liquid staking and restakingWhat are liquid staking tokens and restaking, and what extra risks do they add?8 min
5APR, APY and real yieldWhat is the difference between APR and APY, and what is "real" yield?8 min
6Rules and red flagsWhat have US regulators said about staking, and what are the red flags in a yield offer?10 min
7The Brindlecove case: three offersHow do you compare crypto yield offers?8 min

The case used in this module

The Brindlecove Labs case (made up)

Brindlecove Labs is a made-up company with a made-up token, BRDL. Its finance lead, Maya Quist (made up), looks after a treasury that holds 64 ETH, 500,000 USDC, and 200,000 WRNH that the Wrenhallow team paid it for building a wallet app. Day-to-day cash sits at Pellowmark Bank, a made-up bank. Three made-up yield offers arrive:

Quellmarch Staking, a liquid staking pool for ETH. Deposit ETH and get qmETH, a token whose value in ETH rises as rewards come in. It shows 2.25% a year, after keeping 10% of the rewards.
Wrenhallow Network, the made-up proof-of-stake network behind WRNH. Staking WRNH pays 60% a year in new WRNH, and the WRNH supply is set to grow 80% this year. New WRNH that does not go to stakers goes to Wrenhallow's own funds.
Glimmerhay Earn, a platform that takes USDC and promises a "guaranteed" 18% a year, a simple yearly rate (APR) before compounding, paid daily, with withdrawals "at any time". It doesn't say how it earns the money.

The lessons come back to Brindlecove to ask one question each time: where does this number come from? Some quiz questions ask about it. None of this is a suggestion to use any product.

Each module tells its own made-up Brindlecove story, so details can differ from one module to the next.

Key words

Yield: What an investment earns over a year, shown as a percentage of the amount put in.¹
Staking: Locking up a proof-of-stake network's coins so that they can be used to help run the network, in return for rewards.²³
Issuance: Creating new coins that did not exist before. On proof-of-stake networks, new coins are paid to validators as rewards.⁴³
MEV (maximal extractable value): Extra value a block producer can take by choosing which transactions go into a block, and in what order.⁵
Slashing: The penalty for provable cheating by a validator: part of its stake is destroyed and it is forced out of the network.⁶²
Inactivity leak: An Ethereum emergency rule that slowly drains the stake of offline validators until the active ones hold more than two-thirds of it.⁶
Exit queue: The rate-limited wait to stop staking. How long it takes depends on how many others are leaving at the same time.⁷²
Withdrawal address: The address a validator's staked ETH and rewards are sent to. On Ethereum it can be set only once.⁷
Staking as a service: Delegated staking: you deposit your own 32 ETH, and a third-party operator runs the validator for a fee.⁸
Liquid staking token (LST): A receipt token for coins staked through a pool, which can be traded or used while the coins stay staked.⁹¹⁰
Rebasing token: A token whose balance in your wallet changes as rewards, or losses, are added. Lido's stETH is one.⁹¹¹
Restaking: Using coins that are already staked to help secure other services too, for extra rewards and extra risks.¹²
Actively Validated Service (AVS): A service, such as a price oracle or a bridge, that is secured by restaked ETH and pays rewards for it.¹²
APR (annual percentage rate): A yearly rate that does not include the effect of compounding.¹
APY (annual percentage yield): A yearly rate that includes the effect of compounding, worked out over a 365-day year.¹¹³
Token dilution: When new tokens are created, each existing token becomes a smaller share of the total supply.¹⁴

Sources

Regulation DD (Truth in Savings), 12 CFR part 1030: sections 1030.2 and 1030.3, and Appendix A. Electronic Code of Federal Regulations, US Government (read 24 October 2026, through the eCFR's own content service).
Ethereum staking: How does it work?. ethereum.org (read 24 October 2026).
Statement on Certain Protocol Staking Activities (staff statement). US Securities and Exchange Commission, Division of Corporation Finance, 29 May 2025.
How The Merge impacted ETH supply. ethereum.org (read 24 October 2026; page last updated 6 June 2026).
Introduction. Lido documentation (read 24 October 2026).
Proof-of-stake rewards and penalties. ethereum.org developer documentation (read 24 October 2026; page last updated 28 September 2026).
Staking withdrawals. ethereum.org (read 24 October 2026; page last updated 17 August 2026).
Delegated staking (staking as a service). ethereum.org (read 24 October 2026; page last updated 17 August 2026).
Liquid & pooled staking. ethereum.org (read 24 October 2026; page last updated 17 August 2026).
Statement on Certain Liquid Staking Activities (staff statement). US Securities and Exchange Commission, Division of Corporation Finance, 5 August 2025.
Lido Tokens Integration Guide. Lido documentation (read 24 October 2026).
Restaking. ethereum.org (read 24 October 2026; page last updated 15 May 2026).
Compound Interest (glossary). Investor.gov, US Securities and Exchange Commission (read 24 October 2026).
Inflation Schedule. Anza (Agave validator client documentation for Solana) (read 24 October 2026).