On proof-of-stake networks, validators help establish the accepted transaction history. Rewards compensate specified network duties; they are not interest on an insured bank deposit. Ethereum is the example here, and other protocols can use different rules. A provider’s advertised yield may combine several sources and deduct different fees.
Follow the reward chain
On Ethereum, protocol rewards involve newly issued ETH. A block proposer can also receive transaction priority fees; the base fee is burned rather than paid to validators. A service’s payout depends on its fee and reward-sharing terms.
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| Layer | Question to answer |
|---|---|
| Protocol | Which duties earn rewards and which failures incur penalties? |
| Operator or pool | Who holds keys, deducts fees and controls withdrawals? |
| Investor result | What is the net token amount worth after price changes and costs? |
More tokens can still mean a loss
Hypothetical example: you start with 10 tokens priced at 100 each. After all token-denominated service fees, you have 10.4 tokens, but the price is 80. Value is 10.4 × 80 = 832 versus an initial 1,000: a 16.8% loss before tax or other costs, despite 4% more tokens. This is arithmetic, not a forecast or offered yield.
Distinguish the risks
- Missed validator duties can lead to penalties; specified serious violations can cause slashing. They are not the same event. Check who bears each loss.
- Withdrawal queues, service lock-ups, pool contracts and any liquid-staking token introduce different exit conditions. Restaking adds separate obligations and risks.