Skip to main content

​
The Tokenomics of Staking

This paper explores the role of staking in modern proof-of-stake blockchains, focusing on how reward mechanisms influence validator behavior and security. Cong,

​
Abstract

This paper explores the role of staking in modern proof-of-stake blockchains, focusing on how reward mechanisms influence validator behavior and security. Cong, He, and Tang model the economic incentives governing staking participants, demonstrating that staking acts as a mechanism for both signaling commitment and securing network consensus. The research employs an analytical framework that incorporates the cost of capital and risk-adjusted returns to evaluate how staking ratios affect blockchain safety. Findings reveal that while staking promotes network security, it can lead to centralizing forces if reward distributions are skewed toward large capital holders. This study is significant for its formalization of the economic costs of decentralization and its contribution to the design of secure, sustainable consensus protocols that depend on community participation and asset locking. Authors: Lin William Cong, Zhiheng He, Ke Tang Publication: Academic Paper Publication date: 2025-01-01

​
Key findings

  • Staking acts as both a network security mechanism and a capital-signaling device.
  • High staking ratios are correlated with increased protocol safety but may introduce centralization risks.
  • Reward structures significantly dictate the distribution of power among validators.
  • The cost of capital plays a decisive role in participation rates for proof-of-stake networks.

​
Citation

Lin William Cong, Zhiheng He, Ke Tang (2025). The Tokenomics of Staking. Academic Paper. https://www.nber.org/system/files/working_papers/w33640/w33640.pdf
Canonical knowledge ID: research:the-tokenomics-of-staking