I just read one of the "Popular" posts on PUBLISH0X that gives a good intro. to the concept of staking crypto tokens (https://www.publish0x.com/decentralizedfinance/why-does-depositing-crypto-on-decentralized-finance-platform-xykdenp). After reading the full article, though, my primary question of risk remained.
So, I used the PRESEARCH engine (the one advertised at the top of the page right now, or at least as long at the contest is in effect), selected the Quant search engine option (logo is a big "Q"), and quickly found a clearly-written article that discusses staking risk at https://medium.com/stakin/risks-in-crypto-staking-66f8bb9067ec. For example, staking crypto can be susceptible to slashing and market volatility, among other risks.
In short, rates of return that seem too good to be true may actually be "true", at least for the moment, but they may be that high because they incur significant risk. In general, including in traditional finance, you will almost never get something for nothing, and often the decision to incur risk isn't always straightforward.
Staking crypto is similar to the idea of Certificates of Deposit or even interest-bearing savings accounts (although the latter doesn't come close to matching staking rewards lately). When you stake crypto, you're basically letting others borrow your assets so they can be used for other purposes. This idea isn't new and it can be lucrative, but the crypto space is much newer and less regulated than traditional financial sectors. This can be good for investors because it is part of the reason why individuals can get much better returns by staking crypto than they can from their (barely) interest bearing fiat-based savings account. It can have downsides, though, due to lack of guarantees by many platforms (eg traditional savings accounts primarily have FDIC protection whereas crypto platforms do not) and the crypto "gold rush" where people may find themselves executing transactions based on only surface knowledge posted on hosted websites and FOMO, only to later find out that the fine print and/or gaps in info. provided were substantial and damaging.
