Key Points
- Select an Ethereum staking method that suits you best
In short, there are many ways for one to stake their Ether, including via:
Exchange platforms
The top crypto exchanges offering Ethereum staking, such as Binance, Kraken, eToro, and Coinbase, provide investors with many conveniences. Generally speaking, you will likely find little to no minimum staking requirements. Nevertheless, the cons associated with staking on exchanges would be its service fees as well as security.
Operating a validator
One can earn more through running a validator, but a minimum of 32 Ether will be required to get started. Meanwhile, particular hardware is needed, further increasing the initial expenses. Besides that, the Ethereum validator will need a strong internet connection to handle the computing prowess.
Validator pools
Staking your Ethereum to a pool essentially means that you will be pooling your funds with other validators to hit the 32 Ether needed to operate a validator. The pros of this structure are that the financial entry barrier has been dramatically minimised. At the same time, investors still get the privilege to enjoy the majority of the benefits of running a validator. Furthermore, all investors will be allowed to keep their cryptocurrencies because this is a non-custodial arrangement.
Liquid Staking
Liquid staking usually exchanges your Ether tokens for a receipt token, which investors can store in their private wallets to prove their ownership. This, in turn, can be used to trade whilst their original token proceeds to generate passive income. In addition, investors are not obligated to perform extra actions to stake Ethereum. On that note, notable liquid staking platforms include Kraken, Binance, and Ankr. In most scenarios, liquid staking offers investment yields of around 4%, which is nearly equivalent to alternative Ethereum staking approaches.
Concluding Thoughts
In a nutshell, Ethereum staking is a simple way for cryptocurrency enthusiasts to earn passive income on the Ether they already possess. Regardless, it remains imperative to note that, like every other investment, all individuals should conduct their own research and only invest in crypto tokens that they can afford to lose.
Frequently Asked Questions (FAQs)
How much ETH will I earn from staking?
The investment returns from Ethereum staking broadly vary based on the amount of Ether staked across the Ethereum blockchain network. At the point of writing, the typical procedures of Ethereum staking bring investors around 3% to 5% APY.
Is it a good idea to stake my Ethereum?
Staking is a popular go-to option to earn passive income, though investors must consider certain aspects of this option before making a decision. For example, Ethereum staking mandates the locking up of your Ether for an unspecified period. Nevertheless, if you come up with a long-term investment thesis, Ethereum staking may be the right choice for you.
Can you lose ETH by staking?
There will always be a risk associated with Ethereum staking. Still, staking has been generally perceived to be safe as the most plausible chances are likely to impact returns rather than your crypto wallet itself negatively.
Video
- Purchase Ethereum
It will be necessary for you to buy Ethereum if you are looking to stake it. Fortunately, you will be able to purchase it very quickly via crypto exchanges.
- Select an Ethereum staking method that suits you best
In short, there are many ways for one to stake their Ether, including via:
Exchange platforms
The top crypto exchanges offering Ethereum staking, such as Binance, Kraken, eToro, and Coinbase, provide investors with many conveniences. Generally speaking, you will likely find little to no minimum staking requirements. Nevertheless, the cons associated with staking on exchanges would be its service fees as well as security.
Operating a validator
One can earn more through running a validator, but a minimum of 32 Ether will be required to get started. Meanwhile, particular hardware is needed, further increasing the initial expenses. Besides that, the Ethereum validator will need a strong internet connection to handle the computing prowess.
Validator pools
Staking your Ethereum to a pool essentially means that you will be pooling your funds with other validators to hit the 32 Ether needed to operate a validator. The pros of this structure are that the financial entry barrier has been dramatically minimised. At the same time, investors still get the privilege to enjoy the majority of the benefits of running a validator. Furthermore, all investors will be allowed to keep their cryptocurrencies because this is a non-custodial arrangement.
Liquid Staking
Liquid staking usually exchanges your Ether tokens for a receipt token, which investors can store in their private wallets to prove their ownership. This, in turn, can be used to trade whilst their original token proceeds to generate passive income. In addition, investors are not obligated to perform extra actions to stake Ethereum. On that note, notable liquid staking platforms include Kraken, Binance, and Ankr. In most scenarios, liquid staking offers investment yields of around 4%, which is nearly equivalent to alternative Ethereum staking approaches.
Concluding Thoughts
In a nutshell, Ethereum staking is a simple way for cryptocurrency enthusiasts to earn passive income on the Ether they already possess. Regardless, it remains imperative to note that, like every other investment, all individuals should conduct their own research and only invest in crypto tokens that they can afford to lose.
Frequently Asked Questions (FAQs)
How much ETH will I earn from staking?
The investment returns from Ethereum staking broadly vary based on the amount of Ether staked across the Ethereum blockchain network. At the point of writing, the typical procedures of Ethereum staking bring investors around 3% to 5% APY.
Is it a good idea to stake my Ethereum?
Staking is a popular go-to option to earn passive income, though investors must consider certain aspects of this option before making a decision. For example, Ethereum staking mandates the locking up of your Ether for an unspecified period. Nevertheless, if you come up with a long-term investment thesis, Ethereum staking may be the right choice for you.
Can you lose ETH by staking?
There will always be a risk associated with Ethereum staking. Still, staking has been generally perceived to be safe as the most plausible chances are likely to impact returns rather than your crypto wallet itself negatively.
Video
- Ethereum (ETH) staking is the procedure of locking up a specific quantity of the native cryptocurrency of the Ethereum blockchain for a particular duration as part of committing to upholding the security of the blockchain network. In return for their risk-taking efforts, the investor will be eligible for monetary rewards in the form of interest on their staked coins (denominated in Ether).
- Investors who stake their cryptocurrencies (does not necessarily have to be Ethereum specifically) are called “stakers” or “validators”. These groups of individuals will be responsible for processing transactions, storage of data, as well as introducing blocks to Ethereum’s novel proof-of-stake (PoS) consensus model, known as the Beacon Chain.
- A total of 32 ETH is required for an individual to run their own validator. Nonetheless, there are plenty of other ways to stake your Ethereum. Such examples would include liquid staking, staking at exchanges, or participating in a staking pool.
- All in all, the process of Ethereum staking not only acts as an invaluable opportunity for validators to generate passive income for themselves, but it is also an innovative approach to safeguard the next iteration of Ethereum’s blockchain network, popularly termed “Ethereum 2.0”. In particular, Ethereum 2.0 will be the next phase of Ethereum that operates on the Beacon Chain.
The concept of Ethereum staking has become an increasingly popular topic amongst cryptocurrency enthusiasts because it provides all users with a chance to help secure the network alongside earning rewards via validating data and transactions. At the point of writing, 11% of all Ethereum that is being circulated in the ecosystem has been staked, and this percentage of Ethereum is estimated to be worth more than US$22 billion.
Having mentioned that, VALK provides a well-rounded ecosystem comprising decentralised tools to help crypto investors invest better. For instance, their Smart DeFi portfolio tracker, Merlin, could calculate the efficacy of an investment strategy almost immediately by determining the total yield and profit/loss generated from a portfolio in United States dollars (USD) currency.
An Introduction to Ethereum
Ethereum is a blockchain protocol created in July 2015. Miners, in turn, were able to use this blockchain to develop their very own cryptocurrency called Ether, which is also known as Ethereum. Since then, Ethereum began to gain loads of traction amongst investors as storing it on a blockchain provided significant public confidence that Ethereum is a very secure cryptocurrency. Nevertheless, it is essential to remember that a vast amount of energy is required to secure the network via a Proof-of-Work consensus mechanism. Whilst Ethereum remains a popular cryptocurrency globally, most computers (or nodes) running on the Ethereum blockchain are situated in the US.
On that note, there has been an announcement involving the launch of an upgraded Ethereum 2.0 to the protocol on the 15th of September 2022. This significant update essentially involves converting Ethereum into a more scalable asset to support more transactions at one point in time, improve the system’s security, and ensure this field becomes more environmentally friendly as a whole. Therefore, most exchanges are not banning Ethereum staking or withdrawing stakes until the merging of Ethereum and Ethereum 2.0 has been finalised.
With that, it is incredibly vital first to comprehend the implications of Ethereum staking before the launch.
A Brief Overview of How Ethereum Staking Works
In essence, staking is the process of locking up 32 Ether into the blockchain network as part of activating the validator software. Once that is completed, the validator will be tasked with authenticating transactions, storing data, and adding new blocks to the Ethereum 2.0 blockchain. As a result, the validator will contribute to maintaining the legitimacy and security of the Ethereum blockchain for the rest of the public and thereby be rewarded with new Ether coins for their work. In other words, Ethereum staking can be considered a public good for the ecosystem.
Things to Consider When Staking Ethereum
There are various ways in which investors can choose to stake Ethereum. Nonetheless, it is imperative to consider numerous factors on top of investment yields. To begin with, specific staking platforms are custodial, meaning that investors would not be able to control their cryptocurrencies in a private wallet. Additionally, investors could expect the majority of services to charge a fee for Ethereum staking. As an example, Stakefish charges 0.1 Ether for individuals to stake 32 Ethers. Conversely, Coinbase mandates a 25% commission rate before investors are able to receive their financial rewards. With that, it would be clear that different exchange platforms may have varying methods of charging investors for staking Ethereum, though some, such as Binance, do not charge any fees at all.
On top of the factors mentioned above, the returns on investment for staking Ethereum typically differ depending on the amount of Ether that has been staked across the blockchain network. Though at the moment, the most common approach of Ethereum staking generates between 3% and 5% in annual percentage yield (APY).
VALK has created a Smart DeFi Portfolio Tracker known as Merlin to provide investors with a comprehensive overview of their DeFi positions across protocols. This includes liquid staking solutions for Ethereum, such as Lido Finance. Merlin’s tools, in turn, are vital to help investors improve their investment strategies.
Ethereum Staking Benefits
There are a number of good reasons why investors may consider Ethereum staking, with notable reasons detailed below.
A passive income opportunity
In general, Ethereum staking follows a very similar principle as utilising a money market account or depositing your hard-earned savings into a traditional fixed deposit account, which involves putting up one’s tokens to keep a blockchain secured. Once you have consented to the terms and conditions as well as deposited your Ether, no extra work will be required on your end, and you may be able to earn high-interest rates for your efforts.
To provide some context, the mean return for Ethereum staking currently hovers at 4%. This means that if an investor were to stake one Ether, they would be eligible to earn an extra 0.04 Ether by the end of a single financial year, thereby yielding 1.04 Ether during the process. Not to mention, some cryptocurrency experts are predicting that the investment returns for Ethereum staking may rise to 10% to 15% once the Ethereum 2.0 upgrade has been completed.
To help investors who have dedicated crypto assets to liquid staking services, VALK has developed a dashboard known as Merlin, which offers in-depth analytics of their investment positions. Merlin calculates PNL related to chosen protocols like Compound, Lido, Uniswap, Aave, and V3.
A sense of community
Like any other cryptocurrency, Ethereum completely depends on the blockchain network to operate and function properly. Hence, if you are a person who is enthusiastic about Ethereum and have faith in its value, Ethereum staking provides you with a rare opportunity to take part in the network and enhance the cryptocurrency’s worth.
A relatively low-risk investment
In comparison to other existing cryptocurrencies, Ethereum staking is known to be stable due to its global usage, popularity, and high level of security. Consequently, this gives Ethereum a significant unfair advantage over most of the other digital assets.
Downsides of Staking Ethereum
Despite the numerous upsides that investors could enjoy with Ethereum staking, it is important to be well aware of the disadvantage and risks associated with this activity:
Investors will not be allowed to withdraw
At the moment, no validators will be able to withdraw their staked Ether until Ethereum 2.0 has been completed and released. Considering no one can be too sure of when the release date will be, it is, therefore, crucial to acknowledge that staking your Ethereum prior to the upgrade means that you will be locking up your cryptocurrency assets until after the new consensus model is launched.
Risk of losing your Ethereum stake
Although the benefits of Ethereum staking look exceptionally tempting for some, there is an inherent risk of losing the entire sum due to counterparty risk, governmental intervention, or even a network hack.
Potential validator penalties
Although this is more of a rarity than the norm, the Ethereum blockchain could penalise stakers for going offline or for validating fraudulent transactions. Should such an event occur, a penalty fee will be charged, in which specific amounts of the staked Ethereum could be wholly or partially removed. This, as a result, adversely impacts an investor’s APY.
Risks associated with custodial staking
Investors must understand that with Ethereum, the majority of their staking options are likely to be custodial. This means their Ether will not be in their private wallet but with a staking service or exchange platform. On that note, any cryptocurrencies not in a personal wallet will be vulnerable to third-party hacking, counterparty risks, or any unwelcome issues.
How To Get Started with Staking Ethereum?
If you feel like you are prepared to embark on Ethereum staking, you will likely realise that the process of getting started is surprisingly straightforward!
- Purchase Ethereum
It will be necessary for you to buy Ethereum if you are looking to stake it. Fortunately, you will be able to purchase it very quickly via crypto exchanges.
- Select an Ethereum staking method that suits you best
In short, there are many ways for one to stake their Ether, including via:
Exchange platforms
The top crypto exchanges offering Ethereum staking, such as Binance, Kraken, eToro, and Coinbase, provide investors with many conveniences. Generally speaking, you will likely find little to no minimum staking requirements. Nevertheless, the cons associated with staking on exchanges would be its service fees as well as security.
Operating a validator
One can earn more through running a validator, but a minimum of 32 Ether will be required to get started. Meanwhile, particular hardware is needed, further increasing the initial expenses. Besides that, the Ethereum validator will need a strong internet connection to handle the computing prowess.
Validator pools
Staking your Ethereum to a pool essentially means that you will be pooling your funds with other validators to hit the 32 Ether needed to operate a validator. The pros of this structure are that the financial entry barrier has been dramatically minimised. At the same time, investors still get the privilege to enjoy the majority of the benefits of running a validator. Furthermore, all investors will be allowed to keep their cryptocurrencies because this is a non-custodial arrangement.
Liquid Staking
Liquid staking usually exchanges your Ether tokens for a receipt token, which investors can store in their private wallets to prove their ownership. This, in turn, can be used to trade whilst their original token proceeds to generate passive income. In addition, investors are not obligated to perform extra actions to stake Ethereum. On that note, notable liquid staking platforms include Kraken, Binance, and Ankr. In most scenarios, liquid staking offers investment yields of around 4%, which is nearly equivalent to alternative Ethereum staking approaches.
Concluding Thoughts
In a nutshell, Ethereum staking is a simple way for cryptocurrency enthusiasts to earn passive income on the Ether they already possess. Regardless, it remains imperative to note that, like every other investment, all individuals should conduct their own research and only invest in crypto tokens that they can afford to lose.
Frequently Asked Questions (FAQs)
How much ETH will I earn from staking?
The investment returns from Ethereum staking broadly vary based on the amount of Ether staked across the Ethereum blockchain network. At the point of writing, the typical procedures of Ethereum staking bring investors around 3% to 5% APY.
Is it a good idea to stake my Ethereum?
Staking is a popular go-to option to earn passive income, though investors must consider certain aspects of this option before making a decision. For example, Ethereum staking mandates the locking up of your Ether for an unspecified period. Nevertheless, if you come up with a long-term investment thesis, Ethereum staking may be the right choice for you.
Can you lose ETH by staking?
There will always be a risk associated with Ethereum staking. Still, staking has been generally perceived to be safe as the most plausible chances are likely to impact returns rather than your crypto wallet itself negatively.