How to Stake Ethereum
September 22 2022 - 7:02AM
Finscreener.org
Mark the date of the beginning of
the new Ethereum (ETH)
era. On September 15,
Vitalik Buterin announced the long-awaited merge, so Ethereum is finally a Proof-of-Stake (PoS)
blockchain.
Many users ask if ETH and ETH2
will be treated as different assets now. Of course, they won’t.
ETH2 is not replacing the original Ethereum it’s an upgrade
to a more practical and environmentally sustainable backend system.
The PoS mechanism doesn’t require high energy usage to ensure a
secure transaction flow. Instead, it allows users to maintain
blockchain by staking their ETH coins.
What Is Staking?
In simplest terms, Ethereum
staking consists of “locking” 32 ETH units to set up validator
software and get involved in the work of the ETH blockchain. It’s
similar to mining with the difference that you’re called a
validator
now. The “material” you deposit is
different, but your role on the blockchain is the same. As a
validator, you’ll be in charge of data storage, processing
transactions, and adding new ETH blocks to the network. No hassle,
though. Once you activate the software, your computer will complete
these blockchain tasks on your behalf.
Methods for ETH Staking
If you hold Ethereum, staking can
be a lucrative opportunity to earn more coins as a reward for your
contribution. Ethereum staking is available in multiple forms, and
you can choose the best fit depending on the amount of ETH you have
and your blockchain skills.
Solo Staking
Staking solo is the ultimate
staking standard. As a solo validator, your work will be executed
in an entirely trustless manner without relying on any centralized
establishment. The entire staking reward goes to your ETH
wallet.
I must admit that setting up the
validator software in a home environment requires blockchain
knowledge, but you can find plenty of how-to-set-up tools to ease
your job. Most importantly, you need to own at least 32 ETH units
and ensure a 24/7 operable computer to qualify for
solo-staking.
Use a Node Operator
This staking method allows you to
avoid dealing with hardware requirements related to the process.
The node operator executes the hard part (setting validator
credentials, ETH deposits, and signing keys) while you earn the
original block rewards.
Even though you involve a
third-party service, you maintain complete control of your funds
since the node operator lets you keep your ETH wallet keys in your
device. The 32 ETH minimum is still required.
Pooled Staking
Staking pools are popular among
users who don’t meet the 32-ETH criterion. Most pools offer liquid
staking solutions and let you swap your ethers with ERC-20 tokens
representing your staked ethers. That way, you can withdraw your
ETH from the pool whenever you want. Since they’re run by external
providers, you don’t have control over the whole staking operation
and have to trust the pool operators. Still, most pool services
allow you to keep your ETH wallet keys.
Centralized Exchanges
Finally, centralized crypto
exchanges such as Coinbase (NASDAQ:
COIN) and Binance offer staking opportunities to earn passive
income. They run ETH pools containing a huge number of validators
and allow you to join them without any hardware or capital-size
requirements. While they’re a handy and effortless method for
staking, these centralized formations are a perpetual target for
hackers. Also, you need to put full trust in the selected crypto
exchange as it’ll keep the private keys of your ETH wallet (for
collecting rewards) on its servers.
A Few Ending Words…
The official Ethereum website
shows that the current APR for staking Ethereum is approximately
4.1%. This is a generous amount for a relatively stable operation
in the fierce crypto arena. However, the APR can change, especially
if you use a third-party service to help you join the Ethereum
blockchain.
All things considered, staking
can be an excellent investment solution for your ETH holdings,
given the positive reactions the Ethereum merge
received.
Coinbase Global (NASDAQ:COIN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Coinbase Global (NASDAQ:COIN)
Historical Stock Chart
From Apr 2023 to Apr 2024