SHORT ANSWER: The easiest way to stake Ethereum is through a centralized exchange.
Ethereum has been one of the most discussed topics in crypto in 2024. With recent upgrades to the chain and the potential for spot ETFs later this year, many are extremely excited to see what the future has in store for the project. This excitement has led many to invest in Ethereum, and some do not plan to sell for the foreseeable future. These investors have turned to staking as a way to earn additional income on a position they would have held regardless.
What is Ethereum Staking?
Staking is a process in which you can give some of your tokens to a pool or firm that provides you with a reward. It is similar to giving money to a bank in a savings account that provides you with interest for allowing it to have control over your money.
The two main forms of staking involve giving your money directly to Ethereum and giving your money to a centralized exchange.
Holding your tokens on the Ethereum chain lets you contribute to the proof-of-stake (PoS) consensus model because you provide some tokens as collateral in exchange for the ability to help validate transactions.
Giving tokens to an exchange works more similarly to the bank model. The exchange lets you control your funds to lend them to others or use it in other ways. They provide interest in exchange for you offering your tokens.
How to Stake Ethereum
You can use four main ways to stake your ETH.
How to Stake Ethereum: Solo Staking
Solo staking provides the most direct access to PoS and the highest rewards.
1. Set up a Validator Node
To solo stake, you need to create your own validator node, which will verify transactions on the chain. To do so, download the Ethereum software, create your node and fulfill the hardware requirements.
2. Buy 32 ETH Tokens
A validator node requires a minimum of 32 ETH to run. Once you have this many tokens, which can be bought on nearly any exchange, you can sync the tokens with the validator node.
3. Activate the Validator Node
With 32 ETH connected to a validator node, you can activate the node and begin staking. It typically takes 1-2 days from activation until you are approved to begin staking.
How to Stake Ethereum: Staking as a Service (SaaS)
SaaS is similar to solo staking but allows you to outsource the hardware requirements.
1. Buy 32 ETH
SaaS also requires 32 ETH, as you are still staking with ETH but through a third party.
2. Select a Provider
Various SaaS providers offer different services. Some of the top firms are Lido and Ankr. These companies allow you to provide the ETH tokens, while they provide the hardware and software in exchange for a small portion of the rewards.
3. Begin Staking
With a provider and 32 ETH, you can create an account on one of the providers’ sites and begin staking.
How to Stake Ethereum: Pooled Staking
Pooled staking involves giving ETH to a firm that pools it and stakes it for you.
1. Buy ETH
Pooled staking also requires you to buy ETH. However, there is often a much smaller minimum for investment, much less than the 32 ETH needed for solo or SaaS staking.
2. Select a Provider
The providers for pooled staking are very similar to the SaaS providers. Some main points to consider are the fees, APY and lockup period.
3. Begin Staking
With a provider selected, you can send ETH to the pool, which will accumulate interest. After the lockup period, you can send the ETH back to your wallet/exchange and withdraw it.
How to Stake Ethereum: Centralized Exchanges
Centralized exchange staking can be done directly and entirely on on exchange.
1. Open an Account
To begin staking, the first step is to open an account on an exchange such Coinbase. This process is usually straightforward and only requires an email address. You can then verify your account with a driver’s license or other form of identification.
2. Buy ETH
With a verified account, you can buy ETH on the exchange. This is straightforward, requiring you to search for ETH, enter the amount you want to buy and execute the trade.
3. Begin Staking
You can then take your ETH and give it to the exchange to stake. This process can be done on the ETH page, which should have an option to stake your position.
Benefits of Ethereum Staking
- Extra income: If you are planning on holding Ethereum for a long time, you can continue to hold it and earn extra income in the form of interest payments.
- Network security: By participating in direct staking on the Ethereum network, you can contribute to network security. This can increase the overall value of the chain.
- Price increases: If you stake Ethereum, you can make money from both potential price increases in ETH, as well as interest payments.
- Remove emotional element: Lockup periods can help you remove the emotional element associated with trading. This can help traders stay invested in ETH throughout market movements if they want to hold ETH for the long term.
Risks of Ethereum Staking
- Lockup period: Lockup periods can remove the emotional element. However, they can also cause traders to miss out on timely trades, either by timing the top or selling before a large crash.
- Slashing: If you or the pool you stake with does not follow the rules laid out by the chain, the network can slash some of the deposit that you gave to the chain.
- Network security: While this is a smaller concern, there is a small possibility that a 51% attack could occur on ETH. If this were to happen, staking deposits could be stolen.
What to Consider When Choosing a Staking Method
- Yield: One of the most important things to consider is the APY you could earn on your staked tokens. The rate can vary based on the exchange, pool and market conditions.
- Technical requirements: Some staking methods have technical requirements, which involve knowledge of computing and hardware and the ability to set up and run a validator node.
- Lockup period: Some forms of staking also have a lockup period. The time of the lockup period can also play a role in choosing a method depending on your view of and plan for investing in ETH.
- Security: The main security concern with centralized exchanges is a hack. Generally, large exchanges, such as Coinbase and Kraken will have the largest security measures in place.
Earn Passive Income With Ethereum
If you are planning on holding Ethereum for the long run or want to contribute to the security of the network, staking could be a great option for you. If the benefits of the staking outweigh the risks associated with staking, it could be a great option to enhance your experience with the Ethereum platform.
Frequently Asked Questions
What's the best way to stake Ethereum?
There is not necessarily a best way to stake ETH. Centralized exchanges like Coinbase are the easiest but may not provide the most security or yield.
Is it worth staking your Ethereum?
If you plan on holding ETH for a long time, it is likely worth it to stake.
How much do you make staking Ethereum?
The yield varies, but it is typically between 2-5%.
Can I lose my ETH if I stake it?
Yes, you can lose your ETH if there is a hack or if the tokens are slashed.
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About Caden Pok
Caden has been involved with cryptocurrency for several years, began trading and investing in crypto in 2018 and is highly experienced with DeFi technology. He took part in undergraduate research studying cryptoeconomics and is a member of Wolverine Blockchain, a group designed to educate students on cryptocurrencies and blockchain technology. Currently, he mines multiple coins and holds positions in Cardano and Ethereum.