In September 2022, the Ethereum network finally made the much-anticipated transition from Proof of Work to Proof of Stake. This means that anyone who holds ETH can now stake their coins to help secure the network and earn a passive income.
But how exactly does Ethereum staking work? Where can you stake ETH? And how much can you earn in ETH staking rewards? We'll answer all these questions and more in our comprehensive guide to staking on the Ethereum network.
Top Ethereum Staking Platforms
|Partner Name Label||Label||CTA||Disclaimer|
|1. Coinbase||4.2||Visit Websitecoinbase.com|
|2. Binance||4.5||Visit Websitewww.binance.com/en|
|3. Kucoin||3.9||Visit Websitekucoin.com|
|4. Ledger||2.4||Visit Website|
What is Ethereum Staking?
Staking is the method by which the Ethereum blockchain and other Proof of Stake networks are secured. Anyone who wants to become a validator must stake 32 ETH, ie deposit 32 ETH into the Ethereum staking contract. They can then validate transactions on the blockchain, for which they receive staking rewards in the form of more ETH tokens.
Ethereum validators are incentivized to process Ethereum transactions accurately, as if they don't, they could lose some or all of the ETH they stake. People with less than 32 ETH can still take part in the system by delegating their ETH to a validator. They won't be responsible for the validation process, but they will still earn a proportional share of rewards, minus a fee charged by the staking provider.
Proof of Stake vs Proof of Work
Before the Ethereum blockchain transitioned to Proof of Stake, it was a Proof of Work network, like Bitcoin. This meant it was secured by mining - a system in which a network of computers compete to solve cryptographic puzzles. The first computer to do so wins the honor of processing transactions for the new block, for which it will earn rewards.
Mining in a Proof of Work blockchain requires a lot of power, so when the Ethereum ecosystem transitioned from Proof of Work to Proof of Stake, it became a lot more energy efficient.
Ethereum Staking - Useful Words To Know
Ethereum validators - These are the participants in Ethereum's Proof of Stake consensus mechanism. Their purpose is to validate transactions, store data, and add new blocks to the blockchain.
Staking rewards - These are the tokens that validators receive in return for their service. The rewards are paid in the native token of the blockchain, ie ETH, and come from gas fees (transaction fees) and the ETH tokens that are minted with each new block.
Beacon Chain - Launched in 2020, the Beacon Chain was the Proof of Stake blockchain designed to test out the consensus mechanism before its implementation on the Ethereum Mainnet. It ran in parallel to the original Proof of Work Ethereum blockchain.
The Merge - This was a 2022 upgrade that merged the original Ethereum Mainnet with the Beacon Chain to form a single Proof of Stake blockchain. The Merge reduced Ethereum's energy consumption by ~99.95% and could set the stage for future upgrades to improve transaction speeds, scalability, and transaction fees.
Ethereum 2.0 - This term was commonly used to refer to the future of Ethereum and the set of upgrades that would eventually see it transition to Proof of Stake.
How to Stake Ethereum
There are various ways in which you can stake your ETH, and they differ in terms of how much ETH, effort, and skill they require. We'll walk you through the main methods of staking ETH below, so you can decide which one is right for you.
1. Staking Ethereum on a centralized exchange - Easy
The simplest way to earn rewards on your ETH is through a centralized exchange (CEX). Usually, on a CEX, this requires nothing more than the click of a button. This is the most popular option as anyone can do it, without needing to know how to set up a private wallet, transfer tokens, or maintain hardware and software.
What are the benefits of a CEX?
We'll go into detail on which CEXs you can stake with and how in the next section.
2. Joining an Ethereum staking pool - Intermediate
Pooled staking requires more technical knowledge than CEXs as you will need to set up your own Ethereum wallet, and you may need to understand liquid tokens and how to navigate decentralized finance (DeFi) platforms. However, it is a more popular method than solo staking as it requires less than 32 ETH and you don't need to manage any hardware.
Essentially, pooled staking involves lots of ETH holders coming together to reach the required 32 ETH threshold. They will all receive a share of the rewards proportional to their amount of ETH staked, with the validator deciding what proportion to keep for themselves.
Liquid staking pools vs non-liquid staking pools
How to join a staking pool
3. Solo Home Staking - Hard
Running your own validator node, or solo staking, means actively participating in block production and transaction validation, and receiving ETH staking rewards directly from the protocol in return. Most ETH holders don't opt for this method due to the cost and effort involved.
Solo staking requirements
How to stake as a validator
Ethereum staking options compared
|CEX||An account on a CEX||Staking rewards minus a fee||Placing your trust in a custodial service|
|Staking pools||Private wallet, a little technical knowledge||Staking rewards minus a fee, liquidity tokens||Losing your private keys, counterparty risk, smart contract vulnerability|
|Validator node||Hardware, software, technical knowledge, 32 ETH||Maximum staking rewards, unburnt transaction fees||Your 32 ETH is at stake, penalties for going offline and malicious behavior|
Where to stake Ethereum
Here are our picks for the best Ethereum staking platforms to help you decide which one is right for you.
1. Coinbase Ethereum Staking - Best for Beginners
Coinbase is one of the most well-known and trusted crypto exchanges. It stands out for its simplicity, security, and learning resources. It's a top choice for beginners as the platform is easy to navigate regardless of crypto knowledge.
Coinbase makes staking straightforward. By clicking on the Earn tab, you can easily see a breakdown of your staking portfolio, which other assets you can stake, and a graph showing how much you've earned over time.
With five cryptocurrencies eligible for staking, Coinbase offers a less comprehensive staking service than competitors like Binance, and the 25% commission on staking rewards Coinbase charges is significant. However, Coinbase is one of the best exchanges out there when it comes to simplifying staking and minimizing the risks.
How to stake Ethereum on Coinbase
If you haven't already, you'll need to create an account on the Coinbase website and either transfer your ETH from another wallet with the Send & Receive button or purchase some in a couple of clicks with the Buy & Sell button. Then you can stake it by following these steps:
Step 1 Go to the assets tab
Step 2 Read the disclaimer
Step 3 Enter how much you want to stake
Step 4 Preview stake
Step 5 Start earning ETH staking rewards
2. Binance Ethereum Staking - Best for Earning Compound Interest
Binance is one of the world's largest crypto exchanges and is popular with traders thanks to its advanced trading interface packed with charting tools, technical indicators, and different order types. Most of the other features, however, are simple enough to satisfy less experienced users.
The staking page clearly displays the 27+ coins you can stake and the APY you can expect to earn by doing so. A benefit of Binance's staking services is the Auto-Restake feature, which automatically stakes any rewards you receive to compound your returns.
How to stake Ethereum on Binance
Before you can stake ETH on Binance, you'll need to create an account on the Binance website and buy some ETH using the Buy Crypto feature or go to your Binance wallet to find your Ethereum network address and transfer ETH from another wallet.
Step 1 Visit the staking page
Step 2 Understand the risks
Step 3 Enter an amount
Step 4 Confirm
3. Ledger Ethereum Staking - Best for Security
Ledger is a hardware wallet that provides secure cold storage for thousands of cryptocurrencies. As Ledger owners store their own private keys offline on their hardware device, they remain in full control of their assets throughout the staking process.
You can stake your ETH using the Ledger Live app, which gives you access to a range of other applications. You can either use Kiln to run your own validator (this currently requires 32 ETH, though in the future there won't be a minimum) or select Lido for liquid staking.
Staking with Ledger isn't quite as simple as staking with a CEX, and you need to purchase one of their hardware devices, which currently retail at between $79 and $279. However, Ledger's unrivaled security means that it's a great option for those with a significant amount of ETH they want to keep safe.
How to stake Ethereum on Ledger
Before you can stake your ETH, you'll need to purchase a hardware device from the Ledger website.
Step 1 Download Ledger Live
Step 2 Open the Lido app
Step 3 Stake your ETH
Step 4 Receive stETH tokens
Ethereum Staking Platforms Compared
Here is how our top staking platforms compare on all the most important factors.
|🏆 Reward rate*||Up to 3.48% APY||5.7% APY||4-7%, depending on validator|
|💸 Payout frequency||Every 3 days||Every Thursday||Daily|
|⚠️ Staking limits||None||0.001 to 4,000 ETH||None|
|💰 Staking commision||25% (15% for eligible Coinbase One members)||Not specified||Up to 10%|
|#️⃣ No. of coins eligible for staking||5+||27+||39+|
* Reward rates can change over time
How much can you make staking Ethereum?
This will vary over time. The amount of staking rewards released by the Ethereum network depends on the number of participating validators at a given time. Fewer validators mean more ETH released to incentivize staking, and vice versa.
Where and how you stake Ethereum could also affect how much you receive in rewards, as validators and staking platforms can choose to keep a proportion of the rewards as a fee, and the percentage they take differs.
With these things in mind, you might currently expect to earn an annual percentage rate of anything from 3% to 7% on any ETH staked.
Depending on how you stake, you may be able to increase your earnings by staking your rewards as well. Some platforms have a feature that will automatically add any rewards you receive to your staked ETH. If you receive liquidity tokens for staking ETH, you may be able to use them to earn even more on DeFi platforms through yield farming or lending. These activities can be risky, however.
Remember that the fiat value of rewards won't just depend on APR. As rewards are paid in ETH, their value will vary with the changing market price of Ethereum.
Is there a downside to staking ETH?
While staking can be an easy way to earn a passive income, there are a few risks you should consider first.
Slashing - In the event of validator failure or a validator acting maliciously, they could be penalized by having some or all of their staked ETH confiscated, ie "slashed". Anyone who has staked ETH through that validator could therefore lose their tokens. This is why it is important to select a reliable validator. Fortunately, slashing is a rare occurrence.
Lack of access to staked tokens - While your tokens are in the staking contract, you won't be able to sell them, send them, trade them, or use them on DeFi platforms (unless you receive liquidity tokens in return). Although Ethereum's Shanghai network upgrade in April 2023 means that ETH can be unstaked, it could still take some time for the withdrawal queue to be processed, and platforms may add their own processing time to withdrawal requests.
Barriers to entry - The minimum requirements to stake as a validator are very high in terms of hardware, software, knowledge, and ETH. Joining a staking pool has much lower requirements, though you will still need some technical understanding. Staking through a CEX, however, has a very low barrier to entry.
Security - Unless you become a validator, you will be trusting a third party to stake your ETH. This comes with counterparty risk, as well as the possibility they could lose your tokens through making a mistake, getting hacked, or going bankrupt. This is why it is important to select a reliable staking service, such as a regulated platform with a strong reputation.
Volatility - Ethereum, along with the rest of the crypto market, is highly volatile. Prices can fluctuate suddenly and dramatically. It is possible that your ETH could decrease in value while you're staking it.
Should I stake my Ethereum?
It is ultimately your decision whether or not you should stake your ETH. Below are some of the considerations that might impact your choice.
Risk vs reward - Consider the risks detailed above and what you stand to gain from staking. Decide how these things balance out with regard to your risk tolerance and financial situation.
Skill level - Think about how much skill and technical knowledge you have when it comes to staking. If you're inexperienced, you might want to avoid running a node or using DeFi platforms. Novices will have no trouble staking through a CEX but should read the T&Cs first to understand the risks.
Investment goals - Whether to stake your tokens could depend on what you want to do with them in the future. If you want to hold ETH as a long-term investment, staking could be a suitable way to increase your holdings over time. If, however, you want to be able to trade your ETH or sell it at a moment's notice, staking could be inconvenient.
Tax implications - Remember that receiving liquid tokens through liquid staking is a taxable event, so consider whether you will have the fiat to meet your tax obligations before doing this. Staking rewards are also taxable, regardless of the staking method, so you might want to choose a staking platform that enables you to export your earnings data or sync with tax software.
Long-term value of Ethereum - It could take a while to see a significant increase in your ETH holdings through staking, and a lot can change in that time. There could be major innovations in blockchain technology, new projects might arise and flourish while others disappear, Ethereum might be upgraded or its roadmap altered, and the global economic situation could change. Think about the fundamental value of the Ethereum project and how the price of ETH may change in the future.
Only stake what you can afford to lose - This is the most important thing to remember. Any form of trading or investing carries a risk of loss, and those risks are even higher in the crypto market.
In summary, staking your ETH is a great way to help secure the Ethereum blockchain and earn rewards. Although most people don't have enough ETH or technical knowledge to become a validator themselves, anyone can stake a smaller amount by joining a staking pool or staking through a centralized exchange (CEX).
The easiest staking method by far is to use a CEX. If you're looking for a suitable platform to start staking ETH, our top choice is Coinbase. This is because it excels when it comes to simplicity, security, and learning resources.
|Partner Name Label||Label||CTA||Disclaimer|
|1. Coinbase||4.2||Visit Websitecoinbase.com|