With all the eyes on the highly anticipated move to Ethereum 2.0, the big focus for ETH holders now is staking. I want to try and make ETH 2.0 staking as clear as possible for anyone who holds ETH but is unsure about the process and whether it’s the right move for them.
Staking is the process of actively participating in transaction validation on a PoS blockchain. Basically you are using your Ethereum to support the security and operations of the ETH 2.0 network. Simply put, staking is the act of locking your ETH in exchange for interest on your staked ETH.
There are 2 main ways to stake your Ethereum.
1. Stake as an independent validator node:
In order to do this, you will need 32 ETH. Many investors do not hold 32 ETH so if you do not have this minimum amount, you will need to go through a third party or a staking pool.
2. Third party staking and staking pools:
This is going to be the most common way of staking Ethereum. Multiple wallets, pools, and exchanges will take your ETH and use it to build a 32 ETH node which they then stake on your behalf. There usually is no minimum but it will depend on where you stake. However, understand these third parties do take a fee of your staked rewards so you do not receive the full rewards at the end of the staking period. Some third parties that currently offer staking are Binance (non-US), Kraken, Coinbase, MyEtherWallet, Atomic Wallet, and more.
Use this link to find where you can stake your ETH:
Risks of staking:
There are several risks and downsides to staking. The first being that staking your ETH essentially means you are locking it up until the Ethereum 2.0 network goes live. This could mean a few years of locked assets as ETH 2.0 doesn’t have a set timeframe for release as of now. As a result, you are fully vulnerable to the volatility of ETH. Your locked ETH will not be liquidable meaning you cannot sell it until the staking is complete. However, some places will give you their own version of ETH such as BETH (Binance Ethereum) which you can trade as you stake.
Rewards of staking:
APR rewards for ETH is based on the total amount of Ethereum currently being staked. The more ETH that becomes staked, the lower the APR will be. Currently, it’s at about 7.5% APR so this is what your staked ETH would return if you staked it today.
If you truly believe in Ethereum as a long term hold, staking is going to be your best option as your ETH will be slowly accumulate more ETH over time so you can really think of it as free Ethereum. However, if you prefer to have full control of your ETH and want to always have the option to sell or send it at any point, you’ll have to really consider whether staking is worth the risk.
There is no right or wrong answer, staking solely depends on your unique case.
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