How to Stake Ethereum
Second, only to Bitcoin, the most notable cryptocurrency to watch is Ether (ETH).
Ether is the currency of the Ethereum Network. Staking Ethereum has never been easier. In this guide, you will learn how to stake Ethereum and gain rewards from doing so.
When you stake Ethereum, you are helping to maintain and secure the Ethereum network. The Ethereum network gains strength and expands, and, as a bonus, those who stake Ethereum earn rewards that are payable in ETH tokens.
If you want to know how to stake Ethereum, it can be a great way to make a passive income of around 7.5% from your Crypto holdings.
In early May 2021, Ethereum hit exciting new highs of over $4,000. The previous high was $1400.
This high may well have correlated with the first phase of Ethereum 2.0 with the first component of the Beacon chain, which is steering Ethereum away from PoW (proof-of-work) to PoS (proof-of-stake).
This first phase demonstrated Ethereum's commitment to growth, intent on securing Ethereum as a future cryptocurrency. Add to that the potential for more people to learn how to stake Ethereum because PoS makes accessibility to stake ETH far easier than PoW.
So, now it's easier to stake Ethereum since the ETH2 upgrade, but should you stake your Ethereum? How much ETH do you need to stake? And what are the risks of staking Ethereum?
There has probably never been a better time to make profits from staking Ethereum. With the launch of Ethereum 2.0, is Ethereum staking profitable?
In this article, we'll answer your questions on how to stake Ethereum and how much money you can make from staking Ethereum so you can plan for how to gain the most benefits from staking Ethereum.
- What is Ethereum Staking?
- How to Stake Ethereum
- Should you Stake for Ethereum 2.0?
- Risks of Staking
- A Stake is a Belief
- The Key Takeaways
What is Ethereum Staking?
According to the official Ethereum website, they say, "Ethereum Staking is the act of depositing 32 ETH to activate validator software. As a validator, you'll be responsible for storing data, processing transactions, and adding new blocks to the blockchain. This will keep Ethereum secure for everyone and earn you new ETH in the process."
What does this mean?
All blockchain projects rely on the decentralized mining network to provide a stable foundation for cryptocurrencies. Staking is a process of being an active participator in transaction verification with proof-of-stake (PoS) blockchain. It is similar to mining Bitcoin, although Bitcoin is still PoW (proof-of-work).
More on PoW and PoS later.
There is a minimum balance requirement of 32 ETH to become a validator and stake Ethereum. But if you meet the specific cryptocurrency criteria minimum, anyone can validate transactions and earn staking rewards.
Effectively, you are committing to locking up your cryptocurrency for a period so that you can gain rewards. Right now, you may have longer to wait for rewards because of the rollout of ETH2.
You may have to wait to collect your rewards until ETH2 completion in 2022, barring delays.
The potential reward for staking Ether is around 7.5% per year, which is excellent compared to the current negligible interest returns from traditional banking. But, how is it possible to get such high returns from staking Ethereum?
The Ethereum network can give high returns as a result of changes in how the network validates transactions. The Ethereum network is evolving from proof of work (PoW) to proof of stake (PoS).
Proof of Work vs Proof of Stake
The Bitcoin network uses proof of work (PoW) to validate transactions, and Ethereum used to be the same. But now, Ethereum is evolving from PoW to proof of stake (PoS).
It's early days to weigh up the benefits of staking Ethereum via the 2.0 upgrade, but the potential future rewards look good.
Proof of work is where Bitcoin miners solve mathematical problems by running complex algorithms via high-tech computers to verify and validate cryptocurrency transactions. They then submit data in blocks to the blockchain exchange.
The difficulty of PoW is significant, expensive and with no guarantee of reward, and difficulty levels are increasing exponentially.
Proof of stake is far easier than the PoW process.
PoS involves showing your commitment to the Ethereum network by staking a deposit of ETH to participate as a network validator. You lock in your Ethereum, and, in return, you will receive payment from the Ethereum network.
If you wonder how much ETH you need to stake, the minimum requirement for Ethereum staking is 32 ETH, but there is no limit above that. Typical network validators earn a 7.5% annual return with rewards on their stake.
Proof of stake is far less labour intensive than proof of work as you don't need the high-tech, energy-intensive computers that have the significant start-up and running costs.
And PoS has better security.
Staking is a PoS system that is a consensus mechanism that will, eventually, replace the proof of work (PoW) system.
Consensus systems keep blockchains such as Ethereum secure and decentralized.
It's possible to corrupt a blockchain if you control 51% of the network. So, theoretically, 51% of validators could state that you have 1 ETH and not 1,000,000 ETH. But, to control 51% of network validators, you would have to own 51% of the entire ETH in the system, numbers so huge as to be unimaginable.
Ethereum did the first phase of ETH2 in December 2020. This foundational component is called the Beacon Chain, and it introduced PoS as a new way to keep Ethereum more secure.
The more people participating in the Ethereum network, the more decentralized and safer from attack Ethereum becomes.
At some point in 2021, the plan is to merge the Beacon chain proof of stake system with the current Ethereum mainnet. This merge signifies the end of proof-of-work and a transition to proof of stake.
The merger will precede the rollout of shard chains. Sharding is a multi-phase upgrade planned for 2022 that will significantly improve the scalability and capacity of Ethereum.
The shard chains spread the load of the Ethereum network across 64 new chains. It keeps hardware requirements low and makes it much easier to run a node.
All of this progress is great, and it looks positive for the future of Ethereum, but you can get started right now as an Ethereum network validator and start earning rewards.
If you do want to stake Ethereum, there is a caveat. If you stake Ethereum for the 2.0 upgrade, you cannot withdraw ETH reward tokens until the upgrade completes fully in 2022.
Should you stake your Ethereum now or wait until completion in 2022?
Well, that's a personal choice. You might want to wait before staking Ethereum and, in the medium term, focus on trading Ethereum.
There is no fixed date for ETH2 completion other than the year 2022. But, as we get nearer, the Ethereum network will undoubtedly keep ETH2 progress details up to date.
Check Out: What Will Ethereum Be Worth In 10 Years?
How to Stake Ethereum
Are you ready to stake Ethereum and find out how to make money on Ethereum 2.00?
It's never been easier to stake Ethereum.
Previously, with the minimum staking requirement of 32 ETH, the potential costs were prohibitive. Plus, you had to set up your own Ethereum node. But now, today, some of the biggest online exchanges have made it possible to stake Ethereum without the 32 ETH requirement. Indeed, with many of them, there is no minimum requirement at all.
Where Can I Stake my Ethereum?
You need a secure platform to stake Ethereum, and it's advisable to do your research before staking your Ethereum with an online company.
Be aware that should you stake ETH now, you may have to wait until the ETH2 blockchain is fully live (sometime in 2022) before accessing your accrued rewards.
The below three established platforms allow you to stake Ethereum with no minimum requirements:
- eToro – eToro offer ETH staking potential rewards of between 5% to 6.25% per year. eToro offers a membership reward percentage programme for monthly ETH staking yields. Bronze members are 75%. Silver, gold and platinum members are 85%, and diamond and platinum+ club members receive 90%
- Coinbase – earn up to 6% per year with ETH staked on Coinbase. The company states that the percentage return depends on how much ETH is staked on the Ethereum network. Rewards may decrease if a lot of ETH is staked.
- Kraken – Kraken suggest an interest rate of between 5% to 17% annually, depending on the amount of Ether tokens staked on the network. The more tokens, the lower the rewards
Staking Ethereum into one of the above companies means you can start staking Ethereum without the minimum requirement of the 32 ETH you would need if you were staking Ethereum on your own and setting up as an Ethereum network validator.
But, remember that if you stake Ethereum now, you cannot access your ETH, or your rewards, until the network completes the ETH2 blockchain in 2022. And that date cannot be cast in stone. There could feasibly be further delays in rolling out the completion of ETH2.
Should You Stake for Ethereum 2.0?
The official Ethereum website reports the following data on the ETH2 network:
- 4,815,107 ETH staked to date
- 146,465 validators
- The current APR is 7.1%
These figures will continue to grow as more people stake in ETH. More Ethereum validators will stake their Ethereum to maintain, secure and expand the Ethereum network.
The Risks of Staking Ethereum
When you stake Ethereum as a validator, you have direct access to how the Ethereum network develops. That means that validators could double-spend or introduce false information, or they could participate with a group to increase their rewards for staking.
The prevention of malicious activities is vital, so the Ethereum network introduced the concept of slashing.
Any validators found guilty of malicious activities towards the network may have their stake slashed, or they could lose part of their stake. The worst offenders could lose their entire Ethereum stake and be removed from the Ethereum network.
If you intend to stake Ethereum through an exchange, you are putting your trust in them to take care of your stake and prevent it from being slashed.
That the penalties for slashing are harsh is good because the current consensus is that the risks of being slashed or removed from the Ethereum network are relatively low.
And, in principle, the likelihood is that network security will continue to become stronger over time as more people stake Ethereum and become validators. The more Ethereum network validators there are, the more secure the network.
Read Also: Will Ethereum Make Me Rich?
A Stake is a Belief
If you want a safe gain on your Ethereum, then staking Ethereum is a great way to make some extra money.
Trading cryptocurrencies is challenging, and not many traders succeed at it. But, when you learn how to stake Ethereum and get involved in staking Ethereum, the risks are far more acceptable.
There is a bit of a learning curve if you become an Ethereum validator, and you do need a little blockchain expertise, but once you gain that experience and learn how to stake Ethereum, it's a great path to take.
Many people believe in the Ethereum project, and, indeed, it seems that ETH is here to stay and continue making progress. If you believe in Ethereum as a project, staking Ethereum could be your next step to making money from staking Ethereum.
The Key Takeaways of How to Stake Ethereum
- Ethereum 2.0 (ETH2) has upgraded the network to proof of stake (PoS)
- The first component is called the Beacon Chain
- Proof of stake is more secure than proof of work and much easier
- Proof of work for Ethereum will eventually become obsolete
- In 2021 Ethereum will merge the Beacon chain with the current Ethereum mainnet
- This merger will precede the rollout of shard chains in 2022, which will improve Ethereum scalability and capacity
- ETH2 will not be fully complete until 2022, exact date unknown
- You can stake Ethereum with no minimum requirement with online platforms such as eToro, Coinbase and Kraken.
eToro – The Best Platform to Buy Ethereum
eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.
Virtual currencies are highly volatile. Your capital is at risk.
How much ETH do I need to stake?
If you want to be an individual Ethereum network validator, you need 32 ETH. But, you can stake Ethereum with no minimum requirement with an online platform such as eToro
How much can you earn by staking Ethereum?
How much money can you make staking Ethereum? Results are variable, but the average potential gain hovers around 7.5% per year for staking ETH.
Many online platforms have made it easier to stake Ethereum without the minimum requirement of 32 ETH. It is far easier now to stake Ethereum than ever before.
What's the future of Ethereum?
The projected growth for Ethereum is high.
With the final release of ETH2 in 2022, the sky could be the limit. The blockchain is used for smart contracts and transactions, but often, crypto assets are built on Ethereum's blockchain.
Cryptocurrencies are likely here to stay, and the potential for Ethereum is booming. A few weeks ago, Ethereum hit a new high of $4,000, and experts suggest it has far further to go.
Who knows, could Ethereum rise in the way Bitcoin has? No one knows how high the price of Ethereum could go, but it's definitely worth watching that space.
What is the risk of staking Ethereum?
The main risk at the moment is that your ETH is locked in until the completion of ETH2 in 2022.
The exact date of completion is not known, and there is always the risk of delays. So before you consider staking Ethereum, be prepared for the wait.
Although the above is a risk, your ETH stake is still reaping the rewards during the waiting period. These rewards are accrued for when you can finally access your ETH stake.
What's the benefit of staking Ethereum?
The benefits of staking Ethereum are many. Compared to trading cryptocurrencies, the risks are low. Anyone can learn how to stake Ethereum.
You can start staking Ethereum with an online platform with no minimum requirement and still receive an average return of 7.5% a year from staking Ethereum.
Is Ethereum staking profitable?
If you put your dollars into a savings account with a bank, the returns are pretty unspectacular. The average return offered for staking Ethereum is around 7.5% annually.
Where else are you going to find such a high return with relatively low risk?
What's the best place to stake Ethereum?
The best place to stake Ethereum is your personal choice. Many online platforms are offering the opportunity to stake Ethereum. We recommend eToro, Coinbase and Kraken
Is it worth staking Ethereum?
There are two things to consider if you want to stake Ethereum
- How much money to stake Ethereum – if you only have a few hundred dollars available to stake Ethereum, it will not be worth doing so.
Todays' Ethereum price is 1 ETH = $2192 (May 2021). If you staked 1 ETH, you'd make less than $200 a year if the price didn't rise, or less than that if the ETH price dropped lower.
Admittedly, this is more than if you had the same amount in a traditional bank.
Weigh up the pros and cons and observe the price of Ethereum for opportunities to buy at a lower price and then start staking Ethereum
- Wait until 2022 to receive Ethereum rewards - if you stake Ethereum now before ETH2 has completed, you cannot access it or withdraw rewards. Potentially, you may have to wait a year or more before receiving Ethereum rewards.
You cannot touch the ETH you have staked either. You can't trade it or remove it. So if you plan how to stake Ethereum, use money you can comfortably afford to have zero access to for that period.