|Year||ETH Staked||ETH Reward||ROI (%)|
Ethereum Staking 2022
Operating a full ETH 2 validator node by yourself is a demanding task. To even be eligible to become an Ethereum validator, you need at least 32 ETH that you can stake. That’s the most difficult box to check.
And if you can check that box, you still need to set up your own hardware, ensure a stable internet connection to keep your node live at all times, and then take care of a bunch of other technicalities to manage the validator.
All that screams “headache.”
To make things easier and more inclusive, there are platforms with staking pools that help you participate in ETH 2.0 staking with a click of a few buttons. These platforms neither need you to own 32 ETH (~$42,000 at the time of writing) nor do they ask you to indulge in any other complex processes.
These are all-done-for-you services that make staking ETH a matter of minutes.
Best Ethereum Staking Pools October 2022
There are two categories of ETH 2 staking pools and services that you can utilize to participate in ETH 2 network operation: custodial services and non-custodial services.
What does that mean?
In simple terms, custodial platforms are those that retain the private keys to your crypto wallets, thus having the ultimate control over your crypto assets.
Contrarily, non-custodial platforms allow you to link your non-custodial crypto wallets – where you are the owner of your private keys – to use their services. That means, when using a non-custodial ETH 2 staking platform, you are always in charge of your keys and your assets, thus retaining ultimate control.
While staking ETH is possible through both custodial and non-custodial platforms, we do recommend using the latter for increased security and ownership of your crypto assets.
Non-Custodial Staking Providers
If you are one for security, decentralization, ownership, and self-sovereignty, non-custodial ETH 2 staking service providers are definitely your way to go. And below are two reliable platforms where you can get started.
Lido is the most popular decentralized liquid staking solution for proof-of-stake chains. While you can currently stake multiple coins on Lido, the platform is particularly popular for staking ETH on Ethereum 2.0.
Staking on Lido is simple. Here’s a step-by-step process to get started on Lido:
Step 1: Visit the Lido website and head over to the “Supported Networks” section on the page.
Step 2: Select Ethereum and click on “Stake now.”
Step 3: Connect your wallet and switch to Ethereum Mainnet
Step 4: Enter the amount of ETH tokens you want to stake and press the “Submit” button.
Step 5: Confirm your transaction on your wallet, and you will receive stETH as a representation of your staked ETH.
Hurray! You have successfully staked ETH on Lido for a 3.9% APY. You can now trade or transfer your stETH across different DeFi protocols and earn returns on that as well while your staked ETH generates yield.
Everstake is a decentralized staking provider for Ethereum 2.0 and other popular proof-of-stake chains. The protocol boasts over 625,000 users and over $6 billion in staked assets.
The staking for ETH 2.0 is not yet live on the Everstake but the process is simple.
To begin with, you need to deposit ETH to stake, and the platform will pay out around 4.05% APY in ETH rewards. Each pool has 32 ETH capacity, with the minimum deposit being 0.01 ETH, and you will start receiving your rewards once the pool you deposited in reaches 32 ETH and gets a validator node.
Custodial Staking Services & Pools
Those advocating decentralization often see centralized platforms with a bit of skepticism. However, these platforms make onboarding users to the crypto ecosystem less complex, and they deserve their credit for that.
And if you aren’t acquainted with non-custodial services, lucky for you that most major centralized cryptocurrency exchanges, like Binance and Kraken, provide native ETH 2 staking services.
Let’s see how you can stake ETH across three major platforms: Kraken, Binance, Midas.
Kraken is one of the world’s major digital asset exchanges and the market leader in euro volume and liquidity. Its global clientele trades over 100 digital assets and seven different fiat currencies, including GBP, EUR, USD, CAD, JPY, CHF, and AUD. The platform’s staking program allows investors to earn yields on various crypto assets including the ETH 2.0.
Staking ETH 2.0 on Kraken can earn you up to 7% APY, and the process is simple. Here’s a step-by-step guide for you:
Step 1: Visit the Kraken staking page, sign in to your exchange account, and purchase some ETH.
Step 2: Select Ethereum 2.0 on the same page and click on the Stake button
Step 3: Enter the amount you wish to stake and click on Continue to proceed with staking ETH.
Hurray! You have successfully staked ETH on Kraken. The newly staked ETH will go through a bonding period of up to 20 days (typically less than a few hours, depending on network condition) before starting to collect ETH 2.0 rewards.
Staking limits and fees
- Staking Limit: Kraken does not specify the minimum and maximum staking limit for ETH.
- Fees: Kraken retains 15% of the total rewards collected from ETH 2.0 staking.
Binance is the world’s largest cryptocurrency exchange that offers a wide range of services including trading, staking, payments, and so on. Binance Earn is the staking feature on Binance that offers investors the opportunity to stake their otherwise ideal crypto assets and generate a passive income.
Here’s a step-by-step process on staking ETH 2.0 on Binance:
Step 1: Log into your Binance account and navigate to Finance > Binance Earn. Scroll down and select View More on ETH 2.0 Staking.
Step 2: Click on Stake Now on the ETH 2.0 staking page.
Step 3: Click Stake Now, enter the amount of ETH you want to stake, and click Confirm.
Step 4: Check the terms and conditions and click Confirm” to proceed with staking.
Once the stake is confirmed, you will start receiving daily BETH rewards proportional to your stacked amount.
The ETH redemption amount will be determined by your BETH holdings at the time of redemption rather than your original staked ETH. For instance, if you stake 100 ETH, you will receive 100 BETH at a 1:1 ratio.
On the redemption day, you can redeem 110 ETH if you have 110 BETH from a transaction and on-chain rewards distribution.
Staking limits and fees
- Staking Limit: A minimum of 0.01 ETH can be staked, although Binance does not define a maximum staking limit.
- Fees: Binance currently does not charge any fees for ETH staking.
Midas Investments is a custodial crypto investing platform for staking key crypto assets and DeFi markets. The website allows you to trade and earn interest on over 20 different digital assets, including BTC, ETH, USDC, and USDT. It currently provides the highest yields on ETH deposits of up to 9.8% APY.
Here’s a step-by-step guide to staking ETH on Midas and reaping the returns:
Step 1: Visit the Midas website and sign in to your account.
Step 2: Select Ethereum from the list of available staking coins.
Step 3: Click on the deposit button to proceed with ETH staking
Step 4: Click “Deposit” and transfer the required ETH amount to the provided wallet address.
Yeay! You have successfully deposited your ETH on Midas. You will now start receiving yields on your deposits.
Staking limits and fees
- Staking Limit: Midas does not specify a minimum or maximum deposit amount for ETH.
- Fees: Midas does not charge any deposit fees.
What is Ethereum 2.0 and The Merge?
Ethereum was the first blockchain network to enable developers to use automated software called smart contracts to build applications that didn’t need a centralized infrastructure.
Upon launch in 2015, it used most of the principal architectures of the first-ever blockchain – Bitcoin. In doing so, Ethereum also utilized Bitcoin’s proof-of-work (PoW) consensus protocol that allowed it to verify and record transactions without the help of a central authority. However, the PoW protocol requires high computing power to verify transactions and register them on the chain.
The core team members were aware of that fact and also knew PoW lacked scalability. But there weren’t any other available options to have made the blockchain work more effectively. So, the team included in the Ethereum roadmap their plans to transition Ethereum from PoW to a more efficient and scalable consensus protocol proof-of-stake (PoS).
After several delays due to the complexity of the transition, the Ethereum mainnet is finally switching to the PoS protocol in September 2022. This will initially bring down the energy demand of the network by 99.95% and, in future, allow Ethereum to implement infrastructures that boost scalability.
What’s interesting to note is that the first step of this transition was taken in late 2020 with the launch of the Beacon chain – the first PoS implementation in Ethereum. It was dubbed the “genesis event” of Ethereum 2.0.
Since then, the Ethereum core team has developed the Beacon chain to finally be able to take on all activities that majorly live on the current Ethereum (1.0) mainnet. In September 2022, developers will merge the existing Ethereum chain and its activities with the Beacon chain, giving rise to what is popularly called Ethereum 2.0.
This event of merging Ethereum 1.0 with the beacon chain is collectively dubbed The Merge.
What is Proof of Stake (POS) and why is it better than Proof of Work (POW)?
Having discussed Ethereum 2.0 and The Merge, let’s dig a little deeper into the two consensus protocols to understand what makes PoS more suitable for Ethereum than PoW.
But first, what is a consensus protocol?
Unlike traditional databases, blockchains do not have a central entity operating them and verifying the information that’s recorded on it. As a replacement for these central systems or entities, blockchains rely on many nodes (computers) to verify and approve transactions.
A consensus protocol sits at the core of a blockchain and allows all nodes spread across the world to function in unison and come to an agreement (a.k.a consensus) about a set of records.
Now, back to PoW and PoS.
Proof-of-work or PoW is a consensus protocol first implemented by Bitcoin to secure and verify its transactions in the absence of a central entity.
As part of this consensus mechanism, the nodes of a blockchain use computation devices to secure a verified set of transactions and add them to the existing blocks in the chain. The computation devices use their power to find a random alphanumeric value, called hash, that was smaller than a hash generated by the network for a set of transactions.
Because there are no “solutions” to this puzzle, all the computation devices can do is make random guesses as fast as possible. This use of computing power to guess the hash is dubbed mining and the devices are called miners. The miner that finds the hash then submits their “proof of work” to all other miners for final verification and adds the new record to the blockchain.
As the network grows bigger, these puzzles become harder and miners need more “guessing power” to find the winning hash. That translates into more computing power and high-end computing devices. This makes PoW a highly energy-intensive protocol.
We’ll look at some mind-blowing facts about PoW once we’ve understood PoS.
Proof-of-Stake or PoS does exactly what PoW does but takes a different approach toward helping nodes reach consensus over a given set of records.
Instead of asking nodes to run high computing devices, PoS requires nodes to stake (lock) a certain amount of a blockchain’s native coin to become a blockchain validator. For instance, Ethereum 2.0 requires nodes to stake at least 32 ETH to become a validator and verify the transactions on the network.
The stake is a way for validators to tell the network that they will work in favor of the blockchain and only verify and add legitimate records. To further enforce the rules, Ethereum and other PoS blockchains implement fines for suspicious behaviors.
But what makes PoS better than PoW?
Quite a few things.
PoS cuts off the need for computing devices and makes the verification process more eco-friendly.
To help you understand better, here are some stats of PoW chains:
- The Bitcoin network uses almost 146.17 TWh of electricity annually. That’s almost the same amount of electricity used by Ukraine in a year.
- Ethereum (PoW) uses around 92.01 TWh of electricity annually. This compares the annual electricity consumption of the Philippines.
PoS also offers more scope for scalability. While PoW blockchains struggle with transaction speeds (per second) in single and double digits, PoS blockchains have already scaled to three, four, and five digits.
These two major benefits are the reason for Ethereum to transition from PoW to PoS.
How will Ethereum staking work after The Merge?
The Merge defines the integration of the current Ethereum mainnet (PoW) with its PoS network, Beacon Chain, that was launched in December 2020. It is not expected to particularly bring any changes to the ETH staking process, however, stakers should expect a change in staking rewards.
The ETH staking APY will change depending on various network metrics after the merge, such as transaction volume, total staked ETH, and transaction fees.
How secure is staking ETH?
Nothing in crypto comes without a sike of risk, and staking is not an exception. So,
here are a few risks you might want to consider before staking ETH:
- Locked assets: One thing that many users might miss is that once you stake your ETH, you will only be able to redeem it post the protocol update completion; that could very well be early 2023. However, liquid staking platforms like Lido are definitely something you can consider to circumvent this problem.
- Validator penalties: Ethereum can penalize validators for being offline or verifying wrong transactions. When this occurs, a penalty may be imposed, or the validator’s right may be revoked. So, do your due diligence before choosing a platform to stake your ETH.
- Custodial staking risks: Many of the ETH staking options are custodial, which means your ETH is not in your private wallet. Instead, your ETH is held by an exchange or staking provider. So, if an exchange goes bust or restricts transaction, you might have to part ways with your assets. Be vigilant of what custodial platforms you trust.
- Client diversity on the Beacon chain: Decentralization is a significant selling point for cryptocurrencies. The great majority of validators, however, employ the same proof-of-stake consensus client: Prysm. A bug or vulnerability in software tools extensively used to safeguard networks can introduce additional risk. This is an unlikely event with some of the world’s best developers working to secure the protocol, but it’s certainly a risk worth being aware of.
ETH 2 Staking Risks
Staking ETH and becoming a validator is all fun and games until you encounter one of the risks or challenges involved in it. As a good starting point, how about we discuss some of these risks associated with ETH staking?
Becoming a validator is more of a responsibility than you may initially realize. As a validator, you are taking charge of verifying transactions, which happen 24×7. Thus, your node is expected to be live at least more than 50% of the time.
So, a stable internet connection and electricity are a must if you’re planning to run a validator on your own.
It’s also worth noting that in case your node stays offline for too long, Ethereum will only slash your rewards and your staked coins will not be affected. In fact, if a validator stays online for more than 50% of the time, they may see an increased APY.
This means that prospective validators don’t have to go to extreme lengths to set up backup clients and have redundant internet connections. But it’s highly recommended that you have a secure internet connection in order to maximize your rewards.
The most infamous risk with becoming a validator is slashing. It serves two purposes:
- Make it expensive to attack the network
- Disincentivizing existing validators from acting against the network.
Two actions that could result in your staked assets getting slashed could be:
- Double voting: an action where a validator votes on two different blocks during the same epoch, meaning they are trying to support two different versions of the chain at the same time. In broader crypto terms, this is known as the “double-spend attack”.
- Surround voting: an event where the validator attests to one version of the chain and then later attests to another version, making it unclear which set of records they support.
As long as you follow the rules and don’t try to cause any issues in the network, slashing should be the last of your worries.
That said, in the rare case that some accident or bug results in a slashable action, the amount of stake slashed will be proportional to the number of other validators slashed at the same time. Given that successfully attacking the network would require a majority of ETH validators, slashings that occur in small numbers are assumed to be honest mistakes and only incur a small slashing fee (min 1 ETH).
In the instance that there were a large number of validators being slashed simultaneously, a large amount of their stake is burnt (up to the full balance) and distributed to the whistleblower.
The implementation of PoS on Ethereum is a multi-phase process that is expected to go on for a long time. Even with The Merge scheduled in September, validators who staked their ETH will only be able to redeem their coins after the rollout is complete (early 2023).
Since staking began in late 2020, validator deposits have been one-way. They are sent from the current ETH 1 chain to the ETH 2 chain and cannot be returned.
Even with The Merge scheduled less than a month away, users who become validators on Ethereum 2.0 must recognize that they may not be able to withdraw their deposited ETH for an undefined period of time.
Users looking to deposit their ETH into a centralized staking provider should be conscious of the risks that come with such services. If a centralized provider is hacked and funds are stolen, users with deposits on that exchange may be affected by the attack.
While self-custodial alternatives exist, there are tradeoffs for both. Centralized providers can give newer users a more intuitive and seamless experience for earning validator rewards while self-custodial providers offer a safer alternative where a user controls their assets.
An alternative to running a validator node from a physical location is to use a Virtual Private Server (VPS) that can be scaled up and down. And while VPS has its advantages, there are also risks.
For instance, staking nodes must contain private keys for the signing messages. And considering VPS providers have administrative access over all of their hardware, all it would take to compromise the node and the node is one malicious staff member with the right privileges.
While validator deposits can only be withdrawn to a specific Ethereum wallet and are therefore safe, there is a risk that a malicious attacker signs blocks in a way that would slash deposits. It is therefore essential that those validating via a VPS use an extremely strong password to encrypt their private key files.
ETH 2 Demand
- The amount of ETH staked in the network will stabilize anywhere between 500,000 ETH (the minimum required to provide security to the chain) and 110,000,000 ETH.
- The range for annual yields for staking ETH is expected to be somewhere between 2% and 34%.
- With more validators online, the annual yield will likely trend to the lower end of the range over time.
- If proof-of-stake is able to fulfill the industry’s role as a “risk free” protocol, the demand for staking ETH may well drive the price of the currency upwards.
ETH 2 Supply
There are a few key factors to consider regarding ETH supply post The Merge:
- The circulating supply of ETH might fall as more ETH is locked in the blockchain’s staking contract.
- Depending on the demand for staking, it is possible that over half the total ETH coins will be staked.
- Proof-of-stake will reduce the issuance of new ETH significantly, possibly decreasing Ethere’s annual inflation rate from 2% to 0.5% or even negative.
- The inflation rate of Ethereum will also depend on the number of stakers and the total transaction fees burned (see EIP 1559).
How much will you make staking ETH?
Ethereum 2.0 rewards validators for staking their coins and verifying the transactions. As a standalone validator, your rewards can range from 2% to 20% APY, depending on the number of validators that participate at a given point in time.
However, if you are part of a staking pool such as Lido or Everstake, you may get around 4% to 7% APY depending on the platform you choose. You must also account for the platform’s fees when trying to calculate your final rewards.
How much will I be able to stake?
There are no restrictions on how much ETH you can stake on ETH 2.0. However, there is a minimum number of ETH you must stake to run one full validator node, and that is 32 ETH.
Also, your balance can be as high as 1000 ETH, but your rewards and penalties per validator are determined by your effective amount, which is limited to 32 ETH.
On the other hand, pools and staking services allow you to stake as part of a pool for as little as 0.01 ETH (or with no minimum). You may also stake through exchanges, which frequently have no or low minimums.
Where to stake Ethereum
Since Ethereum’s Beacon chain went live in December 2020, many decentralized and centralized platforms launched staking services. They enabled users to participate in Ethereum 2.0 by staking their ETH coins and yielding rewards for contributing to the blockchain’s operations.
Here’s a list of platforms where you can stake ETH:
A step-by-step guide for staking Ethereum after The Merge
If you are planning to stake ETH, here’s a simple, step-by-step approach to follow:
Step 1: Find a staking pool service, such as Lido, where you want to stake your ETH.
Step 2: Buy some ETH on a non-custodial crypto wallet such as MetaMask.
Step 3: Link your wallet to the staking pool’s official platform.
Step 4: Go to the ETH staking page on the platform.
Step 5: Enter the amount of ETH you want to stake.
Step 6: Follow the instructions and confirm the transaction from your wallet.
- What happens to staked ETH after the merge?
The staked ETH will remain staked after The Merge and keep generating yield based on the current yield rate. Unless you have staked ETH through a liquid staking platform, you will only be able to unstake it after the protocol upgrade is complete. This can take until early 2023.
- Will ETH staking rewards go up after the merge?
The answer to this depends on a number of post-merge metrics such as total ETH staked, total daily transaction fees, and on-chain user activity. However, you can expect the annual staking rewards to be between 6% to 12%. There is no fixed answer to this because network metrics are dynamic and can change month-on-month.
- Can I still mine Ethereum after the merge?
No and yes. Ethereum will switch to the proof-of-stake protocol after the merge, which would no longer require mining operations, thus reducing the network’s energy consumption by 99.95%.
However, there’s a good chance of an Ethereum hard fork due to the community’s disagreement over the transition. This would result in a new Ethereum chain and coin that will still utilize the proof-of-work consensus. If that happens, this chain will be dubbed EthereumPoW ( ETHPOW) and mining will continue on this new chain.
- Will I get my staked ETH back?
You will most definitely get your staked ETH back. But when staking began, most platforms put out a disclaimer clarifying that once you stake your ETH, you will only be able to unstake them after the Ethereum protocol upgrade is complete, which is supposed to happen in early 2023.
In case you stake your ETH using a liquid staking platform like Lido, you can trade your staked ETH representative (stETH in the case of Lido) to the original ETH on a decentralized exchange. This would, practically “unstake'' your ETH.