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Ethereum is transitioning its model in 2021 from proof of work (POW) to proof of stake (POS), which allows you to stake your Ether coins (ETH) in return for more ETH.
Staking is part of Ethereum 2.0, an upgrade designed to make the network faster, more scalable and more sustainable. Mining on Ethereum will eventually phase out, leaving staking the only way to earn new ETH — which comes with benefits and risks to weigh.
Like general crypto staking, Ethereum staking is a process of validating transactions on the Ethereum network to earn new ETH coins. By locking up a minimum of ETH in a wallet, you gain the ability to confirm whether a transaction conforms to signature requirements and other rules. In return for your work, you get additional ETH coins — called staking rewards.
Anyone can become a validator by staking through the Eth2 software, through your Ethereum wallet or by joining a staking pool. The minimum amount of ETH required to run a validator node is 32, so anyone with less than that will want to join a pool or another service that lets you stake small amounts of ETH for rewards.
The goal of staking is to make the network more secure from attacks and yet more decentralized. Ethereum staking will be the only way to create new ETH coins when the Eth2 upgrade is complete.
Ethereum 2.0 — referred to as Eth2 or Serenity, is the coin’s network upgrade designed to improve three areas:
The two ways of staking Ethereum depend on how much Ether you’re willing to deposit.
You must stake 32 ETH to become a validator on your own. The simplest way to stake solo is through a wallet like MyEtherWallet, which comes with a 0.75% fee.
MyEtherWallet through a partnership with a node-hosting service called Staked lets browser and mobile wallet users stake ETH directly through their wallets. You must deposit the full 32 ETH required to become a full validator and be willing to pay a 0.75% fee.
If you don’t have 32 ETH to deposit, an alternative is Trust Wallet, which allows you to directly stake using the DeFi protocol Lido with less than 32 ETH.
To securely use your ETH with MyEtherWallet or Trust Wallet, consider a hardware wallet – compare some of the options below or read our dedicated guide.
Or keep the process on your computer to avoid the fee:
If you don’t have 32 ETH or want to deposit that much, consider joining a staking pool. This is a simpler process than staking alone, because the pool and services staking for you typically do the technical work for you. Because these pools are providing a service for you, most pools charge either a flat fee or a percentage of your rewards for the convenience.
You can’t withdraw your ETH staking deposit until the mainnet merges with the Beacon Chain, which should happen late in 2021. Write down your ETH address and your recovery phase to avoid losing access to your ETH down the line.
You need storage space and a stable connection to run the validator software:
Until the network fully upgrades to Ethereum 2.0, you can earn ETH coins through both mining and staking.
|Requirements||Expensive and powerful mining hardware||ETH coins, Internet access and a computer|
|Earning difficulty||High — mining is very competitive and has a large investment to get started||Low — staking can be done in pools with minimal equipment and entry investment|
|Environmental impact||High — requires a lot of electricity||Low|
|How many ETH you can earn||Depends on your mining hardware||Depends on the number of ETH you are staking and the number of ETH staking overall on the network|
|Withdrawal limits||None||Must wait until Ethereum 2.0 upgrade is complete|
With Ethereum staking, you secure and add new blocks to the Beacon Chain. You must deposit either 32 ETH to become a full validator or join a staking pool with a lower amount.
You earn rewards for correctly validating transactions. If you make too many mistakes — for example, validating conflicting blocks — you can lose a part of your staked coins through a process known as slashing that’s designed to punish poor validators. You might also be booted from the network.
Staking will validate all of Ethereum after the network’s upgrade is complete and the mainnet merges with the Beacon Chain.
Slashing is a penalty designed to punish validators who submit fraudulent transactions to the Ethereum blockchain. If a validator breaks the rules, they will have a portion of their staked 32 ETH removed from their ownership and be booted from the network.
At the time of writing you can earn anywhere between 3% and 8% of your invested ETH, paid annually in ETH coins.
Your rate of return depends on the number of ETH staked at any given time across the network. When fewer ETH are validating the network, the reward is higher to provide an incentive for more users to stake their ETH. The more ETH staked at the same time, the lower the reward.
The dollar value of your return depends on the current price of ETH. If the price of ETH rises, your reward increases even more. But if the price of ETH drops, your reward value drops as well.
The network transfers ETH taking rewards to validators every epoch — every 384 seconds or roughly 6.5 minutes. The number of coins each validator receives is calculated based on the state of the Ethereum network after an epoch is complete.
You must be an active validator during the previous epoch to receive a reward, meaning you need to be online and validating the network — you will only be rewarded for the epochs you participate in. Calculations of potential rewards provide only an estimate, and you won’t know your exact reward amount until you receive it.
Aside from earning ETH rewards, staking is designed for those who want to be part of the community actively building the foundation of the new Ethereum.
You help the network grow and contribute toward a decentralized world. If this kind of work aligns with your ideology, it might be your main reason to stake.
Before getting started, weigh potential drawbacks that include:
Ethereum staking is the process of locking up a portion of Ether to validate the Eth2 Beacon Chain and earn rewards. You can stake solo with 32 ETH or join a staking pool with a lower amount. Either way, you can’t withdraw your deposited Ether until Ethereum 2.0 is fully complete in late 2021. If the risks feel worth the reward, you’ll need to buy some ETH to get started on your staking journey.
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