How to Stake Ethereum
Learn how to stake Ethereum in our complete guide, including the different ways to stake Ethereum, the pros and cons of each, and step-by-step instructions.
Can you mine Ethereum?
No. Ethereum switched to a Proof-of-Stake consensus mechanism during the Ethereum Merge in September 2022. You have not been able to mine Ethereum since this date. You can either stake Ethereum, as we’ll cover in this guide, or you can still mine Ethereum Classic (ETC).
Read next: How to Mine Ethereum Classic
What is Ethereum staking?
Ethereum’s native token, ether (ETH), is used as payment, a reward, and collateral on the blockchain. Staking ETH means using it as collateral to secure the network by validating transactions. Validators ensure that a user has enough ether to send a transaction and has signed it with the correct private key.
Read next: Best Crypto to Stake
Why stake Ethereum?
Staking is crucial for the operation and security of the Ethereum network. Validators are trusted to honestly verify transactions and ensure network integrity. When selected to process transactions into a block, validators earn rewards proportional to the network's activity and the amount of ETH staked.
Validators face penalties if they act dishonestly or fail to maintain their hardware. Such penalties include the loss of rewards and, in severe cases, slashing, where a portion of the staked ETH is permanently removed.
Read next: What is the flippening?
4 ways to stake Ethereum
There are multiple ways to stake Ethereum - each with unique benefits and risks.
| Staking method | Description | Requirements | Pros | Cons |
|---|---|---|---|---|
| Stake with a centralized exchange | Stake crypto through exchanges like Coinbase or Binance. They handle staking on your behalf. | Purchase and hold ETH on the platform. | Easy setup, no technical knowledge required. | Lower rewards, risk of holding ETH on a centralized platform. |
| Delegate ETH with a non-custodial wallet | Use a compatible wallet to delegate your ETH. | Hold ETH in a self-custody wallet and delegate. | Rarely a minimum deposit, less technical complexity. | Potential lower rewards, trust in the node you’ve delegated to. |
| Stake using a DeFi platform | Use a platform like Lido or Rocket Pool to join a staking pool. | Use a non-custodial wallet to access DeFi protocols. | Convenience, ease of use, maintain liquidity. | Lower fees, trust in the protocol security. |
| Run a validator node | Run your own validator node on the Ethereum network for the highest returns. | At least 32 ETH and technical knowledge of running a node. | Highest rewards, full control. | Requires technical knowledge, hardware costs, and reliable internet connection. |
Staking via centralized exchanges
Staking via centralized exchanges like Coinbase or Binance is straightforward and requires no technical knowledge. Users simply purchase ETH on the platform and stake it through the exchange’s staking program. However, this method typically offers lower rewards and carries the risk of holding ETH on a centralized platform.
Read next: How to buy Ethereum on eToro
Delegating your ETH with a non-custodial wallet
Staking-as-a-service involves delegating ETH to a service provider that handles the staking process. This is the often most convenient method but comes with higher fees and the need to trust the service provider’s honesty and competence.
Stake via a DeFi platform
DeFi platforms like Lido and Rocket Pool work as staking pools that allow users to join together and contribute ETH to create a 32 ETH node. This method has lower minimum deposit requirements and is less technically complex than solo staking. It may also come with the additional benefit of being a liquid staking service, which means even while your Ethereum is locked, you have tokens that you can still trade and otherwise invest and maintain your liquidity while earning rewards.
Running a validator node
Solo staking involves running a dedicated computer as a validator node with 32 ETH staked. This method is the most secure and offers the highest rewards but requires significant technical knowledge, hardware costs, and a reliable internet connection.
Read next: Best Staking Platforms
How to stake Ethereum
Whatever method you choose to stake Ethereum, we’ve got you covered. Here’s how it works for each…
How to stake Ethereum on a centralized exchange
Sign up: Create an account on the exchange and verify your identity.
Purchase ETH: Buy ETH using available payment methods.
Transfer ETH: Navigate to the staking section and stake your ETH.
Choose parameters: Select the amount and duration for staking.
Stake ETH: Confirm the staking process and start earning rewards.
How to stake Ethereum with a non-custodial wallet
Choose a wallet: Select a compatible wallet like Ledger, Trezor, or MetaMask.
Transfer ETH: Move ETH from an exchange to your wallet.
Navigate to staking: Locate the staking section in the wallet.
Follow the steps in your wallet: Stake your ETH as per the wallet’s guidelines.
How to stake Ethereum with a staking pool
Select a pool: Choose a staking pool like Lido or Rocket Pool
Connect wallet: Use a self-custody wallet to connect to the pool.
Stake ETH: Follow the pool’s instructions to stake your ETH.
Receive tokens: Get ERC20 tokens representing your staked ETH, which can be used in DeFi.
How to run an Ethereum validator node
Purchase hardware: A reliable computer with a high-end CPU, 16GB-32GB RAM, and at least a 2TB SSD. You’ll also need at least 32 ETH.
Install software: Execution client, consensus client, validator client, and additional tools.
Configure node: Set up network settings and generate cryptographic keys.
Monitor and maintain: Regularly check logs, update software, and ensure consistent uptime.
What are the benefits of Ethereum staking?
Ethereum staking offers several benefits, including earning passive income, contributing to network security, influencing governance decisions, supporting ecological sustainability, and potential capital appreciation as the value of ETH increases.
What are the risks of Ethereum staking?
However, staking also comes with risks, such as ETH price volatility, liquidity constraints due to the locking period, potential technical issues with hardware, and the risk of penalties for dishonest or incorrect validation activities.
Which Ethereum staking method is best?
There are multiple factors to consider when choosing an Ethereum staking method:
Deposit requirements: Minimum amounts needed for staking.
Cybersecurity: Platform’s ability to protect your ETH.
Staking fees: Fees charged by providers, impacting overall returns.
Lock-up periods: Time required to unstake and access rewards.
Technical ability: Technical skills required for solo staking.
Hardware costs: Upfront and ongoing expenses for running a node.
Ethereum staking offers multiple methods to participate and earn rewards, each with its own set of requirements and risks. Whether you choose to run a node, delegate your ETH to a DeFi protocol, or a centralized exchange, it’s vital you understand the benefits and risks of each.
But don’t forget the tax bill…
Yep. Your Ethereum staking rewards are taxed. We’ve got a complete guide on crypto staking taxes to check out, but in brief, you may pay both Income Tax and Capital Gains Tax on your Ethereum staking rewards. However, there are potential ways to reduce your staking bill depending on the ETH staking protocol you use. Learn more in our article - which Ethereum staking protocol is best for your taxes?
