How to stake Ethereum (ETH)

Following the Merge, Ethereum now uses proof of stake (POS), which allows you to stake your Ether coins (ETH) in return for more ETH.

Staking is designed to make the Ethereum network faster, more scalable and more sustainable. Mining on Ethereum has stopped, leaving staking the only way to earn new ETH. There are both simple and complex ways to participate in staking, each with its own benefits and risks that you need to weigh up.

What is Ethereum staking?

Ethereum staking involves 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 – these are called staking rewards.

Anyone can become a validator by staking through dedicated software, through your Ethereum wallet or by joining a staking pool.

The minimum amount of ETH required to run a validator node alone is 32. Anyone with less than that will want to join a pool or another service that lets you stake small amounts of ETH for rewards. You can find these pools on trading platforms such as Kraken and Binance, or DeFi services like Lido and Rocket Pool. These services usually let you start with 1 ETH or even less.

Staking's goal is to make the network more secure from attacks and more decentralised. Ethereum staking is the only way to create new ETH coins following the Merge, which made energy-intensive mining obsolete.

How to stake Ethereum

There are various ways of staking Ethereum. This depends on how much Ether you're willing to deposit and how comfortable you are using the Ethereum blockchain.

You must stake 32 ETH to become a validator on your own. This means you get to keep the full staking rewards. With anything less than that, you can join a pool like the DeFi protocol Lido or use an exchange like Kraken. This makes staking a lot easier for most people, although the pool will take a cut of your rewards.

Ethereum staking through an exchange pool

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 as the pool and services staking for you typically do the technical work on your behalf. Because these pools provide a service for you, most pools charge either a flat fee or a percentage of your rewards for doing so.

Exchange pools operate on exchanges like Binance, Coinbase and Kraken, but some of these may not be available to users in Australia. Joining is a matter of creating an account with an eligible exchange and following the instructions for staking your ETH.

Ethereum staking with a wallet

You can use any compatible Web3 wallet like MetaMask to stake through a pool like Lido or Rocket Pool. The process only takes a few minutes and has the added benefit of providing you with a Liquid Staking Derivative (LSD).

LSD's are tokens that represent your staked share of ETH and increase in value over time, which reflects your accrued staking rewards. LSDs like stETH (Lido) and rETH (Rocket Pool) can are popular and can be easily sold or used with DeFi apps.

Another way of staking through a wallet is by using a Ledger hardware wallet. Ledger allows you to stake directly through the Ledger Live software or in conjunction with a Web3 wallet. Using a hardware wallet to stake adds an additional layer of security, and is considered the safest way to store cryptocurrency. Ledger partners with either Lido or Kiln to provide staking services through Ledger Live.

If you have the full 32 ETH required you can use MyEtherWallet which has partnered with a node-hosting service called Staked. It allows browser and mobile wallet users to stake ETH directly through their wallet as a validator.

Ledger Nano X Wallet	Trezor Model T Wallet	Ledger Nano S Plus Wallet
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Ethereum staking with a validator node

Staking as a validator is complex, but here's a brief overview of a method to help you decide if it's right for you.

1. Either install staking software on your computer or buy specialised staking hardware.
2. Connect your hardware to the internet.
3. Download and validate Ethereum's blockchain data.
4. Run the execution and consensus client software.
5. Deposit your ETH to the official ETH staking address after verifying it at ethereum.org.

Hardware requirements to stake alone

You need storage space and a stable connection to run the validator software:

• Staking requires around 2TB SSD storage drive.
• You need a 24/7 uptime without bandwidth caps to sync and validate without interruptions.
• 8GB RAM if using Raspberry Pi or 16–32GB RAM on a regular computer.
• Intel NUC, 7th-gen processor or higher.

How does Ethereum staking work?

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 slashing, a process designed to punish poor validators. You might also be booted from the network.

Slashing

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.

How much can I earn with Ethereum staking?

As of September 2022 you can earn around 4% of your invested ETH, paid annually in ETH coins. This rate is dynamic though and will change over time.

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.

When do I get my staking rewards?

The network transfers ETH staking 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.

Benefits of staking Ethereum

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 decentralised world. If this kind of work aligns with your ideology, it might be your main reason to stake.

Drawbacks of staking Ethereum

Before getting started, weigh potential drawbacks that include the following:

• You must lock up your ETH. You can't access your ETH until the developers make another upgrade after the Merge.
• You can lose ETH. If you're offline for more than 50% of the epoch time or make mistakes, it can cost you. How much you lose depends on your impact on the network. Let's say you and more than two-thirds of validators are offline. You could progressively lose up to 50% of your stake over 21 days. After 21 days, you might be kicked out of the validator pool.
• You must keep your address safe. Without your withdrawal address and recovery phrase, you can lose all of your ETH.
• Value is affected by the market. Because your ETH is locked, if the price of Ether drops, you could lose the value of your cryptocurrency without the ability to sell them off.

Bottom line

Ethereum staking is the process of locking up a portion of Ether to validate the Ethereum network and earn rewards. You can stake solo with 32 ETH or join a staking pool with a lower amount.

Using a pool like Lido or Rocket Pool will also provide you with a token which represents your share of staked ETH and rewards. These can be easily sold or used in DeFi applications.

For added security, consider using a hardware wallet to protect your private keys if you decide to stake through a wallet.

Keep in mind there are various risks involved with staking, such as slashing or smart contract vulnerabilities.

If the risks feel worth the reward, you'll need to buy some ETH to get started on your staking journey.