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Ethereum staking: all your options to get 5% return in ethers


The Merge event on Ethereum has kept the entire crypto industry in suspense for many months. This historic transition has been carried out perfectly, and the time has now come to learn how to take advantage of the new characteristics of the network, and in particular the income in ETH that staking on Ethereum can provide. Whether you are in possession of fractions of the second crypto market capitalization or true “Whale Ethereum”, an overview of your options.

Ethereum 2: everything evolves, nothing changes

Since September 15, 2022, the blockchain Ethereum saw its consensus mechanism – or more precisely the method allowing to select the node in charge of the integration of the next block of the chain -, evolve proof of work (Proof of Work or PoW) proof of stake (Proof of Stake, or PoS).

So we are now talking about Ethereum 2.0 network, although this name is no longer relevant because it can be confusing: the name of the network therefore remains officially ”Ethereum”. Indeed, the network has not really ”evolved”, it is simply a question of integrating the beacon chain (consensus layer or consensus layer operating in proof of stake, formerly ETH 2.0) to the ”main” network (executive layer or execution layer, formerly ETH 1.0, which integrated proof of work before The Merge).

Thanks to the proof-of-stake mechanism, it is now possible for anyone with ETH on the Ehereum network to stake themthat is to say, to lock them on the Ethereum network in order to participate in the validation of transactions, allowing to obtain a return, and this since December 2020 when the beacon chain was activated, before being actually integrated to the mainnet about 1 week ago.

We will therefore detail in this article the different options available in order to benefit from the ethers you own.

Yields and Conditions for Ethereum Staking

Know that the yield is variable over time depending on the total number of ETH locked. The larger the number of ETH staked, the lower the yield.

Currently, the APR is around 5%, with 14.6 million ETH staking on the Ethereum network.

Graph showing the number of ETH staked since the launch of the beacon chain. Source: beaconcha.in

Important point: the locked ETH as well as the rewards will only be accessible after the Shanghai update, the date of which is not set precisely a priori, and which should occur in mid-2023.

What options are available to me for Ethereum PoS staking?

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Ethereum staking: I have 32 or more ETH and the necessary technical skills to create my own node

Probably the option that will suit a minority of you. Nevertheless, this is the method that allows you to obtain the maximum return. You get your rewards directly from the protocol when you create a new block, but also when you participate in the verification of blocks produced by other validators. From the Merge, you also receive part of the transaction costs of the block that you validate.

Perfectly stable internet connection, adequate computer hardware, management of validating private keys, risk of sanction called ”slashing” in the event of a technical problem on the node… setting up your own node therefore requires a certain expertise and involves certain risks which you do not you won’t have to worry about the following staking methods.

It should be specified that a Ethereum node requires 32 ETH, no more no less. For example, if you want to stake 35 ETH, you will have to stake the excess 3 ETH with another method (pooling).

You can use the official Ethereum link providing all the instructions to set up your own node.

I own 32 ETH or more and want to delegate the technical aspect to a third party

In this case, a third-party node operator manages the technical part delicate described above. You are your own validator, and you keep the node validation keys. In other words, you have access to all of your funds. However, you remain dependent on the service provider who has your signature keys and may, for example, attempt to act maliciously, which may lead to the total loss of funds, or even a penalty and the loss of a part of your ETH. This risk is obviously low, but it is important to underline it.

Several providers offer this service, for example Allnodes, Kilnor BloxStaking. You can find more information by following this link.

I own less than 32 ETH Where I want to fully delegate the management of my ETH, regardless of the quantity

Most common configuration. The concept is simple: you send your ETH to a third party who will do the staking for you.

Many advantages are associated with it: no minimum quantity of ETH in order to benefit from staking, rewards received every x days, daily or even continuously, and very often liquidity token distributed in exchange according to a 1:1 ratio (for example stETH for the decentralized Lido protocol) in particular by decentralized protocols but also by certain centralized platforms such as Binance (with BETH), which can be traded on DEFI platforms, or exchanged again against ETH after the update Shanghai.

The third can correspond to a decentralized protocol or a centralized platform.

Decentralized Protocol

The best known is undoubtedly Lido : DAO open source audited many times, it is the largest custodian of ETH in staking with around 30% of all ETH staked. Its services are directly available via the application Ledger Live for those who store their ETH on a Ledger key.

The risk is moderate but not zero: indeed, no computer protocol can be immune to a code error, or even a computer hack.

Many other decentralized protocols exist, each with its own specificities. We will cite as examples Rocket Pool, Ankr or StakeWise.

Centralized Exchange

The vast majority of major centralized exchanges offer Ethereum 2.0 staking, with the most popular currently being Coinbase, kraken and Binance.

Take the example of Binance: you have ETH on your Binance cutosdial wallet and want to use them to participate in the operation of the network. You delegate your ETH to Binance, which will take care of pooling the ETH deposited by its customers and will set up an Ethereum node. In return, you get BETH at a 1:1 ratio.

You will then periodically receive BETH corresponding to your staking rewards. You can then use your BETH on decentralized finance Dapps on the Binance SmartChain to generate additional revenue. Once ETH withdrawals on the Ethereum network have been authorized, you can perform the reverse mechanism to recover native ETH from the Ethereum 2.0 network from your BETH.

The risk here is linked to the exchanger itself: in the event of financial difficulty or a hack of the platform, your funds are de facto no longer guaranteed. However, this is the simplest method, easily accessible to novice investors.

Many solutions have emerged to allow various profiles to take advantage of the Ethereum 2.0 staking : from the homemade Ethereum node to the solutions offered by centralized exchangers. Each solution has its advantages and disadvantages, it is up to you to decide which one will suit you best.

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