Everything you need to know about staking Ethereum.
Are you prepared to earn up to 17% on your ETH holdings?
Ethereum has over 1.25 million active users. Are you gonna be amongst the few early stakers?
Worried about staking minimum, risks, or liquidity? Read on. We have looked at the most feasible opportunities and service solutions helping you to earn that sweet passive ETH income for providing a public infrastructure good while reducing your operative overhead and keeping your risk minimized.
This guide is for you to find the best service solution for your ETH staking needs and the risks and benefits of different options available to you.
TLDR:
If you are holding any ETH, you should care about this upgrade.
Ethereum 2.0 (referred to as “eth2”) is not only moving to Proof of Stake with attractive returns for all participants, but also setting the starting point for a blockchain scaling solution.
The tooling around Staking is versatile enough to allow participants to create a one-of-its-kind decentralized network. Stakeholders are assigned with an important role in providing security to the network. You can now for the first time, become an active stakeholder and earn rewards for doing so.
The staking service provider landscape is rich enough to address all kinds of users groups – even many solutions are still being actively developed. We are sure, there is one that fits your needs, even without technical or web3 expertise.
The biggest “risk” for stakers is an indefinite lock-up period, which is also addressed by many service solutions.
What is Ethereum 2.0 all about?
The Launch of the biggest upgrade in blockchain history is right around the corner. At the time of writing, over 1M ETH or $600M have been staked in the official deposit contract that went live on November 3rd, marking the first step of Ethereum’s migration to Proof of Stake.
The Ethereum 2.0 Beacon Chain has successfully launched on December 1st, 2020.
Ethereum has been heavily in the critics around its usability while in DeFi summer 2020 Ethereum gas prices climbed as high as 900 gwei.
Thus, the transition of the $51B blockchain network to it’s new version has been highly anticipated and addresses scalability via sharding and introduces an advanced consensus mechanism leveraging Proof of Stake.
It is now experts’ common knowledge that Proof of Stake is superior in most aspects to Proof of Work and brings along benefits such as improved speed, absolute finality, higher performance, environmental sustainability, larger design space for economic incentives, and lower cost of security.
Many may be unaware of the fact that Proof of Stake has been on the Ethereum Roadmap since the very beginning. Already in 2014, miles ahead of the Ethereum 1.0 launch in 2015, the Ethereum Creator Vitalik Buterin published research (1, 2, 3, 4, 5) around Proof of Stake.
Since then, it has been a bumpy road with many iterations and fine-tuning around the incentives design, but the combination of increasing usage and limitations of Ethereum’s current scalability helped to accelerate the development of this update and finally put it into the starting holes.
Building on the lessons learned from Ethereum’s operations as a Proof of Work chain, the foundational design principles of Ethereum 2.0 have always been anchored around optimization for decentralization, resilience, security and longevity. Enabling decentralization by facilitating broad participation and reducing the barriers to entry has been a fundamental component of this. As a result, the protocol design is free of any type of ‘super-node’ structures that require high CPU or memory, fixed set of participating validators or delegation mechanisms. With that, Ethereum’s design path is clearly differentiated from its competitors at the consensus level, who almost exclusively offer delegated staking (e.g. Polkadot, Cardano, Tezos, Cosmos, NEAR, etc.) and often have fixed or maximum numbers of network validators.
Ethereum 2.0 is rolling out in three phases. All ETH staked during the initial Phase 0 of the Beacon Chain rollout is locked until the current eth1 chain is folded into a shard on eth2. This is currently planned to take place before Phase 2 is rolled out in the next 12-24 months. As a result of this design there is no opt-out for early participation. Sending ETH to the Beacon Chain during Phase 0 is a one-way street.
Phase 0 – Beacon Chain:
- Introducing the eth2 Proof of Stake consensus layer
- Tracks eth2 validators and balances
- One-way ETH deposit to stake on the Beacon Chain
- No state management (transactions, smart contracts)
Phase 1 – Shard Chains:
- Trial run for the eth2 sharding infrastructure (adding, storing, retrieving shard data)
- Validators are now validating randomly selected shards (not the full chain anymore)
- No state management (transactions, smart contracts)
Phase 1.5 – Migration of Eth1 to eth2
- Migration from eth1 to a shard on eth2
- No full sharded execution
Phase 2 – State Execution:
- Adds execution to the remaining eth2 shards
- Fully operational sharded eth2 chain (incl. accounts, contracts, state across all shards.)
Ethereum 2.0 is introducing the new Casper FFG (Friendly Finality Gadget) Proof of Stake Consensus, which has its own twists, considerations and risks like a minimum staking requirement of 32 ETH per validator, an unknown lock-up duration, downtime penalties and slashing of funds, in case that your validator misbehaves. To reduce the risks of early adopters the inactivity and slashing penalties have been reduced by 67-75% throughout the first few months of the eth2.
With all that in mind, there have evolved many businesses and projects to improve the user experience and minimize the risks for staking ETH.
This article is for you to assess the risks when staking and to find the most suitable staking service provider. We have written the article together with contributions from Mara Schmiedt, who is the Business Development Manager at Bison Trails and who has been actively involved in research around eth2 with the Staking Ecosystem Report and “The Internet Bond” whitepaper. Justin Drake from the Ethereum Foundation has also helped to check and proof-read the article. That being said, Staking Rewards is not affiliated with any Staking Provider and provides an independent author opinion only. We do not recommend any service listed.
To stake or not to stake?
First and foremost it is essential to consider if you want to stake your ETH at all. It comes down to the balance between risk and reward you are comfortable with. Staking by its definition means to expose capital to a certain risk and earn rewards for doing so.
And while many staking service providers minimize risks or provide alternative solutions, there are certain key characteristics within Ethereum 2.0 that apply to all stakers:
- Rewards up to 17%
Ethereum 2.0 is implementing a dynamic inflation curve, which rewards validators for securing the network, while keeping the monetary issuance at a minimum.
With the Ethereum Staking Calculator you can project any amount of total staked ETH, to estimate your earnings. Numbers can only be estimated, but are pretty much accurate and also in line with Vitalik Buterin’s calculations.
- 32 ETH Staking Minimum
To run a validator on the Beacon Chain you will be required to stake 32 ETH. Therefore, ETH can only be staked in multiples of 32 ETH per validator instance that is set up. Only solutions that pool funds, such as custodial Staking Providers or Staking Pools allow for the staking of fractional portions of 32 ETH.
- Staked ETH is locked up until Phase 1.5
The launch of eth2 phase 1.5 is uncertain and could take anywhere between 12-24 months or even longer.
If you don’t like this, you may want to consider using a centralized exchange or staking pool, that will be offering a tradable representation of your staked ETH on the eth1 chain (ERC-20 tokens). We are reviewing these further below.
Even after phase 1.5 there will be dynamic lock-up time (exit queue), to prevent mass withdrawls of staked ETH. This is currently set at 256 epochs (~ 27 hours).
- Funds may get slashed
Stakers face the prospect of being “slashed”(permanently compromised) in the event their validator behaves in a provably destructive manner i.e. double signing or surround voting. Even slashing is mostly for clearly bad behaviour and it should never happen to normal users baring client bugs, it is important that you are familiar with all aspects when setting up your validator node. Within eth2, the slashing penalty is related to the concurrent total amount of underlying slashed funds. If only one validator with 32 ETH is subject to slashing, the penalty is very low. But if the infrastructure of a large scale operation from a Provider is misbehaving, the slashing penalty might be much higher for everyone individually. Thus, if you are staking with a Staking Service provider, it is recommended to thoroughly assess their trustworthiness to operate a large scale infrastructure. Some Providers may offer slashing insurance.
- Staking on the eth2 chain ETH 2.0 is one-way
The bridge to eth2 is one-way and non-reversible (until it’s not). By sending your ETH to the staking contract to initiate your validator on the beacon chain, there is no way to go back and withdraw your principal or accrued rewards until Phase 1.5 goes live.
With all that in mind you should also have a clear answer for the following questions before making the decision to stake or not:
- Am I comfortable running my own infrastructure?
- How long am I planning to hold my ETH?
- Do I need hard access to my funds in the coming year or two (not via derivatives or loans)?
- Do I want to support the evolution of Ethereum?
Ethereum 2.0 Staking Service Solutions
“I am familiar with the staking economics. Which options do I have to stake my ETH?”
Staking and running a validator node requires both infrastructure and expertise. For this reason, you must decide whether to do so yourself or delegate the task through staking providers. Those who choose a provider, delegate the task of staking to third parties with or without giving up custody (full control) of their assets. Staking service providers are designed to fulfill the staking function optimally to help reduce risk and operational overhead, increase accessibility, and optimize reward consistency for their target customer segments.
- Self-run Validator Nodes
If you are an enthusiastic long-term ETH holder and have a sound technical expertise, this should be your preferred option. While keeping full control over custody, node operators do tremendously support the eth2 network overall in terms of security and decentralization.
- Pre-configured Validator Nodes
The easy way to run your fully owned and controlled validator. With a pre-configured validator hardware or cloud operation, you can save a lot of time and efforts on the initial setup to get your validators up and running.
- Validator-as-a-service Solutions
Institutional and high net worth ETH holders require secure, reliable and easy-to-use solution to support their staking needs while keeping control of their funds. Validator-as-a-service solutions will only hold onto your signing validator keys (which perform the validator responsibilities) and let you retain full control of your funds via the withdrawal keys. This also means, however, that you will need 32 ETH to sign up to their services. Most of these services are thus considered semi-custodial.
- Staking Pools
Retail holders and active DeFi participants are likely to choose Staking Pools as their preferred option. The biggest distinguishing feature of staking pools is that you won’t need all 32 ETH. Staking pool services will act as the middle ground for people with less than 32 ETH to pool their ETH together to stake. While funds are mostly held by Staking Pool Operators, the custody is transparent and verifiable on-chain.
- Lending Platforms
This is the best option for Traders and Investors who like to leverage their holdings. Solutions such as LiquidStake present a balanced option between staking with the ability to borrow funds against staked ETH.
- Exchanges & Custodians
You are considering this option when you are looking for the easiest way of staking and may not have much time to maintain or monitor your staking participation or you plan to stake fractional amounts of ETH. All you need to do is deposit your ETH to their wallets, maybe go through a signup process, and you are all set. The biggest downside to this bucket is that you won’t own your coins. Not your keys, not your coins.
Please take the decision for your preferred solution and provider with care. Since funds are locked up until phase 1.5, choosing a provider often is a long-term commitment of 12-24 months or longer. You should choose a provider that is experienced and capable of consistent operations and providing support, not closing down in the next few years. Switching providers later on would, if possible at all, be a very risky endeavour, in which private keys are at risk.
With the following we are giving an in-depth look at the landscape of Ethereum Staking Service Providers, categorized as above.
Self-run Validator Nodes
To run validators on your self-operated infrastructure, you should have the expertise and ongoing willingness to maintain the operation of your blockchain infrastructure.
Benefits:
- low scope hardware requirements
- no fees to service providers
- support the Ethereum network and its decentralization
- keep full control of all your keys and custody
Drawbacks:
- requires technical initial setup
- requires ongoing maintenance and uptime
- no liquidity
- staking only in 32 ETH multiples
- slashing risk
Requirements:
- Multiples of 32 ETH (32 / 64 / 96 ….)
- Know how to use the command-line interface
- Occasional Maintenance & Updates
- A (virtual) hardware device to run the ETH client must be online 24/7
Furthermore there are certain hardware requirements your machine must meet in order to successfully Ethereum 2.0 clients. These specifications below must currently be met in order to successfully the prysm client. It is likely that these minimum specifications will be reduced drastically over time as clients continue to optimize. Also some clients such as Lighthouse may be more efficient than prysm.
- Operating System: 64-bit Linux, Mac OS X 10.14+, Windows 64-bit
- Processor: Intel Core i5–760 or AMD FX-8100 or better
- Memory: 8GB RAM
- Storage: 20GB available space
- Internet: Broadband connection
Users running their own validators have an important decision to make:
- Buy a Computer and run a validator node at home
- Run a Validator on a virtual private server (VPS) in the cloud
If you are unsure to buy a computer or make use of a VPS, we recommend reading this article.
Once the decision for a home validator node or VPS is made, the next pressing step is to choose one of the 4 different ethereum 2 clients. Each is written in a different programming language and is targeting different demographics like devices and operating systems:
- Prysm (Go)
Prysmatic Labs are developing Prysm – an Ethereum 2.0 client written in the programming language Go. Some argue, the prysm client acting as a counterpart to the already popular Go client, Geth.
- Teku (Java)
The PegaSys Ethereum 2.0 client is called Teku (formerly known as Artemis). It is being built alongside Besu, an Ethereum 1.0 and enterprise-grade client written in the Java programming language. Both Artemis and Besu are Apache 2.0 licensed.
- Lighthouse (Rust)
Sigma Prime is building an Ethereum 2.0 client called Lighthouse written in the programming language Rust.
Please note, that Lighthouse does not have any mainnet deposit functionality.
- Nimbus (Nim)
Status is building Nimbus – an Ethereum 2.0 client written in the programming language Nim. Nimbus is expected to be Ethereum’s first mobile-native client.
If you are keen to go ahead with running your own eth2 validator, we highly recommend this guide How to become a Validator, and you can start at the official Ethereum Launchpad.
Pre-configured Validator Nodes
With pre-configured validator nodes hardware you are subject to all conditions described above, but you can save a lot of time and efforts on the initial setup to get your validators up and running.
Benefits:
- no initial technical setup
Drawbacks:
- still requires ongoing maintenance and uptime
Avado
Avado is a pre-configured hardware device to run a validator at your home, which is based on the Prysm Client.
Furthermore you may run staking nodes from other blockchains simultaneously on the same device. This opportunity might be suitable for users who want to save the time and cost to setting up their own nodes on a computer at home. 24/7 stable internet connection is very important. This is an all-in-one staking hardware solution for enthusiasts who like to listen to the sound of freshly minted ETH at home. With a one-time payment for the device, the costs are minimized to the monthly electricity bill.
Price: $1936 USD
Launchnodes
With the Launchnodes product, users can run validators on the AWS marketplace with a single click.
Annual Fee: $1188 USD
Validator-as-a-service API solution
Are you operating any crypto related business and are planning to offer ETH 2.0 staking within your product?
Validator-as-a-service API solutions are targeted at large exchanges, wallet providers, custodians and hedge funds, who require state-of-the art staking infrastructure expertise in order to provide stable and profitable solutions for their customers.
We are aware of 2 API solutions for enterprise-grade operations as below:
Bison Trails
Bison Trails is a leading, enterprise-grade Infrastructure-as-a-Service provider across multiple blockchains to the top exchanges, custodians and wallets in the space. With their fully-managed node clusters you can seamlessly create, scale and manage your Beacon Chain nodes and validators within their non-custodial platform via their API solution.
Their API product is already live on the testnet and leading exchanges, custodians and providers have begun testing Bison Trail’s eth2 solution via their Pioneer Program.
Codefi Staking
In June, Coindesk reported on the highly anticipated Staking-as-a-service solution by Consensys. Industry Players such as Binance, Huobi Wallet, Matrixport, Crypto.com, DARMA Capital and Trustology mentioned to utilize the technology in order to provide ETH staking services to their clients.
Staked
Staked has been a well-known and trusted staking service provider for over 3 years. Staked’s infrastructure for their eth2 API staking solution is built with slashing protection via Kubernetes to distribute across 5 clouds with automated failover.
They developed a Node Provisioning API, which is one of the most advanced API tooling in the category.
More information about Staked’s Validator-as-a-service UI solution further below.
Validador-as-a-service solutions
With a Validator-as-a-service solution, you are basically paying someone to run a validator in return for an operating fee. These solutions are great especially for high net worth ETH holders and institutional investors. It removes technical requirements and often provides convenient reporting or tracking tools. Whereas different service providers have different charging models:
- Monthly recurring: A subscription model with a recurring cost per month and validator
- One-time deposit: A flat pre-paid fee per validator until the launch of phase 1.5
- Commission-based: A fee percentage of the accrued rewards
The fixed fees (monthly recurring or one-off deposit) are best when rewards are high like at the beginning of the eth2 launch. As more ETH are being staked the rewards are decreasing and thus a commission-based model is cheaper. Giving a basic example for you: Comparing a $10 monthly recurring fee and a 12.5% commission – then the former option is cheaper until 6M ETH have been staked in the network.
Benefits:
- Don’t need to buy or maintain hardware/software
- No technical knowledge required
- Enhanced slashing protection and/or redundancy (provider based)
- Dashboards for reward tracking
Drawbacks:
- Can only stake in multiples of 32 ETH
- No liquidity until phase 1.5
Stakewise Solo
Stakewise is an all-in-one Ethereum 2.0 staking provider. Besides their public and private Staking Pools, users can stake on their own with a non-custodial validator-as-a-service offering, providing maximum uptime & scalability.
Minimum: 32 ETH
Fee Type: Monthly recurring
Fee: 10 DAI
stakefish
stakefish is a leading staking service provider for all kinds of blockchain projects. The team has just announced its unique non-custodial eth2 validator-as-a-service offering.
For each new validator launched with stakefish, 32.1 ETH will be required. 32 ETH will be used directly for staking, and 0.1 ETH will be used to pay the staking service fee.
Once phase 1.5 has launched and withdrawals are enabled, stakefish will provide a grace period of at least 2 months so that you can decide whether to continue to stake with them, move to another service provider, or exit and stop staking all together.
The Batch Deposit Contract of stakefish’s service has been audited by Runtime Verification.
Minimum: 32 ETH
Fee Type: One-time deposit
Fee: 0.1 ETH (early bird special only)
Staked
Besides their eth2 API staking solution, Staked has created an easy-to-use UI and detailed dashboard, which provides enhanced insights into your individual staking setup.
Minimum: 32 ETH
Fee Type: Recurring or one-time deposit
Fee: $5 monthly recurring or $60 one-off deposit (payable in crypto or fiat)
Attestant
Attestant is providing and institutional-grade staking service for eth2. With their commission based fee structure and high minimum they are clearly differentiated from other offerings. The team has decades of experience in technology, finance and treasury management at the highest levels.
Minimum: 1000 ETH
Fee Type: Commission-based
Normal Fee: 17.5%
Special Fee: 12.5% (introductory offer for validators starting within 45 days after the Genesis Block)
Allnodes
Allnodes is a non-custodial platform for node hosting and staking. You easily host masternodes, as well as stake coins in a few clicks. With their new eth2 staking offering you can deploy validator nodes in a simple fashion. With multi-level protection for validator keys, they guarantee 100% uptime and even offer an easy-to-use and fast UX-Free Monitoring, Checking via Telegram & Discord Bots.
Minimum: 32 ETH
Fee Type: monthly recurring
Fee: $5 USD
Blox Staking
Blox Staking provides custody-free Ethereum 2.0 staking services for anyone to participate in staking or become a validator. The project is being developed by the team behind Blox.io, a leading crypto accounting platform.
Blox Staking is leveraging technology built by the Prysmatic Labs team for supporting multi-client validators on the beacon chain. Blox also uses Hashicorp Vault for private key management.
Staking with Blox requires absolutely no key sharing; in fact, each user has a dedicated remote signer stored directly on their own cloud account. The remote signer, KeyVault holds a user’s private validator keys and executes duties sent from the blockchain via Blox Infra nodes. A user manages their validator (or validators) locally using a Desktop App, Blox Live featuring a performance monitoring dashboard.
The Blox infrastructure is open-source, which sets it apart from other services.
Fee Type: One-time deposit
Fee: free in the first 1-2 months and $180 after that until launch of phase 1.5
If staking multiple validators, there is a discount on scale.
Blox Staking by its design is providing decentralized staking pools. However these are not yet available until Q3 2021, and for now, you can only stake with the full 32 ETH.
Staking Pools
With Staking Pools you can pool your funds together with others who do not have 32 ETH ($17,000) to run their own validator. Since most of these coordinations will be happening through smart contracts, you will need to validate that the team has gone through enough security audits before sending your ETH to the pool contract
Most Staking Pools issue staking derivatives when staking. With them you can easily stake your ETH on the Beacon Chain and receive derivatives tokens (ERC-20) on the Eth1 Chain to use in DeFi or others. Please keep in mind that derivatives may have the same symbol or name, but if not issued by the same staking service provider, they are not the same and thus do not have the same liquidity.
Validators of Staking Pools are either operated by a curated set of well-known Staking Service Providers, or they are operated by a dynamic set of individual participants. Please consider that you technically give up custody for your ETH which are being held by validators.
Anyone who has the technical expertise and wants to earn extra ETH, may also consider to run a validator node within those Staking Pools, which allow individual participants to contribute to the dynamic validator set. Often the Staking Pool shares their fees as a reward for the operators of validators in their own network.
Benefits:
- Liquidity on staked ETH (via secondary token issuance)
- Additional incentives for validator operators in the network
Drawbacks:
- Smart Contract Risk
- Custody with Staking Pool Operators
Rocket Pool
Introduced in 2016, Rocket Pool has been the very first project building a solution for Ethereum Staking. Rocket Pool is a decentralized staking network on top of Ethereum, which matches individual stakers with any amount with validator operators in their network. Thus there is no fixed set of network node operators. Any losses that occur from bad nodes for users who deposit ETH are socialised across the whole network to minimise impacts on any single user.
The smart contract infrastructure of Rocket Pool is open source, verifiable and there are several code audits planned before the full launch.
Users who deposit ETH on the Rocket Pool platform, receive rETH, which are accruing rewards in real-time. rETH can be redeemed back for the deposited ETH + accrued rewards when you are ready.
- Derivative Token: rETH
- Minimum: 0.01 ETH
- Fee: unknown
Furthermore, users have the option to run validators directly, in which case either 16 ETH (mini-pools) or the full 32 ETH minimum are being required. This option is comparable to validator-as-a-service solution as described further above. The main benefit here is, that node operators also receive access to their share of the validator balance via the staking derivative “nETH” and also receive a commission from the network for providing the staking service.
- Validator Minimum: 16 ETH
Stkr
Stkr is another decentralized staking network based on and for Ethereum, which is matching node providers and users. The project is developed by the web3 infrastructure and validator-as-a-service company Ankr.
Ankr reports that users will be able to deposit funds through the Stkr platform before the ETH 2.0 genesis date. The key characteristics of of the project are:
- Users can stake any amount from 0.5 ETH to 1000 ETH in a single click and proportionally receive the staking derivative aETH
- Node providers will be running Ethereum 2.0 nodes either on their own hardware or using the Ankr platform, to earn from the staking rewards and platform fees.
- Governors will ensure the long term sustainability of the platform. A substantial stake of ANKR tokens is necessary to become part of the Stkr governance board (a governor does not necessary need to be a node provider).
- Derivative Token: aETH
- Fee: 12%
Please note, that the fee for users on one side is the additional reward for node providers on the other side. So this might be an attractive alternative to validator-as-a-service solutions.
- Validator Minimum: 0-16 ETH
Stafi Protocol
The Ethereum staking solution of Stafi Protocol in it’s design is very similar to Rocketpool and Stkr. However the project claims to to provide much better liquidity for their staking derivative token rETH, which is planned to be tradable on traditional DEX as well as CEX. Furthermore rETH is also projected to be available on Ethereum, Polkadot and Cosmos through Stafi’s cross-chain bridge service.
Users can stake any amount of ETH and trade the rETH derivative at any time on Uniswap for ETH without waiting for eth2 phase 1.5. No technical skills are required for users.
Derivative Token: rETH
Minimum: 0.01 ETH
Fee: unknown
Validators will be allocated with thousand of ETH by joining the StaFi staking contract and can leverage users’ funds, which provides a higher ROI for them compared to using other validator-as-a-service solutions. Furthermore they can redeem part of their deposits for liquidity backed by StaFi.
- Validator Minimum: 4-16 ETH
Stakewise Pool
Stakewise approach is different to other staking pools because they split the deposits and rewards into separate derivative tokens called stETH (staking Ether) and rwETH (reward Ether).
1. When making a deposit into the Stakewise Pool, users receive an equal amount of stETH to represent their deposits in a 1:1 ratio.
2. As long as they hold stETH in their address, rwETH will accrue to the same address proportionally to the user’s share of the Pool.
3. If stETH is transferred to another address, the balance of rwETH that has been accrued will remain immutable. rwETH will start accruing to the new address.
4. When locking stETH into a contract that doesn’t recognize rwETH, users can whitelist said contract and stake their contract tokens to continue receiving rwETH.
5. Upon Phase 1.5, both tokens will be exchangeable into ETH in the Pool at a 1:1 ratio.
So in essence, stETH and rwETH mirror the mechanics of staking but in the eth1 chain.
Expected advantages from this dual-token model are:
1. Separated selling pressure on rewards from deposits, which is helpful for keeping the exchange rate closer to a 1:1 ratio for stETH.
2. Users can provide liquidity for stETH without loss of the staking returns (they don’t get arbitraged away), which, when combined with less expected selling pressure on stETH, makes it a more attractive instrument for LP activity.
3. Users can swap rwETH to achieve compound returns (as long as rwETH/ETH exchange rate is close to 1, which is planned to incentivize).
4. stETH and rwETH have different risk and reward characteristics, which is helpful in price discovery and trading.
The balances of stETH and rwETH are updated via oracles in those contracts.
Minimum: 0.01 ETH
Fee: 10%
Lido Finance
Lido is a project brought to life by the well-known staking service provider P2P Validator and supported by industry leaders such as Chorus One, Certus One, Staking Facilities, Dokia Capital, stakefish and others. The project is being governed by the Lido DAO.
Lido will maintain a set of node operators who are responsible for validating the ETH staked with Lido. The addition and removal of node operators will be voted on by Lido community governance.
Lido thus is projecting to minimize potential slashing risks, by only allowing reputable staking service provider with proven track records to the join as validators in the network.
Users will send ether to the staking pool contract to be minted stETH tokens in return. That ether will be distributed between node operators to maintain uniform distribution and deposited to be validated by their validators. Withdrawal credentials for that ether will be set either to threshold signature of distributed custody.
The staking pool contract contains a list of node operators, their keys, and the logic for distributing rewards between them.
Fee: 10%
Minimum: 0.01 ETH
Derivative Token: stETH
Guarda Wallet
Guarda Wallet is a multi-network staking wallet. They are now additionally offering a new eth2 staking solution.
Users can send as little as 0.1 ETH to the pool and for each ETH token users stake Guarda generates GETH tokens and sends them to users. These tokens are minted for them in 1:1 ratio to $ETH and will become tradable soon.
Guarda Wallet rewards stakers with GETH tokens when users stake ETH and distribute them as a reward every month.
Minimum: 0.1 ETH
Fee: 10%
Etherchest
Etherchest provides a way for users with less than 32 ethereum to stake on the Ethereum Blockchain by purchasing NFT tokens which represent just a portion of the full 32 ETH required minimum validator stake.
Their staking service is powered by a set of smart contracts which control the minting of tokens, manage the maturity of tokens, bind them to the amount of ETH a user stakes plus the future rewards over the lifetime of that stake and oversee the distribution of user rewards.
The NFT (erc721) tokens, called Gems, provide proof-of-ownership and entry to block validation rewards within the EtherChest Ecosystem.
The erc20 tokens, called Ducats, represent accrued rewards and can be used to buy Gems or be traded on exchanges
NFT staking positions can be purchased as the following:
- Diamond = 1 ETH
- Sapphire = 0.5 ETH
- Emerald = 0.25 ETH
- Ruby = 0.10 ETH
Ducats are pegged at 1 Ducat to 0.00001 ETH.
Coming soon:
Stakehound
Stakehound is a custodial staking service provider, which allows users to send staked PoS tokens to them and and receive stake-backed ERC-20 tokens in return. Those can then be utilized within the Ethereum ecosystem and DeFi applications.
Stakehound is currently testing their solution and is planning to release more details soon.
StakeDAO
StakeDAO is a project introduced by Stake Capital. The team mentioned a release of their solution within early december, but there are no further details known.
CanEth Pool
The CanETH development team is currently testing on the Medalla testnet and will release more details soon.
Lending Platforms
Currently there is only one Lending Platform which allows to use staked ETH as collateral for taking out a loan.
Benefits:
- Partial liquidity on your capital
Drawbacks:
- Risk of Liquidation and Liquidation Penalty
- Counterparty Risk
LiquidStake
LiquidStake by DHARMA Capital allows ETH stakers to take out a USDC loan by using their staked ETH as collateral. Clients benefit from both the revenue creation opportunity of staking on eth2 while also preserving their ability to trade, invest, or retain liquid crypto funds.
LiquidStake pools clients’ funds together and delegates them to established staking providers in the ecosystem, including Bison Trails, Figment, and ConsenSys. Loans can be received at the moment ETH is staked, or at a later date in time.
Minimum: none
Exchanges / Custodians
For now the exchange staking landscape for eth2 is very thin. Most exchanges have not announced any Ethereum Staking offerings yet. But we believe this change rapidly within the coming month.
It seems unclear how exchanges will be dealing with the indefinite lock up period. And this would be a hurdle for them in designing sound offerings.
If exchanges create fixed income products like Binance has been doing a lot lately, funds are usually only locked for not longer than 3 months.
Crypto custodians seem in a better position to gain market share for eth2 staking, since users are usually fine with longer lock-up periods.
Please keep in mind that fee structures with exchanges are often very intransparent and it is unclear in which intervals exchanges are compounding rewards. This is at least what we have observed with many exchanges offering staking service solutions on other networks.
Benefits:
- Easy to start
- Fractional staking available (<32ETH)
Drawbacks
- Often intransparent fee structure
- Counterparty risk
- Custodial
We still expect many exchanges to step into the game. So stay tuned. For now we have figured the following players to consider:
Bitcoin Suisse
The fully regulated swiss custodian and brokerage platform offers an all-in-one staking solution, which allows staking of any ETH amount and full transparency by tracking rewards in their staking portfolio dashboard.
Already in March 2020 the Bitcoin Suisse Founder Niklas Nikolajsen promised his full support for Ethereum Staking in an interview with Staking Rewards.
Minimum: 1 ETH
Fees: 15% of the rewards
Coinbase
Coinbase has mentioned their potential support for Ethereum Staking, but so far they have not made any official announcements or released any details for their offering.
Binance
It is being rumored, that Binance plans to offer Ethereum Staking. They have been adding plenty of staking projects and been offering rewards inside their app. However they have not made any official announcements or released any details for Ethereum Staking.
Kraken
Kraken is another contestant for the eth2 staking war. Their offering is not announced yet, but we believe chances are high, they will offer a solution very soon.
CoinDCX
The CEO,Neeraj Khandelwal, of the indian cryptocurrency exchange CoinDCX recently announced support for staking ETH 2.0. He also mentioned further initiatives starting a few weeks after staking goes live, to make staked funds liquid for at least a year.
TokenPocket
Another custodial staking service solution will soon be available via the TokenPocket wallet. According to their latest blog posts the team is building a custodial one-stop node service solution.
Conclusion
Ethereum is making a bold move with its transition to eth2. The biggest upgrade in blockchain history. It sets new standards for Staking and provides attractive returns for participants. Early adopters, who bootstrap the new network by preparing their nodes right now, are enjoying rewards up to 22%.
The best way to participate is probably via self-run validator nodes. With this you will also play an important role in the development of eth2 overall. A decentralized, versatile ecosystem with real grassroots supporters is benefitting the network and thus token appreciation overall.
If you are not convinced with the existing documentation, or support in running validators yourself, you may either wait for these to mature, or choose one of the validator-as-a-service solutions.
Anyhow there are a few risks and uncertainties around staking ETH at this point, which makes staking especially attractive only for longterm holders, supporters, enthusiasts and high-net-worth investors. Staked ETH are locked for a long period of time and slashing risks are not yet fully assessable, even if it is designed to target only clearly bad behaviour.
So for retail investors, who want to stake with the least risk and may not have the time or capital to spin up their own validators, there are many solutions being developed, which address risks and lock-up times.
Even though the current landscape of eth2 staking service providers is still early in its development stage and many solutions are not yet fully ready, there are all kinds of products addressing all user groups already. Established staking service providers are collaborating to provide state-of-the-art solutions.
By choosing a staking service provider from the current landscape, please make sure that you choose wisely and are fully familiar with their setup and offering, looking at liquidity, fees, risks, token design, etc.
We also expect many more products to go live very soon.
Exchanges have been on the sidelines still and seem overwhelmed by the sudden specific launch date of eth2. Also risks and implications for bigger players are not yet well understood – thus only a few are offering staking in their applications natively yet.
Learn more about eth2 and check current staking rates