How to Stake ETH
Since September 2022, Ethereum has been a blockchain based on Proof-of-Stake.
This means it natively supports staking of ETH, since it is precisely thanks to staked ETH that validator nodes can validate transactions.
However, there are different ways to stake your ETH, especially since the primary method is not truly accessible to everyone.
The Primary Technique
The primary technique for staking ETH would be to set up your own validator node.
However, this technique involves a couple of “issues” (although they shouldn’t really be defined as such) that effectively prevent the vast majority of people from being able to use it.
The first challenge is precisely installing, configuring, and correctly operating an Ethereum validator node. This is indeed a process that requires specific technical skills that only a few actually possess.
For those lacking such expertise, it is not recommended to proceed in this manner.
The second issue is that to stake ETH on your own validator node, you need at least 32 ETH, which as of today would have a value of approximately $95,000.
These are amounts absolutely unavailable to most, especially on Ethereum.
Additionally, ETH staked on a validator node are illiquid, meaning they are locked without the possibility of being used otherwise.
Finally, appropriate hardware and specific software are also required, and the node must operate 24 hours a day, seven days a week.
The advantage, however, would be not only to use the primary technique for staking ETH, but also the only one that allows for complete and absolute control over the entire process.
For those who wish to proceed in this manner, an official guide and the so-called Staking Launchpad have been published on ethereum.org for easier installation and configuration.
Other Decentralized Solutions
The self-owned validator node is the quintessential decentralized solution, but there are also other decentralized and accessible options for staking ETH available to everyone.
Decentralized options are those that allow the user to maintain control of the funds themselves (they are non-custodial solutions). Additionally, they often involve the issuance of liquid tokens that represent the ETH staked, which in turn can be used in DeFi, effectively making the ETH locked in staking liquid.
The world’s leading platform accessible to everyone for decentralized ETH staking is Lido.
First of all, it is possible to stake any amount of ETH, even significantly less than the aforementioned 32 ETH.
Additionally, you receive as many stETH (Lido’s liquid token) as the amount of ETH you lock in staking, allowing you to freely use the stETH tokens as you wish.
The APY is approximately 3%, or slightly more, and it is a fairly straightforward solution to use.
However, being a slightly less decentralized solution than the previous one, it carries a bit more risk.
The first is that ETH must be locked in a smart contract created by others. Although to date Lido’s smart contract has never caused any issues, there is an additional small risk. This risk further increases if other less tested platforms are used.
It should also be added that Lido controls nearly 30% of all ETH currently staked worldwide, and this raises some concerns, also expressed by Vitalik Buterin.
The fees are 10%.
Other similar platforms include Rocket Pool, StakeWise, and Frax Ether.
Centralized Solutions
Centralized solutions are by far the easiest to use, but theoretically, they are also the most risky to utilize.
To be honest, less tested decentralized solutions turn out to be significantly riskier than the main centralized solutions, which are now widely tested. However, on a theoretical level, decentralized solutions (i.e., non-custodial) still have one less risk, precisely due to the absence of an external custodian of the funds.
It should be noted, however, that there is an additional risk inherent in non-custodial solutions, namely the risk of not properly storing the seed and the private keys of the wallet.
Many well-known centralized exchanges offer a staking service for ETH.
Using it is very simple: once you find the page on their site specifically dedicated to this service, just send your ETH to the service itself, after ensuring you have enough in your account’s wallet.
However, the APY can sometimes be lower, so it’s advisable to check each exchange to see what returns they promise. It’s also wise to check the fees, which vary from exchange to exchange.
Coinbase, Binance, Kraken, and many other exchanges support ETH staking.
Key Differences
The main difference between centralized and decentralized solutions is that the latter are non-custodial, meaning they allow the user to retain control over their funds.
In the case of a validating node, control is absolute; in the case of platforms like Lido, the true custodian is the smart contract, but if there are no issues, control remains solely in the hands of the user.
Another difference is related to liquidity. In fact, by using decentralized solutions like Lido, one achieves high liquidity thanks to liquid tokens. On the other hand, with centralized solutions, this is not always possible.
There are also differences in terms of returns, but these differences vary greatly from solution to solution because there are also centralized solutions with returns similar to those of decentralized solutions.
Finally, the last difference to mention, which for many users is actually the main one, is related to ease of use. Centralized solutions are indeed extremely simple, whereas decentralized ones always present at least a minimal additional difficulty.
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