Ethereum staking has become a fundamental process for securing the network and earning rewards. This guide explains how it operates, the benefits it offers, and the various methods available for participation.
What Is Staking?
Staking involves depositing 32 ETH to activate validator software. As a validator, you take on responsibilities such as storing data, processing transactions, and adding new blocks to the blockchain. This process helps secure the Ethereum network for all users and allows you to earn new ETH in return.
Why Stake Your Ethereum?
Earn Rewards
The network rewards behaviors that contribute to its consensus. By running software that correctly bundles transactions into new blocks and verifies the work of other validators, you receive rewards. These activities are essential for maintaining the blockchain’s security and operational integrity.
Enhance Security
As more ETH is staked, the network becomes more robust. Controlling a majority of the network would require an attacker to hold a vast amount of staked ETH, making attacks economically impractical and highly difficult to execute.
Promote Sustainability
Staking allows participants to help secure the network without the energy-intensive computations required in proof-of-work systems. This means staking nodes can operate on relatively simple hardware with minimal energy consumption.
How to Stake Ethereum
Your staking approach depends on how much ETH you wish to commit. While 32 ETH is required to activate your own validator, options are available for those with smaller amounts.
Solo Staking
Solo staking is considered the gold standard for Ethereum staking. It offers full participation rewards, enhances network decentralization, and does not require entrusting your funds to third parties.
Ideal candidates for solo staking possess at least 32 ETH and have a dedicated computer with uninterrupted internet connectivity. While technical knowledge is beneficial, user-friendly tools are available to simplify the process.
Solo stakers can also pool funds with others or use liquid staking tokens to maintain access to decentralized finance (DeFi) applications.
Staking-as-a-Service
If you prefer not to manage hardware but still want to stake 32 ETH, staking-as-a-service providers allow you to delegate hardware operations while you retain control over your funds.
These services typically guide you through creating validator credentials, uploading signed keys, and staking your ETH. While this method requires trust in the provider, withdrawal keys usually remain in your possession to mitigate risk.
Pooled Staking
Several pooled staking solutions cater to users unable or unwilling to stake 32 ETH. Many of these options involve liquid staking, where users receive liquidity tokens representing their staked ETH.
Liquid staking simplifies the staking and unstaking processes, similar to token swaps, and allows staked funds to be used within DeFi ecosystems. It also enables users to retain management of their assets.
It’s important to note that pooled staking is not native to the Ethereum network. These solutions are built by third parties and involve their own risks.
Exchange-Based Staking
Many centralized exchanges offer staking services for users uncomfortable with self-custody. This approach requires minimal time and effort, allowing you to earn rewards from your ETH holdings.
However, centralized providers aggregate large amounts of ETH into pools, operating numerous validators. This concentration poses risks to the network and users, creating centralization vulnerabilities and single points of failure.
If self-custody isn’t for you, the above options remain available. Consider exploring non-custodial wallets to start learning about managing your own funds. When ready, you can upgrade to a self-custody pooled staking service.
With multiple participation methods available, each offers unique trade-offs in risk, rewards, and trust assumptions. Some are more decentralized, proven, and/or risky than others. Always conduct thorough research before sending ETH to any address.
Comparing Staking Solutions
Each staking method has distinct characteristics. Below, we compare the risks, rewards, and requirements associated with different approaches.
Solo Staking
Rewards
- Maximum rewards – Full protocol rewards earned directly
- Block proposal rewards, including unconsumed transaction fees and regular attestations
- Ability to mint liquid staking tokens for use in DeFi
Risks
- ETH is locked while staking
- Penalties for offline validators
- Slashing risks for malicious behavior (resulting in stronger penalties and network ejection)
- Optional minting of liquid staking tokens introduces smart contract risk
Requirements
- 32 ETH deposit
- Hardware maintenance with consistent internet connectivity
- Tools like the Staking Launchpad guide users through the process
Staking-as-a-Service
Rewards
- Full protocol rewards minus monthly node operation fees
- Dashboards for easy validator performance tracking
Risks
- Risks similar to solo staking, plus counterparty risk from the service provider
- Delegation of signing keys to third parties who might act maliciously
Requirements
- 32 ETH deposit and key generation with provider assistance
- Secure key storage
- Variable processes depending on the service
Pooled Staking
Rewards
- Variable rewards based on the chosen pooled staking method
- Many services issue tokens representing your staked ETH and reward share
- Liquidity tokens can be held in your wallet, used in DeFi, or sold if you decide to exit
Risks
- Risks vary by method
- Generally includes counterparty, smart contract, and execution risks
Requirements
- Low ETH requirements (as little as 0.01 ETH for some projects)
- Deposit directly from your wallet or trade existing liquid staking tokens
👉 Explore advanced staking strategies
Frequently Asked Questions
What is the minimum amount of ETH needed to stake?
While 32 ETH is required for solo staking, pooled staking services allow participation with smaller amounts. Some platforms accept stakes as low as 0.01 ETH.
Can I unstake my ETH at any time?
Unstaking availability depends on the method. Solo staking involves a locking period, whereas liquid staking tokens can often be traded or redeemed more flexibly.
How are staking rewards calculated?
Rewards are based on network activity, validator performance, and the total amount of ETH staked. Active validators who propose blocks and attest correctly earn higher rewards.
What are the risks of slashing?
Slashing occurs for malicious actions, such as double-signing or downtime. Penalties include loss of staked ETH and removal from the validator set.
Is staking on an exchange safe?
While convenient, exchange staking introduces centralization risks. Large pools controlled by single entities can become targets for attacks or technical failures.
Can I use staked ETH in DeFi?
Liquid staking tokens enable DeFi participation while your ETH is staked. These tokens can be supplied to liquidity pools, used as collateral, or traded on exchanges.