8th May 2022 > > Ethereum staking.

tl;dr

EStaking ETH is not for everyone, but it can give a nice kicker for long-term holders.

Market Snap (at time of writing)

Market Wrap

As expected, perpetual futures funding rates reverted to neutral once Friday’s put options expired in the money.

With this painful price action, there is one way of cheering yourself up.

Curious Cryptos’ Commentary – Staking ETH

The CCC on 4th May 2022 (https://www.curiouscryptos.com/post/4th-may-2022-ethereum-2-0) discussed the latest developments in the move to ETH 2.0.

I should point out that I have been told by the Ethereum Foundation that they do not like or agree with that nomenclature. Still, it’s good shorthand that allows us all to understand the topic under discussion, so I won’t be the only one to keep using it.

Following that CCC update of a move to ETH 2.0 readers of my missive have posed questions about the staking process as ETH moves from proof-of-work (POW) to proof-of-stake (POS).

For clarity, staking any coin in a POS environment means that you will receive staking rewards that can be compared to receiving interest on a bank account.

Once The Merge and sharding have been implemented, it is a no-brainer to stake your ETH. When we do get to that point some time in 2023, the CCC will provide a full, comprehensive, and undoubtedly detailed guide to help you maximise your ETH holdings, at minimum cost, effort, and risk.

Until that undetermined date the question is – should you stake now?

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There is no right or wrong answer to that question.

All I can do is raise some of the issues and potential problems of doing so, and then provide some guidance about how to do so if that is your decision.

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Over 10mm of ETH has been staked worth approximately $27bn, 8% of the total circulating supply.

On the face of it that does not sound like an impressive number but there is one very good reason for that.

If you stake your ETH today, you cannot unstake until ETH has fully transitioned (such a post-millennium adjective) to ETH 2.0.

For long-term holders, that is not particularly relevant. For miners, traders, DeFi aficionados, retailers, and the plethora of other market participants, it is an obstacle to their daily use of ETH.

If you think you might want to sell your ETH holdings before the end of 2023, staking pre ETH 2.0 is not for you.

If that is you stop reading now and go and do something far more interesting instead.

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f, like me, you are in the category of having zero desire to sell ETH anytime soon (possibly never) there are other factors to consider, specifically in relation to the myriad of staking options.

At the most complex, most difficult, but most rewarding in terms of ETH staking rewards is the facility to set up your own staking node.

There is a basic minimum barrier to this option (32 ETH plus gas fees) but the technicalities of doing so are not for the faint-hearted.

If you really want to go down that route, then let me know and we can figure it out together. For most sane people who have a life outside of cryptos (remarkably I have been informed there are a few) I think we can safely ignore that option for now.

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By far and away the easiest method is to stake via a centralised exchange (CEX).

Though I do not subscribe to the nihilistic “not your private keys not your crypto” mentality, I remain wary of leaving any more than 5-10% of my crypto holdings in total in CEX, and I leave virtually nothing on any CEX apart from Binance and Coinbase.

If you make this choice, I don’t think you need guidance from me – the exchanges make it very simple to do.

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Regular readers already know my obsession with using Ledger Nano to secure my crypto assets.

If you agree with me on that point, Ledger has teamed up with Lido Finance to offer a simple and seamless route to staking through Ledger Live. Let me talk you through it, if I may.

Fire up the Ledger Live app, connect your Ledger Nano, navigate to your ETH wallet, and click the large purple button “Stake”. A self-explanatory screen pops up asking you how much ETH you want to stake, the gas fees you will incur and so on. Fill in the fields, click “Submit” and there you go.

You are now staking ETH at around 5% return per annum in what I believe to be the most secure environment possible in the crypto world.

In exchange for staking ETH you receive stETH, in inimitable DeFi style. These coins can of course be used in all your usual Dapps (decentralised applications) for participating in liquidity pools, one-sided staking and so on, at a one to one ratio with your previously unstaked ETH.

That means the 5% kicker is in addition to all the other potential returns you can get from DeFi.

What’s not to like?

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There are also several other staking providers that you can use facilitated by MetaMask (preferably secured with a Ledger Nano).

Special mention has to be made of stake.fish (https://stake.fish/en/ethereum/#faq-tokenized).

I have used this organisation for a few years now to stake various coins including XTZ, ATOMC, COSMO, and SCRT.

They are remarkably responsive to questions, queries, and problems. I should perhaps start to be concerned that I am a little over-exposed to them, but sometimes the devil you know and all that.

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Finally there are many other options out there, some of which I feel obliged to warn you are outright scams.

As an example, a very convincing one which almost had me was discussed in a previous CCC and is now available in our free online training course, Module 2.20: The ETH staking scam:

https://www.curiouscryptos.com/_files/ugd/22f8f8_2b08ce04f8fc48c6afd54a95be932fad.pdf

As always in the crypto world, be wary.

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If you are in any doubt about what you want to do then please, please contact us and we will do our best to find you a safe and reliable partner in your ETH 2.0 staking journey. Our work is always for free, to give love to those who do not yet appreciate the benefits of cryptos.