A specific group of investment market experts believes cryptocurrency doesn't offer significant passive income generation sources. However, the notion doesn't stand entirely true. Crypto staking, along with a few reward programs, has the potential to generate interest income from the crypto that you own.
Through staking, you can earn rewards by locking up your crypto to assist in running the blockchains that support those cryptocurrencies. This article will discuss Ethereum staking and the five best platforms where you can stake ETH.
What Is Ethereum Staking
Ethereum is one of the most popular and valuable crypto coins in the crypto market. While you can purchase or sell this currency on several platforms, Ethereum staking would be beneficial only under certain conditions. Ethereum uses a consensus mechanism, referred to as proof-of-stake that enables staking.
A network of distributed nodes is found at the core of each blockchain. These nodes work together to come to the state of the network. This decentralized, distributed setup is responsible for the security of the blockchain. Different methods are used to make these nodes agree on the state of the blockchain. Two of the most popular methods include proof-of-work and proof-of-stake.
Proof-of-work is the original consensus mechanism that blockchains like Bitcoin use. In this mechanism, the miners are supposed to 'mine' blocks by solving complex mathematical formulas with their computers to prove that they are the 'legitimate' part of the network.
Compared to the proof-of-work mechanism, the proof-of-stake is more environmentally friendly. It does not rely on solving complex mathematical formulas to gain legitimacy. Instead, they use validators, each of which consists of some amount of Ethereum locked up, to vote on the transaction's legitimacy. The Ethereum lock-up is known as 'staking.'
In the case of Ethereum staking, the users receive rewards in exchange for locking up their ETH tokens. When the stakers validate the state of the ETH network, they receive a percentage of the network's transaction fees as rewards. These rewards are displayed as APY (annual percentage yield) applied to the staked funds. The system works just like depositing fiat money with traditional banks in a yield-b
Earlier, the Ethereum blockchain used to work on the proof-of-work mechanism. However, as of 15 September 2022, the blockchain now works on the proof-of-stake consensus mechanism. There are several phases in which this transition takes place.
While the blockchain has started working on the proof-of-stake mechanism, it doesn't allow the stakers to withdraw their staked Ethereum. Anyone thinking about staking Ethereum must know that it wouldn't be possible for them to withdraw their staked funds as of now. The withdrawal functionality will most likely be introduced sometime in the first half of 2023. However, until they can withdraw, the stakers can accumulate transaction fee bonuses they'd receive with each block.
Binance introduced ETH2.0 staking on its trading platform to allow investors with less than the required 32ETH to become validators. Through this popular crypto trading platform, existing users can safely and securely stake Ethereum without any hassle. This platform requires the users to have a minimum of 0.1 ETH to start staking.
With Binance, traders can use several other products and services like leverage trading on the futures market or earning interest on Ethereum and other cryptocurrencies. These are available on the Binance exchange platform.
To indulge in Ethereum staking on Binance, the users are required to convert their ETH tokens into BETH. BETH represents the staked ETH on a ratio of 1:1, i.e., for every 100 ETH, the user will be issued a hundred BETH tokens. These BETH tokens are supposed to remain locked until the first phase is completed and the shard chains have been implemented. The users will then be able to swap these tokens back to ETH instantly.
Customers who stake ETH 2.0 will be given 100% of all on-chain rewards without fees. This is to encourage the existing Binance users to stake their Ethereum instead of becoming their validators and enduring the risk of on-chain penalties.
Binance distributes 100% of all on-chain rewards to customers that stake ETH2.0 without any fees. This incentivizes existing Binance customers to stake their Ethereum instead of becoming their own validator, incurring operating expenses for hardware and bearing the risk of on-chain penalties.
The Binance users who are residents of the United States of America will not be able to indulge in ETH 2.0 staking as the feature is not yet available on Binance.US.
eToro is one of the dominant exchange and trading platforms for cryptocurrencies, stocks, and CFDs. As a means for its users to grow their crypto assets holdings, eToro introduced the one-stop cryptocurrency staking feature on its platform in 2021. The platform requires a minimum of $25 for crypto staking.
As opposed to the fixed or flexible rates, eToro uses a tiered staking reward system. While the top tier can earn up to 90% of the staking rewards, the Silver, Gold, and Platinum Club members can earn up to 85%. Then follow the Bronze club users, entitled to up to 75%. eToro retains a very high percentage to cover the operational costs, unlike platforms like Binance, Huobi, and OKEx, which don't accrue any fees.
The positive aspect of using eToro to stake ETH 2.0 is that the platform is easy to use, hassle-free, and trustworthy. However, eToro.US does not currently support Ethereum staking on its platform.
Via Kraken, cryptocurrency buyers and sellers can connect on a simple and intuitive exchange platform. It is one of the leading crypto exchanges in several countries. Kraken is reputed for its ease of use, safety, and competitive pricing, which experienced crypto investors prefer. On Kraken, users can indulge in the staking of 12 digital assets, including ETH 2.0 staking, to earn rewards.
Just like Binance, Kraken also offers the trading pair ETH2.S/ETH, with which users buy in and out of the staked ETH coins and trade un-staked Ethereum for staked ETH. However, US and Canada-based residents can't use this feature yet.
After users purchase ETH and transfer them to their Kraken wallet for staking, they have to wait for a resting period of 20 days before they can start earning ETH 2.0 rewards. This resting period might also extend more than twenty days based on the network traffic. Once the resting period for the coins is over, and they start earning rewards, users will be able to see them on the 'Kraken Earn' page along with other top coins available for staking.
Users must pay an administration fee of 15% on all rewards they earn. This is reflected in the apprehended 5-7% APY staking return. The Ethereum network determines the ETH reward rate. This rate might vary based on several external factors which are beyond Kraken's ambit of regulations.
Coinbase is considered one of the best crypto exchange platforms globally and is said to have significantly transformed the cryptocurrency environment. The exchange offers a simple and easy-to-use platform and user-friendly interface for individuals and institutions to purchase, sell, trade, and store digital assets.
Coinbase has expanded its core products and services and now includes Ethereum 2.0, staking to gain up to 5% APY while holding Ethereum in the Coinbase wallet. In August 2022, the exchange added Ethereum 2.0 staking on Coinbase Prime, too, for the use of institutional investors.
However, the downside of Coinbase is that the platform offers the feature of Ethereum staking only to the users of the United States and the states of Hawaii and New York. Thus, the users of Coinbase who reside outside the U.S.A. will not be able to avail this feature of staking Ethereum and earning staking rewards.
The eligible users with verified accounts will be waitlisted, and once a staking position is available to convert ETH into ETH 2.0, the exchange will notify them. Those funds will be locked, and the users will no longer be able to use them for trading, exchanging, or selling Ethereum into fiat. As there is no minimum amount of ETH required to stake on Coinbase, it is easier for beginners to initiate ETH 2.0 staking with even a tiny amount.
There are certain risks involved when using a centralized cryptocurrency platform. There is a possibility of losing initial funds due to an exchange hack or if the validator fails to meet the staking criteria. However, Coinbase reassures its users that it would cover these risks at no extra cost.
The stakers are required to pay 25% of their staking profits as the commission fee in return for this service. This makes Coinbase quite expensive as compared to several other platforms, which generally don't charge any fee.
This global crypto exchange serves more than 20 million users across the globe and offers more than 340 cryptocurrencies. One of the aspects that makes this platform a preferred one is that it offers easy and hassle-free options while ensuring that the fees incurred are one of the lowest trading fees as compared to other crypto exchange platforms.
On OKX, users can stake crypto at rates up to 70% APY. The platform allows the staking of several popular tokens like Ripple, Shiba Inu, Litecoin, Dogecoin, Polygon, Avalanche, Polkadot, etc. The users can choose the staking term for these coins ranging from 15 to 120 days. In some of these tokens, the users also get flexible staking options, in which they wouldn't have to lock up their tokens. On OKX users can stake ETH 2.0 at 4.09% APY.
Apart from the DeFi crypto staking, users can also avail benefits of crypto savings accounts via which they can earn interest on stablecoins and tokens. They can earn at the rate of 5% APY with Bitcoin and at the rate of 10% with Tether or USD Coin. At the same time, with Celcius Network's token, they can earn 300% APY. There is no system of lock-in period when it comes to earning interest on crypto tokens. These interests are paid out on an hourly basis.
Apart from this, OKX also offers another nifty staking option called 'flash deals. With flash deals, the platform provides temporary offers to the users on a short-term basis, where they can earn up to 500% APY for the in-demand tokens. The exchange offers such deals for major tokens like Bitcoin, Ethereum, and specific emerging cryptocurrencies, which are in demand by traders for borrowing.
The users don't need to make any minimum deposit to open an account with OKX The minimum trade size on this platform is $10. This platform's accepted means of payment include credit cards, debit cards, bank transfers, and e-wallets.