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How to stake ETH and earn rewards on Ethereum 2.0
A guide to earning staking rewards on Ethereum 2.0
Ethereum is moving from a proof-of-work consensus mechanism to proof-of-stake, through which validators replace miners in maintaining the security of the Ethereum blockchain. Instead of owning and operating mining hardware, ETH investors can now become validators if they stake a minimum of 32 ETH on the Ethereum blockchain.
To encourage wider participation in the ecosystem, various cryptocurrency exchanges, wallet providers and staking platforms are offering Ethereum 2.0 staking options for holders with less than 32 ETH. This means that users can earn staking rewards without taking on the responsibilities of operating a full validating node on the Ethereum blockchain. Products like OKX Earn make the process incredibly easy, even for non-technical users.
How do you stake ETH?
As mentioned, there are a few different options available to those who want to get started with staking Ethereum and earning passive income from their ETH investments. We cover them in this tutorial, starting with the most beginner-friendly and concluding with the most involved but self-sovereign method.
The Ethereum 2.0 specification demands that all independent validating nodes stake at least 32 ETH to participate in the network’s consensus mechanism. At ETH prices at the time of writing, the stake required would cost more than $120,000. This capital requirement excludes many ETH holders from operating their own validating node. However, other services enable holders with less than 32 ETH to earn passive income through staking.
Not only is operating an independent node demanding in terms of capital, but it also requires a dedicated machine to run with almost constant uptime. Nodes that disconnect can face economic penalties through slashing of stakes. Another drawback is that staked funds cannot be withdrawn again until later in the network’s upgrade process.
That said, operating an independent node does make the network more decentralized and, therefore, more resistant to attack. While your stake is at risk of slashing, you do not need to trust any other entity to return your staked ETH following the upgrade’s full rollout. You should determine which staking option is right for you based on your own economic situation, risk tolerance and technical ability.
Staking in a pool
Staking as part of a pool is ideal for users who want to earn passive income from Ethereum 2.0 but lack the technical skills or capital to operate their own node. Rewards distributed by the network are shared between those contributing capital to the pool — and the service provider takes a fee for organizing the pool.
We explain the two main types of Ethereum 2.0 staking pools below.
Centralized ETH staking services
Exchanges like OKX offer Ethereum 2.0 staking services for users who do not have the 32 ETH required to run an independent validating node or who might not want to take on the responsibility for themselves. You can stake with as little as 0.1 ETH and receive a competitive APY. Users staking ETH with OKX will receive the tradable BETH asset, effectively enabling them to exit their staked position if they change their mind later.
Decentralized ETH staking services
Decentralized staking service providers are built using smart contracts deployed to the Ethereum 2.0 Beacon chain. An example of such a service is Lido.
Lido and similar services often enable users to access their staked capital via a tradable token representing the ETH they contributed to the pool. In the case of Lido, the token is called stETH.
Staking via a decentralized staking service carries different risks to staking via a centralized staking service. For example, protocols offering such services consist of more elaborate smart contracts that can be vulnerable to exploits. On the other hand, there is often no minimum staking requirement.
To stake ETH via Lido, go to the Lido homepage and choose Ethereum 2.0 as the staking network. You can click Read more for more details about ETH staking. After familiarizing yourself with a network’s specific staking details, click Stake now to proceed.
To stake ETH in Lido, you need to connect your Ethereum wallet — such as MetaMask or WalletConnect. After entering the amount you wish to stake, you will see reference information, such as the staking rewards fee and the transaction cost.
In this example, we stake 0.005 ETH and receive 0.005 stETH to represent our stake. Click Submit to proceed.
Confirm the gas fee in your MetaMask (or other) wallet, and click Confirm to proceed.
Operating an independent validating node
As mentioned, operating an independent validating node is a more involved process than the options listed above. Firstly, it requires greater initial capital outlay — at least 32 ETH — and, secondly, staked funds cannot be removed from the staking contract until later in the transition from proof-of-work to proof-of-stake. As such, we do not recommend beginner cryptocurrency users attempt to run their own validating node.
That said, if you’d like to learn more about the process, the official website of the Ethereum project — funded by the Ethereum Foundation — offers a gateway for beginners to explore different staking options.
To begin, open the dropdown menu for “Use Ethereum,” which is located at the top left corner of Ethereum’s homepage. Then, click the Stake ETH option to proceed.
The staking webpage introduces two options for Ethereum staking: stake 32 ETH or stake less than 32 ETH. If you want to become a full validator by staking 32 ETH, you need to use the Eth2 launchpad to set up your validator node. To do so, click Start staking after clicking 32 ETH in the “How to stake” section. You will then be redirected to the Eth2 launchpad homepage to continue the setup process.
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