Last year, I was as excited as anyone for ETH 2.0 Phase 0 to finally launch. It had been several years in the making. This was the long-awaited first step towards the full release of ethereum; the promise of what it could potentially become. The world computer, decentralized apps and finance, cheap and fast transactions and so much more.
But this was only the first step; as the name Phase 0 implies, and still this brought with it some big changes. First and foremost phase 0 changes the Ethereum blockchain from a proof-of-work blockchain, somewhat similar to how bitcoin works, into a proof of stake chain. No longer needing several hundreds of energy-intensive computers to mine ETH and secure the network. Not only this, but now you would be able to stake your own coins. This allows you to do my favorite thing in the cryptocurrency market; earn a passive income.
But there is a catch; In order to run your own validator and stake you must have at least 32 ETH in order to do so. But let's face it, having that large of an amount of ethereum is getting more and more difficult as the days go by. Even I don't have 32 ETH. Right now at the time of writing this article it would cost just about $53,000. So what is a person to do if they still want to stake their ETH for a passive income?
Well the good news is that there are some options for you. You could join a staking pool and pay a percentage fee from your staking rewards. But I feel the more common thing that most people will do is to stake their ETH on an exchange. Exchanges such as Kraken already offer the ability to stake ethereum, and others like Coinbase will be adding it in the future.
Having the ability to stake the 2nd most popular cryptocurrency and the most used blockchain is a very exciting opportunity, but there is still one more caveat that you need to be aware of.
THIS IS EXTREMELY IMPORTANT
Once you decide to stake your ETH it is changed to ETH2, and this action cannot be reversed. It will be locked up and unable to be withdrawn until the next phase of ETH 2.0 is launched. This could take a year, possibly 2 or more, or it may never happen. You really must have conviction in what your plan with your ethereum is going to be before you decide to stake your coins. For the most part, you will not even be able to sell your ETH2 if you want to, although I have seen that some exchanges are trying to implement workarounds for this. You also will not be able to participate in DeFi either.
But there are great things you need to know as well. The current staking reward rate is around 10% and this is a larger rate than you will find anywhere you can lend your ETH. And if you were staking the last few months, the reward rate was even higher. There was a Twitter post I saw the other day that really made me smile. They said, "We will be telling our children about the time that we were able to stake ETH for double digit returns." And to be honest, I think this is very true to be honest.
I stake chose to stake my Ethereum on Kraken and so my review will be from the perspective of a Kraken user.
The first thing that I noticed about Kraken's service was that there is a minimum deposit amount for Ethereum on their exchange. This minimum amount is 0.05 Ethereum. Which a year ago wasn't that much money, but now that is more than $80. For someone who purchases small amounts of ethereum and still wanting to have the ability to stake, it will take them quite awhile before they reach that deposit threshold and is recognized by Kraken. But that isn't really a trait of ETH staking, but just Kraken's exchange, so it cannot be considered a negative.
I love that I am paid weekly for my staking. I usually receive mine on Saturday or Sunday. And with the interest rate still being quite high; it is a great opportunity to accumulate as much ethereum as you can. Although the ETH rewards are not compounded; meaning you cannot currently earn interest upon your interest. Once the next phase of ETH 2.0 is released you will at that time be able to claim your staking rewards, add it to your staking total, and from that moment on the staking rewards will be able to be compounded. It is just a waiting game until that happens.
While the amount that I'm staking is honestly quite small, the amount of rewards I have earned would have required double or triple the amount on lending platforms like BlockFi or Celsius. Even though the reward rate for ETH has drop to a little under 10%, that is still nearly double what you would receive from those other platforms.
Should you stake your ETH into the ETH 2.0 protocol? Well even to this day that is something that I struggle with. I couldn't decide if I wanted to send all of my ETH and stake it; but it would then be locked up for at least a year. Or avoid staking for now and continue just lending it out. Then switching to staking after ETH 2.0 is fully released. Or maybe I should split it up even and done both.
At the end of the day I went back and took a look at one of the things that I always stress everyone to do. I took a look at my cryptocurrency plan.
It is true that I have no intention of selling my ETH anytime soon. Definitely not within the next few years. I do not regularly participate in the DeFi Ecosystem. Since that was the case I decided that I did not mind locking up my ETH for a year or two. In fact, it would most likely be the option that would allow me to earn the most off of my Ethereum.
If you're interested in staking your Ethereum too; I highly recommend you to ask yourself the same question as well. For me personally I would okay with taking the risk. I find it very exciting to see my ETH reward each week.
So what I want to know is are you currently staking your Ethereum?! If yes, what factor made you decide to do it? If not, what is keeping you from staking!?
As always, thank you for reading!