How to stake ETH as an ordinary crypto user?
You are not super technical and have no multiple of 32ETH laying under you sofa, but still want to stake ETH? Then this guide is for you: Ways to stake your ETH in 2020.
Today Eth2 Phase 0 is launching! That means validators are starting to earn $ETH by running the ‘beacon chain’, the base-layer for coordination & consensus of the future PoS chain.
Below we will explain how to find a fitting validator service and be rewarded in $ETH!
(This post will neither go into reasons for staking nor Eth2 details. I recommend ethereum.org/en/eth2/ for that.)
Where should I stake my ETH? Your options!
How to start? Isn’t it like in Eth1?
Each full validator has to send 32 ETH to a smart contract and create a wallet on the beacon chain. Both result in keys that show *true* ownership, similar to a private key in Eth1.
However, creating the beacon chain wallet gives you 2 sets of keys: Validator keys and withdrawal keys.
- Validator keys are used to validate blocks. Worst case, someone steals your validator keys and runs a bad node which makes you lose ETH.
- Withdrawal keys allow you to withdraw ETH, once that’s enabled.
Therefore ownership (and therefore security) depends on who is holding those keys and in what way.
Options to stake ETH
Based on those 2 keys, there are different degrees of ownership/control:
- Self-run node. Full self-control, but hard to run. (read below)
- Custody (like centralized exchanges). Convenient, but no control. Using an exchange, your staked ETH might be locked anyways (read below)
- Node-as-a-Service. Withdrawal key in self-control, but validation key and process is controlled by the service provider, meaning that you have to trust your service provider to do a good job.
- Staking Pool. Come in many different types. May or may not distribute the withdrawal key (via multisig or threshold encryption). May or may not and distribute losses to all pool participants. Apart from that they are similar to Node-as-a-Service providers as they own the validation keys and process.
- (Decentralized pools. So far smart contracts can’t act as receiver of the staking reward, which means we can’t have something like RocketPool just yet. Maybe in early 2021.)
That’s our way of looking at it. Staking Rewards categorized a little bit different, but if you like graphics check it out, they did a good job:
Now, which is best for me?
Running your own node is hard
Running your own validator gives you full power over your keys & validation (mind that ‘worse’ validation means less #ETH reward).
You’d need minimum 32ETH, hardware and technical knowledge.
If you are still interested, check out @Consensys ’ how-to: https://consensys.net/blog/blockchain-explained/my-journey-to-becoming-a-validator-on-ethereum-2-0/
Staking with a 3rd party tool or service is simpler and comes in many different types
Staking with a 3rd party tool or service is simpler, but comes with trade-offs between security, cost etc.
We recommend checking out the table on Eth2 staking services https://beaconcha.in/stakingServices . Do note that their list isn’t vetted.
How to evaluate the different services?
Now, 5 criteria to evaluate #Eth2 staking services and tools:
1) Who holds my keys?
As always: Not your keys, not your crypto. (Call us biased but *urgh custody*.) Seriously though, evaluate other options first.
More on validator & withdrawal keys: https://kb.beaconcha.in/ethereum-2-keys
2) Pool token.
Some services issue ERC20 tokens representing your deposit.
Beware of possible taxation implications! https://twitter.com/TokenTax/status/1333541212414947331
Some will ask for a percent of your income, some a $ amount per month. We recommend calculating your fees before staking.
4) Technical setup.
For now, most services just need your money 😉 and don’t need you to run a software.
However, the Node-as-a-Service providers might ask you to generate your own withdrawal key; either via hardware wallet or by running the eth-deposit-CLI one time.
5) Minimum stake.
Some need a deposit of 32ETH to run one node for you alone (as this is a requirement for validation nodes), others require less. The latter one might imply shared risk, beware of that!
We hope that helps you to explore your options for staking #ETH.
Meanwhile we will keep our browser up to date with the latest staking interfaces; so far:
… and more.
Let us know if you know more live and working Eth2 staking interfaces 😎
I posted this as a transcript of my tweet storm (here) as some prefer to read in full-text.