ETH Staking: What to Know and How to Get Started

  • October 6, 2022
  • 25 Min Read

Staking Adj Reward %Avg Reward %Avg Fee %InflationMarket CapStaked Ratio

Ethereum

4.15%4.07%11.88%-0.08%$154,572,106,49613.33%

Uphold.com is currently offering a 7% ETH staking yield with no validator fees when you sign up through our link today.

Ethereum staking is the process of locking up some your ETH tokens to help validate blocks and secure the Ethereum network. In return, you will receive staking rewards in the form of more ETH.

Key takeaways:

  • Staking your ETH provides you with annual percentage yield (APY) rewards on your staked tokens.
  • On-chain ETH staking yields are currently around 5% APY.
  • There are three methods to stake your Ethereum — staking through a centralized exchange, staking pools, or running your own node(s). We will cover exactly how to stake ETH using each approach.

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  • One-click staking — There are no complicated steps to navigate or hoops to jump through; you can just click and stake.
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Uphold.com APR for ETH~7%
Current Fee0% (Limited Time Offer)

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What is Ethereum staking?

Ethereum is now using a consensus mechanism called proof-of-stake that enables staking.

  • Consensus Mechanism: At the core of each blockchain is a network of distributed nodes that all work together to agree on the state of the network. This distributed, decentralized setup is what makes blockchains so secure. There are different mechanisms for getting nodes to agree on the state of the blockchain. The two most popular ones are called proof-of-work and proof-of-stake.
  • Proof-of-Work: This is the original consensus mechanism used by blockchains like Bitcoin. Proof-of-work requires miners to “mine” blocks by using their computers to solve complex mathematical formulas in order to prove they are a legitimate part of the network.
  • Proof-of-Stake: Rather than relying on solving complex mathematical formulas for legitimacy, proof-of-stake consensus mechanisms use validators that each have some amount of ETH locked up to vote on the legitimacy of transactions. This ETH lock-up is referred to as “staking,” so the consensus mechanism is called “proof-of-stake.” Proof-of-stake is much more environmentally friendly than proof-of-work.

In exchange for validating the state of the Ethereum network (guaranteeing that transactions are not fraudulent), a portion of the network’s transaction fees go to the stakers as rewards. These rewards are represented as an annual percentage yield (APY) that is applied to the funds staked. The process is similar to depositing fiat money in a yield-bearing interest account at a traditional bank and earning interest on it over time.

In short: Ethereum staking provides rewards in exchange for locking up your ETH tokens.

How much can I earn by staking Ethereum?

Staking Adj Reward %Avg Reward %Avg Fee %InflationMarket CapStaked Ratio

Ethereum

4.15%4.07%11.88%-0.08%$154,572,106,49613.33%

ETH staking rewards follow a curve where the more ETH is staked, the lower the rewards are. Post-merge, the APY is hovering at around 5% for Ethereum validators.

It’s important to keep in mind that APY is highest for those running their own validator nodes, while stakers who put their ETH to work through a centralized exchange or a staking pool will likely earn a bit less due to the validator fees they will pay. The exception to this is when centralized exchanges boost reward APYs higher than on-chain rates as a marketing effort to attract staking market share.

ETH 2.0 staking

As of 9/15/22, the Ethereum blockchain now uses the proof-of-stake consensus mechanism. Previously, the network ran using proof-of-work for many years, with the ultimate goal of getting to POS.

The transition will have several phases to it, and while the Ethereum network currently runs on proof-of-stake, stakers are not yet able to withdraw their staked ETH. If you are looking to stake ETH, it’s important to be aware that you will not be able to withdraw your staked funds yet. The withdrawal functionality is expected to be added at some point in early 2023. Stakers will still accrue “tips”, which are transaction fee bonuses included with each block, until they are able to withdraw.

A way to continue accessing your staked ETH while waiting for the full upgrade that enables withdrawals is to use the “liquid staking” option covered below. This form of staking issues a liquid “staked token” that can be spent and traded just like regular ETH.

How to stake Ethereum

Each validator on the Ethereum blockchain is required to have at least 32 ETH staked in order to become a validator. Fortunately, not everyone looking to earn staking rewards has to first save up 32 ETH. Validators provide the ability for smaller ETH holders to delegate their tokens to them and thus earn a part of their staking rewards.

Below we cover three common ways to stake Ethereum ranging from the easiest to the most difficult:

  • Staking via a centralized exchange: Exchanges such as Uphold and Binance provide support for ETH staking. The process takes just a few clicks and allows you to start earning rewards on your ETH instantly.
  • Staking via a staking pool: This intermediate option requires a few more steps but has the added benefit of giving you a liquid token that can be used in place of your staked ETH, even as your tokens remain staked and earn rewards.
  • Running your own network validator: This is the most direct but also the most challenging method of staking. Running your own validator node requires having 32 ETH available for staking and a machine that’s on and connected to the internet 24/7.

Please note: Staking via option 1 or 3 will mean your ETH cannot be withdrawn until the requisite upgrade is released.

Staking ETH via a centralized exchange [Easy]

Centralized crypto exchanges offer the ability to stake your ETH tokens and earn staking rewards. These rewards vary across exchanges but are usually in the 3% - 7% APY range. Additionally, most exchanges will own the keys to your wallet, which means that your funds will be entrusted to a counterparty.

Remember: Once you stake your ETH using a centralized exchange, you will start earning rewards, but you may not be able to unstake your ETH. Future updates to the Ethereum network will allow the unstaking of ETH.

How to pick a centralized exchange

Entrusting your crypto to a corporation can be stressful and should only be done when you are sure of the integrity of the company you are working with. Big names like Uphold and Binance are solid options with long-standing reputations in the crypto space.

Besides security, the other big consideration when picking a centralized exchange to stake on is the rewards rates that are offered. While Ethereum has an official staking reward rate that applies to all stakers, some platforms provide bigger rewards in an attempt to earn market share. However, be careful of unknown platforms offering APY rates that sound too good to be true — they often are.

Pros and cons of staking Ethereum via a centralized exchange

Pros:

  • Staking through a centralized exchange is very simple and takes just a few clicks.
  • Sometimes you can get very high APY rates when platforms run specials.
  • Centralized exchanges provide simple, easy to understand tax reporting.

Cons:

  • Exchanges will store your crypto in their proprietary wallets - you no longer directly control your crypto.
  • If the company experiences a hack or goes out of business, your crypto may be at risk.
  • Staking through a centralized exchange is generally antithetical to the decentralized ethos.

How to stake your ETH on a centralized exchange: Step by step

Editor's pick for best exchange for staking Ethereum: Uphold.com - learn more at our full Uphold crypto review.

Step 1: To get started, you will need to have created an Uphold account and completed identity verification. Once you have an account, navigate to Uphold’s staking page and click “Start Staking.”

Uphold ETH Staking

Step 2: You will be taken to your wallet page. Click “Go to Staking.”

Uphold ETH Staking Dashboard

Step 3: Review the instructions and click “Next.”

Start Staking ETH

Step 4: You will see a list of cryptocurrencies you can stake. Find Ethereum and click on it.

Choose ETH Staking

Step 5: Acknowledge the ETH staking notice. Remember, once you stake your ETH, you will be unable to unstake it until a future update to the Ethereum network.

ETH Staking Notice

Step 6: Click “Start staking ETH.”

ETH Staking Confirm

Step 7: Enter the amount of ETH you would like to stake, then click “Preview staking.”

ETH Staking Preview

Step 8: Read the terms, check the acknowledgment checkbox, and click “Confirm Staking.” Your ETH is now staked.

ETH Staking Confirmed

Staking ETH via a staking pool [Intermediate]

The minimum Ethereum balance required to stake as an individual is 32 ETH. Most crypto holders do not have that large of a balance, so innovative solutions for staking with a smaller balance have evolved.

While one of these solutions is staking through a large centralized exchange, as covered above, another way is to use an Ethereum staking pool. A staking pool is simply a group of ETH holders getting together and pooling their ETH to reach the 32 token threshold necessary to stake. They then split staking rewards proportionally based on contributions.

Staking pools have become a buzzing industry by themselves, with entire crypto platforms being established just to provide staking pools as a service. Not all staking pools, however, are the same. The primary difference is whether a staking pool is liquid or non-liquid:

  • Non-liquid staking pools: Traditional, non-liquid staking pools just allow ETH holders to pool their tokens and take advantage of staking rewards. They do not issue a derivative liquid token that can be traded the way liquid staking pools do.
  • Liquid staking pools: A liquid staking pool will not only pool ETH tokens together, but it will also provide stakers with a derivative token that can be actively traded and used. This option lets stakers earn staking rewards while not losing out on liquidity in the process.
Liquid staking poolsNon-liquid staking pools
Issue Liquid Derivative TokenYesNo
Potentially Taxable EventYesNo
Reward Earning PotentialHigherLower

Staking ETH via a non-liquid staking pool

Non-liquid staking pools are a way for ETH holders to earn staking rewards without having the 32 ETH required to self-stake. Unlike liquid staking pools, non-liquid staking pools do not offer a derivative token that can be traded while your ETH is locked up.

An important benefit of non-liquid staking pools compared to liquid staking pools is that non-liquid staking does not create a taxable event. In liquid staking, you get a liquid token (such as stETH) back when you stake your ETH. This token swap, however, is treated like any other token swap and is considered a taxable event by the IRS. Non-liquid staking does not issue a new token, therefore does not incur this tax. Note that the actual staking rewards earned through staking APYs are still considered taxable in both liquid staking and non-liquid staking scenarios.

Staking rewards for non-liquid staking pools are usually around 4%-6% APY. While these rewards are not as high as liquid staking pools, they are still a great way to put idle ETH to use and staking pools don’t require a balance threshold of 32 ETH.

Our picks for non-liquid staking pools:

EverstakeChorus OneBitcoin Suisse
Current APY4.05%3.64%5.30%

Staking ETH via a liquid staking pool

Liquid staking pools generally provide the highest earning opportunity when staking your ETH. Not only do these pools benefit from the official ETH staking rewards, but the liquid tokens they issue can also be lent out or leveraged across DeFi for increased yield.

It’s important to keep in mind that since liquid staking providers issue a new token that represents your staked ETH, liquid staking may be a taxable event, as you are swapping one crypto token for another.

This is in contrast to non-liquid staking pools, which do not provide a derivative token and thus do not provide additional return potential nor the taxable event when you swap.

While the traditional ETH staking rewards are around 5%, using liquidity staking paired with lending or liquidity mining, stakers can achieve APY rewards upwards of 10%.

Editor’s Pick: Lido

Besides Lido, some other liquid staking providers include:

Token TickerToken Market CapCurrent Token APY
Rocket PoolrETH$148,447,3615.26%
StakewisesETH2$84,916,5445.92%
AnkraETHc$35,428,8614.36%

How to pick a staking pool

Several factors should be considered when picking a staking pool:

  • Fees: Staking pools normally provide lower staking returns than directly staking ETH by running your own validator. This is because they are providing you an intermediary service in setting up the pools that allow your ETH to be staked. Each platform has different fees, and since, for many, the primary goal of ETH staking is to earn as much return as possible, it’s important to compare these fees.
  • Validators: Staking pools delegate their staked funds to validators who perform the function of securing the Ethereum blockchain. The idea behind a blockchain is that power is as decentralized as possible, so picking a staking pool that uses a wide variety of validators or one that’s not as popular as the top staking pools is a good idea for anyone focused on decentralization.
  • Security: Liquid staking providers issue their own liquid tokens that are associated with their platforms. The integrity (and price) of this token depends in large part on the security of the underlying platform. The major staking pool platforms, such as Lido, are solid choices in this regard, though smaller platforms generally also have good security.

Besides Lido, some other liquid staking providers include:

  • Marinade Finance
  • Socean
  • Parrot

Pros and cons of staking Ethereum via a staking pool

Pros:

  • Liquid staking provides the best returns on staked ETH, especially when paired with other strategies such as lending.
  • Allows for simple staking without needing 32 ETH
  • Some staking pools require as little as 0.01 ETH to stake.

Cons:

  • Liquid staking is often a taxable event as you are swapping tokens.
  • Takes some know-how of the DeFi ecosystem to get the biggest returns with liquid staking.
  • Some popular staking pool providers only use a handful of validators, thus contributing to the centralization of Ethereum.

How to stake Ethereum using a staking pool: Step by step

It’s best to use staking pools through a trusted third party. The instructions below will walk you through liquid staking your Ethereum with Lido Finance. We will be using the MetaMask wallet in this example which can be downloaded here.

Please note: While the price of Lido’s stETH token is normally pegged 1:1 to the price of ETH, market volatility and other extraneous events may sometimes lower stETH’s price when compared to ETH. This means that you may be able to buy stETH for less than ETH and get access to Lido’s yield rewards without having to stake your ETH. Check the current stETH price before staking to make sure you’re getting the best deal.

Step 1: Navigate to the Ethereum staking part of Lido’s website and click “Stake Ethereum” to get started.

Lido Home

Step 2: On the next page, click “Connect Wallet.”

Lido ETH Step 2

Step 3: Select the “MetaMask” option.

Choose MetaMask

Step 4: You will then receive a prompt in your wallet that asks you to connect to the Lido website. Click “Next” and then “Connect” on the next screen.

MetaMask Connect

Step 5: Your wallet will now be connected to the Lido website.

Lido Step 5

Step 6: Next, enter the amount of ETH that you would like to stake and click the “Submit” button.

Lido Step 6

Step 7: You will be asked to confirm the transaction in your wallet. Click the blue “Confirm” button in order to initiate the transaction.

Lido Step 7

Step 8: Back on the Lido website, you will see a short waiting screen while the platform confirms your transaction.

Lido Step 8

Step 9: Once the transaction goes through, you will see a new balance of “stETH” in your wallet and in the Lido UI. This is Lido’s liquid token that you have received in exchange for your staked ETH.

Lido Step 9

Boost ETH staking rewards with stETH

Liquid tokens can be used to earn additional rewards on top of Ethereum’s staking rewards.

Once you’ve gotten your stETH tokens by following the above instructions, you can boost your staking rewards by depositing your stETH to Yearn Finance’s Curve stETH vault. This staking method combines the base ETH staking yield with the yield from staking stETH through Curve as well as Yearn’s vault yields.

An Example

For example, if you are earning 4% APY on Lido through your staked ETH, and then you take your earned stETH tokens and stake them through Yearn’s stETH pool which provides another 4.81% APY, you will be earning a total of 8.81% APY on your ETH after the Lido and Yearn.finance staking.

These rewards are not paid out in ETH, however. When staking through Lido, you earn staking rewards in Lido’s stETH token. After you take your stETH tokens from Lido and stake them on Yearn.finance, (using the instructions below) your Yearn rewards will be paid out in the Curve stETH token. Both stETH and Curve stETH can be swapped back to ETH at any time using an exchange.

The below table illustrates our example’s combined APY.

Staking APYEarn rewards in
Staking with Lido4%stETH tokens
Staking with Yearn.finance4.81%Curve stETH tokens
Combined Return8.81%

Staking stETH through Yearn.finance

Step 1: Navigate to Yearn.finance’s Curve stETH vault and connect your wallet by using the “Connect Wallet” button in the top right corner.

Note: You can view the current APY of the Yearn vault under the “APY” section.

Staking stETH through Yearn.finance

Step 2: Under the “From Wallet” section on the right, click on the Curve stETH icon and select “stETH” as the currency you are depositing from your wallet.

Step 3: Enter the amount of stETH that you would like to deposit and click “Approve”. Confirm the transaction through your wallet.

Staking stETH through Yearn.finance

Step 4: Once you have approved the transaction, the “Deposit” button will become available. Click “Deposit” to deposit your stETH and start earning Curve stETH APY.

Staking stETH through Yearn.finance
Staking stETH through Yearn.finance

Note on fees: Yearn takes a 2% management fee on all vault deposits. They also take a 20% performance fee on all yield earned. The instructions above use a Yearn feature called “Zap” which also adds a 0.3% fee to the transaction. Find out more about Yearn fees on their website.

Running your own ETH validator [Hard]

Network validators are responsible for validating Ethereum transactions and creating Ethereum blocks. Validators are individuals who have at least 32 ETH staked and have the equipment necessary to perform their duties.

Getting started as a network validator certainly takes some technical savvy. While not every validator has to have a massive computing rig at their home, and some can use off-site machines in data centers, validators must still be prepared to handle issues that arise and must understand the intricacies of the Ethereum blockchain.

After staking the 32 ETH necessary to become a validator and getting set up, you can expect to earn the full non-diluted staking APY on your ETH (around 5%).

What you need to run your own network validator

First and foremost, network validators need to have a balance of 32 ETH in order to begin the process.

In terms of direct necessities, a physical computer with a 24/7 connection to the internet is required. Software in the form of an execution layer client and a consensus layer client, as well as validator-specific Ethereum keys, will also be necessary.

Hardware Requirements

The hardware requirements to run a network validator node are not nearly as demanding as those for proof-of-work mining. Most of today’s consumer-grade machines are powerful enough for the task. Please note that you will need a machine with an SSD and cannot use an HDD for validating. It is also strongly recommended that a 64-bit Linux system is used with a cable internet connection (not WiFi).

Minimum System RequirementsRecommended System Requirements
Operating System64-bit Linux, Mac OS X, Windows, Arm6464-bit Linux, Mac OS X, Windows, Arm64
ProcessorIntel Core i5–760 or AMD FX-8100 or betterIntel Core i7–4770 or AMD FX-8310 or better
RAM4GB RAM8GB RAM
Storage20GB available space SSD (you cannot use a hard disk drive)100GB available space SSD (you cannot use a hard disk drive)
InternetBroadband connectionBroadband connection through ethernet cable

Find out more about these requirements from the Ethereum.org website.

Cloud Providers

It’s not necessary to use a personal machine in order to run a validator node. In fact, many validators opt for using a cloud service that allots them space on a remote machine which they can use to run their node. Here are some of the most popular cloud providers:

  • Allnodes: As one of the biggest cloud hosting providers, Allnodes hosts over 33,000 nodes with an aggregate value of over $1.5 billion dollars. Getting started on Allnodes is simple and the service starts at just $5/month.
  • Blox: Blox staking takes pride in their fully non-custodial solution which allows users to retain full control of their private validator keys. What’s more is that signing up for the service and getting started is currently free.
  • Blockdaemon: A favorite cloud provider for institutional stakers. Blockdaemon supports over 60 blockchains and counts some of the largest crypto players among its clients. Their cloud node is touted as a “White Label Validator” service and can be accessed here.

Pros and cons of staking ETH using your own validator

Pros:

  • Get the best staking rewards available, with no middleman.
  • Participate directly in operating the Ethereum chain.
  • No reliance on third-party platforms, so your staked funds are not exposed to potential hacks or site downtime.

Cons:

  • ETH cannot be unstaked until a future upgrade of the Ethereum network.
  • Requires technical know-how.
  • Mistakes made in the process may reduce your rewards or even get you ejected from the network.

How to stake Ethereum with your own network validator: Step by step

Step 1: Acquire 32 ETH + the necessary hardware and software for becoming a validator. (More info)

ETH Validator 1

Step 2: Generate your validator keys and deposit your 32 ETH. (More info)

ETH Validator 2

Step 3: Practice on a testnet, complete the validator checklist and wait to get activated. (More info)

ETH Validator 3

The Merge and Ethereum staking

Ethereum has traditionally been a blockchain secured through the proof-of-work mechanism. On September 15th, 2022, however, the network seamlessly transitioned over to a proof-of-stake mechanism by merging the main Ethereum chain with the Beacon chain — which had itself been running through a proof-of-stake consensus mechanism since 2020.

The price of ETH did not experience major moves in response to The Merge, and the network experienced no downtime or disturbances.

Ethereum’s proof-of-stake mechanism now allows the blockchain to run at full capacity with a much smaller environmental impact, significantly lower transaction fees, and a higher throughput of transactions per second.

The Merge, however, is not the last planned Ethereum upgrade. Over the coming months and years, the network is slated to undergo a series of changes that make Ethereum a much cheaper and faster blockchain. Ethereum co-founder, Vitalik Buterin, has lyrically labeled the planned updates as the surge, the verge, the purge, and the splurge.

  • The Surge: This planned upgrade is the addition of sharding which will allow Ethereum to process over 100,000 transactions per second. The Surge is expected to be deployed to the Ethereum network at some point in 2023.
  • The Verge: This upgrade will reduce the amount of data that network validators are required to keep on their hard drives when helping to run the protocol, thereby making the validating process more efficient.
  • The Purge: The Purge is meant to reduce the hard drive space that storing ETH takes up, as well as not requiring nodes to store history — thereby increasing the efficiency of the network.
  • The Splurge: According to Vitalik, the Splurge is a catch-all term for “all of the other [upcoming] fun stuff.”

To sum it up

Ethereum staking provides holders with the opportunity to validate the Ethereum network while simultaneously earning rewards. While the network requires a 32 ETH balance to directly stake, service providers such as staking pools and centralized exchanges allow staking with much smaller balances.

If you’re considering staking, please keep in mind that staked ETH cannot yet be unstaked, and this functionality is planned for a future update.

ETH Staking FAQ

  • How much ETH do you need to stake?

  • Can you compound your ETH staking?

  • Are ETH staking pools profitable?

  • What is ETH staking yield?

  • What are the best ETH staking validators?

  • What are the best ETH staking pools?

Contributors

  • Avatar of George Hristov

    George is a tech writer interested in web3 startups and communities. In the dynamic world of crypto, he stays plugged in to the day-to-day headlines, deep dives, and industry commentary.

  • Avatar of Shannon Ullman

    Shannon Ullman is a senior editor for DeFiRate.com. Shannon specializes in cryptocurrency and personal finance. Her work has appeared in publications like The Motley Fool and Insider.