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How to Stake Ethereum

Mark the date of the beginning of the new Ethereum (ETH) era. On September 15, Vitalik Buterin announced the long-awaited merge, so Ethereum is finally a Proof-of-Stake (PoS) blockchain. 

Many users ask if ETH and ETH2 will be treated as different assets now. Of course, they won’t. ETH2 is not replacing the original Ethereum, it’s an upgrade to a more practical and environmentally sustainable backend system. The PoS mechanism doesn’t require high energy usage to ensure a secure transaction flow. Instead, it allows users to maintain blockchain by staking their ETH coins.

What Is Staking?

In simplest terms, Ethereum staking consists of “locking” 32 ETH units to set up validator software and get involved in the work of the ETH blockchain. It’s similar to mining with the difference that you’re called a validator now. The “material” you deposit is different, but your role on the blockchain is the same. As a validator, you’ll be in charge of data storage, processing transactions, and adding new ETH blocks to the network. No hassle, though. Once you activate the software, your computer will complete these blockchain tasks on your behalf. 

Methods for ETH Staking

If you hold Ethereum, staking can be a lucrative opportunity to earn more coins as a reward for your contribution. Ethereum staking is available in multiple forms, and you can choose the best fit depending on the amount of ETH you have and your blockchain skills. 

Solo Staking

Staking solo is the ultimate staking standard. As a solo validator, your work will be executed in an entirely trustless manner without relying on any centralized establishment. The entire staking reward goes to your ETH wallet. 

I must admit that setting up the validator software in a home environment requires blockchain knowledge, but you can find plenty of how-to-set-up tools to ease your job. Most importantly, you need to own at least 32 ETH units and ensure a 24/7 operable computer to qualify for solo-staking.

Use a Node Operator

This staking method allows you to avoid dealing with hardware requirements related to the process. The node operator executes the hard part (setting validator credentials, ETH deposits, and signing keys) while you earn the original block rewards. 

Even though you involve a third-party service, you maintain complete control of your funds since the node operator lets you keep your ETH wallet keys in your device. The 32 ETH minimum is still required. 

Pooled Staking

Staking pools are popular among users who don’t meet the 32-ETH criterion. Most pools offer liquid staking solutions and let you swap your ethers with ERC-20 tokens representing your staked ethers. That way, you can withdraw your ETH from the pool whenever you want. Since they’re run by external providers, you don’t have control over the whole staking operation and have to trust the pool operators. Still, most pool services allow you to keep your ETH wallet keys. 

Centralized Exchanges

Finally, centralized crypto exchanges such as Coinbase (NASDAQ: COIN) and Binance offer staking opportunities to earn passive income. They run ETH pools containing a huge number of validators and allow you to join them without any hardware or capital-size requirements. While they’re a handy and effortless method for staking, these centralized formations are a perpetual target for hackers. Also, you need to put full trust in the selected crypto exchange as it’ll keep the private keys of your ETH wallet (for collecting rewards) on its servers. 

A Few Ending Words…

The official Ethereum website shows that the current APR for staking Ethereum is approximately 4.1%. This is a generous amount for a relatively stable operation in the fierce crypto arena. However, the APR can change, especially if you use a third-party service to help you join the Ethereum blockchain. 

All things considered, staking can be an excellent investment solution for your ETH holdings, given the positive reactions the Ethereum merge received.

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